Dow Jones flubs a Wednesday recovery
- The Dow Jones rallied early Wednesday before dipping back to the open.
- US JOLTS data eased back more than expected in July.
- Markets have tilted further into bets of a double Fed cut in September.
The Dow Jones Industrial Average (DJIA) whipped on Wednesday, rising at the start of the US market session but falling back into the day’s opening bids after the opening volley of US labor data disappointed investors.
US JOLTS Job Openings in July missed the mark, adding 7.673 million available jobs compared to the forecast 8.1 million, compared to the previous month’s revised 7.91 million. With the Federal Reserve (Fed) broadly expected to begin cutting interest rates on September 18, markets are tilting further into bets of a 50 bps cut to kick off the next rate cutting cycle. Rate markets are still pricing in 100 bps in total cuts by the end of 2024, but there’s still a 57% chance of the Fed’s September rate call being a slimmer 25 bps, according to CME’s FedWatch Tool.
Friday’s US Nonfarm Payrolls (NFP) report looms large and represents the last round of key US labor data before the Fed’s first rate trim. Friday’s NFP print is widely expected to set the tone for market expectations regarding the depth of a Fed rate cut, with investors fully priced in on the start of a new rate-cutting cycle this month.
Economic Indicator
JOLTS Job Openings
JOLTS Job Openings is a survey done by the US Bureau of Labor Statistics to help measure job vacancies. It collects data from employers including retailers, manufacturers and different offices each month.
Dow Jones news
The Dow Jones tilted into the low side on Wednesday, with two-thirds of the equity index testing into the red for the midweek market session. Travelers Companies (TRV) still managed to rise 1.4% to $231.12 per share, while Verizon Communications (VZ) stumbled to the bottom of the board, falling 3.7% to $19.34 per share.
Dow Jones price forecast
The Dow Jones couldn’t figure it out on Wednesday, rising early in the day to 41,160 before slumping back to the day’s opening prices just above 40,840. The DJIA is holding onto bullish chart paper near record highs approaching 41,600, but momentum has drained out of the bidders’ camp as price action shifts back down toward the 50-day Exponential Moving Average (EMA) at 40,253.
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.