Dow Jones Industrial Average flattens on quiet Tuesday

Posted At: 2024-12-11 09:00

The Dow Jones traded into the middle on Tuesday.
Equities tested lower but stuck to the day’s opening bids.
Markets are coiling ahead of key US CPI inflation update.

The Dow Jones Industrial Average (DJIA) flat-lined on Tuesday, testing briefly into the low end below 44,200 before rebounding into the day’s opening prices near 44,400. Equities are stuck in the mud as investors await the latest print of US Consumer Price Index (CPI) inflation, slated for Wednesday.

Investors will be keeping a close eye on Wednesday’s CPI inflation print which serves as one of the last key data releases before the Federal Reserve’s (Fed) last policy meeting in 2024. Signs that progress on inflation has stalled could kill hopes for a third consecutive rate cut on December 18.

China’s recently-announced policy pivot represents the Asian giant’s first step toward a looser monetary policy stance since the early 2010s. Investors broadly reacted positively to the news that China would be injecting much-needed cash directly into the global markets. However, bullish momentum on the news has faded as traders now grapple with the reality that China’s commitments to monetary policy adjustment remain shadowy. To top it off, the conditions that would require a pivot from a decade-plus-long policy stance are less than ideal for investment conditions.

Dow Jones news

A tepid Tuesday market session sees action on the Dow Jones split roughly even between gainers and losers for the day. Merck & Co (MRK) shed 2.5% to fall below $102 per share, while Boeing (BA) rebounded an additional 4.5% and climbed above $164 per share as investors continue to re-bid the battered aerospace manufacturer. Boeing has been besieged by issues of late, including strikes, lawsuits, manufacturing errors, and the worst of all, missed earnings calls. But investors are taking heart after the plane maker announced it would revive its investor appeal by axing ten percent of its global workforce despite a multi-year backlog of customer orders continuing to pile up.

Dow Jones price forecast

The Dow Jones has quietly closed lower for three straight trading days when nobody was looking, dragging intraday price action down below 44,400 after testing record highs above 45,000 just last week. Despite the near-term pulldown, prices remain firmly entrenched on the high end, with bids floating well north of the 50-day Exponential Moving Average (EMA) near 43,437.

Dow Jones daily chart

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

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.

How often does the Fed hold monetary policy meetings?

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.

What is Quantitative Easing (QE) and how does it impact USD?

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.

What is Quantitative Tightening (QT) and how does it impact 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.

Economic Indicator

Fed Interest Rate Decision

The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).