Dow Jones futures gain after Wall Street suffers October-level slump
- Dow Jones futures advance after Wall Street posted its worst slump since October amid “Sell America” sentiment.
- Trump reiterated Greenland ambitions as Europe threatens tariffs, with the EU signaling duties on US goods.
- Netflix shares fell premarket on earnings uncertainty; Johnson & Johnson and Charles Schwab report on Wednesday.
Dow Jones futures gain by 0.25% to near 48,800 during the European session on Wednesday, while S&P 500 and Nasdaq 100 futures rise 0.38% and 0.41% to near 6,860 and 25,200, respectively. US stock futures advance after Wall Street slumped in the previous session on “Sell America” sentiment, which could be attributed to escalating United States (US)-European Union (EU) trade tensions.
US President Donald Trump said there is “no going back” on his ambitions regarding Greenland, alongside earlier threats to impose new 10% tariffs on eight EU countries, fueling concerns over slower economic growth. Trump is scheduled to meet various stakeholders to discuss Greenland at the World Economic Forum in Davos on Wednesday.
The European Parliament plans to suspend approval of the US trade deal agreed in July, with the decision set to be announced on Wednesday in Strasbourg, France, signaling an escalation in US–Europe tensions. The European Union signaled potential duties on $93 billion of US goods, while France reportedly urged the use of the bloc’s Anti-Coercion Instrument.
On Tuesday’s regular US session, the Dow Jones fell 1.76%, the S&P 500 slid 2.06%, and the Nasdaq 100 dropped 2.39%, marking their worst daily performance since October. During premarket trading, Netflix shares declined after its earnings highlighted growing uncertainty for the streaming giant. Meanwhile, Johnson & Johnson and Charles Schwab are among several companies set to report results on Wednesday, alongside a range of mid-sized financial institutions.
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
Author
Akhtar Faruqui
FXStreet
Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.
