Dow Jones pares recent gains as investors take a pause
- The Dow Jones shed half of a percent amid cautious market flows.
- The midweek market session has investors looking ahead to US PCE inflation.
- China GDP downgrade has investors concerned about physical trade.
The Dow Jones Industrial Average (DJIA) trimmed near-term gains on Wednesday, backsliding 150 points in the midweek market session. A downgrade to China’s Gross Domestic Product (GDP) forecast has investors concerned about a possible overhang in global trade, but most of the market is buckling down for the wait to Friday’s US Personal Consumption Expenditure Price Index (PCE) inflation print.
Equities pared back across the board after UBS trimmed its forecasts of Chinese GDP growth in 2024 and 2025. The Fitch ratings agency also issued a warning about performance in several of China’s business sectors in the second half of 2024 in a double-punch to market expectations of Chinese growth forecasts.
According to UBS, Chinese GDP growth is expected to clock in at 4.6% for 2024 compared to the previous expectation of 4.9%, and its 2025 forecast has been shifted down to just 4.0% from 4.6%. From Fitch Ratings, China’s ongoing property development slump is expected to remain a drag on issuers across several sectors, crimping growth and activity prospects in a measurable way through the last half of the year.
This week, investors will be closely watching Friday’s US PCE Price Index inflation reading for July. It is anticipated that YoY PCE inflation will increase to 2.7% from the current 2.6%, while the MoM figure is expected to remain unchanged at 0.2%. Those who are anticipating a reduction in interest rates will be looking for the inflation data to be lower than anticipated. However, if the inflation data exceeds expectations, it could unsettle investor sentiment and throw a wrench in current rate cut forecasts.
Dow Jones news
Tepid risk appetite on Wednesday has most of the Dow Jones in the red for the midweek market session. Gains are being led by Merck & Co Inc. (MRK), which rose around 0.6% to $163.90 per share, while Nike (NKE) fell 3.5% to $82.30 per share.
The moment is almost here. Despite a number of showstopping earnings calls this season, everyone has been waiting for Nvidia (NVDA) to release fiscal 2025 Q2 results, which finally arrive after the closing bell on Wednesday.
Dow Jones price forecast
The Dow Jones’ midweek pullback is picking up speed, with the equity index backsliding nine-tenths of one percent and shedding over 350 points. The DJIA has once again fallen below the 41,000 handle as near-term bullish momentum takes a pause and overextended price action snaps lower.
With bullish pressure running out of gas near fresh all-time highs beyond 41,250, bids are poised for an extended backslide to the 50-day Exponential Moving Average (EMA) rising through 40,000. Despite a near-term crimp in bidding momentum, short positions in the Dow Jones are unlikely to find a clear path all the way back to the index’s last major swing low below 38,500.
Dow Jones daily chart
Economic Indicator
Core Personal Consumption Expenditures – Price Index (YoY)
The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal Reserve’s (Fed) preferred gauge of inflation. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures.” Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.