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Dow Jones Industrial Average climbs 400 points on Wednesday rebound

  • The Dow Jones added a full percent on Wednesday, climbing over 400 points.
  • Equities are staging a rebound after the week’s early declines.
  • Stocks weigh wholesale inventories data and Fedspeak ahead of latest FOMC Meeting Minutes.

The Dow Jones Industrial Average (DJIA) rallied another 400 points on Wednesday, extending a bullish turnaround after an early-week decline that briefly dragged the major equity index back below 42,000. The midweek market session sees investors hitting the bids despite a low-weighted print August Wholesale Inventories, and a lukewarm appearance from Federal Reserve (Fed) Bank of Dallas President Lorie Logan.

US Wholesale Inventories grew by less than expected, rising a scant 0.1% versus the expected hold at July’s figure of 0.2%. However, there was a mixed print between the numbers: while non-durable goods inventories decreased, falling 0.1% versus the anticipated 0.5% uptick. Meanwhile, durable goods inventories rose much faster than expected, climbing 0.3% versus the previous month’s 0.1% as US consumers dedicate more of their consumption to non-durable goods and eschew investment in long-life purchases.

Dallas Fed President Lorie Logan hit newswires early Wednesday, trying to draw investor focus back to ongoing inflation risks that still loom in the darkness. Despite rate-cut-hungry markets clamoring for more rate cuts to follow up September’s jumbo 50 bps rate trim, Dallas Fed President Logan noted that economic growth that continues to clock in above forecasts poses a very real risk to inflation. While US inflation has made significant progress toward the Fed’s 2% annual target, price growth in key core categories continues to run hotter than expected.

The Federal Open Market Committee’s (FOMC) Meeting Minutes from the September rate call are due later in the US market session; while little new is expected from the document, investors will no doubt be pouring over the Fed’s internal communications about rate expectations. Traders will be looking to glean further clues from how the Fed feels about further rate cuts through the year, despite a steady stream of tepid talking points from various Fed officials in recent days.

Rate markets are currently pricing in a perfectly pedestrian 25 bps rate cut in November. However, according to the CME’s FedWatch Tool, rate traders still see a 15% chance that the Fed may not move rates at all on November 7.

Dow Jones news

Equity markets rolled over into full bull mode on Wednesday, with all but four of the Dow Jones’ constituent equities finding room in the green during the US market session. IBM (IBM) rallied over 2% to climb into $238 per share, with Nike (NKE) hot on its heels, rising a comparable 2% and clipping above $82.50 per share.

On the low side, Boeing (BA) continues to struggle with an ongoing worker strike. Things became more complicated for the battered aerospace company after the Boeing workers’ union rejected a recent proposal.

Dow Jones price forecast

The Dow Jones continues to outpace its own averages, grinding out chart paper north of the 50-day Exponential Moving Average (EMA) and sticking close to record highs. Price action stuck close to late September’s peak bids, and a bearish pullback that essentially went nowhere has momentum indicators poised for another flip into buy signals.

The Dow Jones remains up roughly 6.25% from September’s swing low into the 40,000 major handle, with intraday action churning just above 42,000. The major equity index has returned 12.75% YTD, with half of those gains from September alone.

Dow Jones daily chart

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.