Dow Jones Industrial Average News: DJIA advances in fifth week higher, leading NASDAQ
- Dow Jones Industrial Index continues month-long rally into fifth week.
- US annualized Q3 GDP revised much higher on Wednesday to 5.2%.
- US Treasury yields continue to decline, aiding equity market.
- Charlie Munger, Warren Buffet’s long-time partner at Berkshire Hathaway, dies at 99.
- Thursday’s release of October PCE inflation print becomes primary obstacle for DJIA.
The Dow Jones Industrial Average (DJIA) is advancing on Wednesday in what is so far its fifth straight week of gains. The index rose near 0.3% midway through the session, while the S&P 500 and NASDAQ Composite tagged along behind.
US third-quarter GDP was revised upward, stoking stock market excitement. Additionally, US Treasury yields, which typically move in the opposite direction of equity market indices, continued to fall. Yields on the 2-year through 30-year tenures all moved more than 1% lower at the opening bell.
Many institutions and investors have released remembrances and condolences for Charlie Munger, who passed away on Tuesday. Munger held a partnership with Warren Buffet for 60 years, helping the Oracle of Omaha build Berkshire Hathaway into one of the largest companies by market cap in the world. Munger passed at 99 years of age, just one month before his 100th birthday.
Besides the bullish Q3 GDP figures, revisions to the US PCE Price Index showed inflation was lower than the preliminary estimate in the third quarter. Also, Dow Jones components Apple (AAPL) and Goldman Sachs (GS) have ended their partnership over the former’s credit card.
Dow Jones News: US Q3 GDP revised up as optimism grows for Thursday’s PCE print
The US Bureau of Economic Analysis released its second estimate for US GDP in the third quarter one hour before the market open on Wednesday. The first, or “advance”, estimate last month was 4.9% on an annualized basis. Wednesday’s estimate was 5.2%, demonstrating that the US economy is continuing to surprise the market with its robust growth in the face of higher interest rates.
Additionally, the market has grown more optimistic about Thursday’s Personal Consumption Expenditures (PCE) release for October – the Federal Reserve’s (Fed) preferred gauge of inflation in the US economy. This is because on Wednesday Core PCE inflation estimate for Q3 arrived at 2.3%, lower than the earlier estimate of 2.4%.
Predictions for the Fed to begin trimming rates in March 2024 have already doubled on Wednesday to 35%. A rate cut at the May meeting is now a foregone conclusion for most market participants, and US Treasury yields are dropping in anticipation as the market buys up bonds before yields drop further.
Thursday’s October PCE release will surely lead markets higher or lower since it will be the most trusted and comprehensive snapshot of US inflation. The Core PCE Price Index for October is expected to grow by 0.2% MoM, down from 0.3% in September. The annual Core PCE consensus calls for inflation to fall to 3.5% In October from September’s 3.7%.
Goldman and Apple call it quits on credit card partnership
Apple and Goldman Sachs have agreed to part ways over the next 12 to 15 months as partners in the Apple Card, the tech giant’s foray into the credit card market. The partnership and product was launched a little more than four years ago and was extended to 2029 last year.
According to a report in The Wall Street Journal, Goldman ran into heavy losses in its bid to enter the consumer credit market. Goldman told Apple earlier this year that an exit might be in the cards. Apple appears likely to find a new partner, and rumors suggest that American Express (AXP) may take over Goldman’s contract as an issuer.
Interestingly, both the Goldman and Apple stock prices gained on the news, advancing on Tuesday and early Wednesday. Goldman comprises 6.2% of the Dow Jones index, while Apple makes up approximately 3.5%. American Express comprises roughly 3.1% of the DJIA index.
Goldman has already suggested internally this month that it may also be ready to ditch its credit card partnership with General Motors (GM).
Nasdaq FAQs
The Nasdaq is a stock exchange based in the US that started out life as an electronic stock quotation machine. At first, the Nasdaq only provided quotations for over-the-counter (OTC) stocks but later it became an exchange too. By 1991, the Nasdaq had grown to account for 46% of the entire US securities’ market. In 1998, it became the first stock exchange in the US to provide online trading. The Nasdaq also produces several indices, the most comprehensive of which is the Nasdaq Composite representing all 2,500-plus stocks on the Nasdaq, and the Nasdaq 100.
The Nasdaq 100 is a large-cap index made up of 100 non-financial companies from the Nasdaq stock exchange. Although it only includes a fraction of the thousands of stocks in the Nasdaq, it accounts for over 90% of the movement. The influence of each company on the index is market-cap weighted. The Nasdaq 100 includes companies with a significant focus on technology although it also encompasses companies from other industries and from outside the US. The average annual return of the Nasdaq 100 has been 17.23% since 1986.
There are a number of ways to trade the Nasdaq 100. Most retail brokers and spread betting platforms offer bets using Contracts for Difference (CFD). For longer-term investors, Exchange-Traded Funds (ETFs) trade like shares that mimic the movement of the index without the investor needing to buy all 100 constituent companies. An example ETF is the Invesco QQQ Trust (QQQ). Nasdaq 100 futures contracts allow traders to speculate on the future direction of the index. Options provide the right, but not the obligation, to buy or sell the Nasdaq 100 at a specific price (strike price) in the future.
Many different factors drive the Nasdaq 100 but mainly it is the aggregate performance of the component companies revealed in their quarterly and annual company earnings reports. US and global macroeconomic data also contributes as it impacts on investor sentiment, which if positive drives gains. The level of interest rates, set by the Federal Reserve (Fed), also influences the Nasdaq 100 as it affects the cost of credit, on which many corporations are heavily reliant. As such the level of inflation can be a major driver too as well as other metrics which impact on the decisions of the Fed.
Dow Jones Industrial Average forecast: DJIA continues gains for fifth straight week
The Dow Jones index outperformed the S&P 500 and the NASDAQ Composite for the three sessions following the Thanksgiving holiday last Thursday, but the NASDAQ has narrowed its lead on Wednesday as it is more affected by falling Treasury yields.
DJIA 5-minute chart vs S&P 500 vs NASDAQ Composite from Nov. 24 through Nov. 28, 2023
The DJIA index is now gunning for the 35,679 level, which was the 2023 high from August 1. The 9-day Simple Moving Average (SMA) has been holding onto its distance from the 21-day SMA counterpart. This shows us that the extreme rally that began on October 30 is not slowing down even after a month.
It looks like the index has the odds on its side to produce a new annual high before the year is out. December is typically a great month for stock market investors as what many call the Santa Rally unfolds. US investors are typically more bullish at the end of the year and expect stocks to pump due to the heavy holiday consumer buying spree.
Dow Jones Industrial Average daily chart