Dow Jones futures refresh all-time highs near 45,300 ahead of Trump-Putin meet
- Dow Jones futures hit an all-time high in the overnight session ahead of the Trump-Putin meeting.
- Hot US PPI could force traders to reassess Fed’s interest rate cut bets.
- The US Retail Sales data is expected to have risen moderately by 0.5% in July.
Dow Jones futures post a fresh all-time high during the European trading session on Friday. United States (US) index futures strengthen even as hotter-than-projected United States (US) Producer Price Index (PPI) data for July has raised concerns about whether the Federal Reserve (Fed) will cut interest rates in the September policy meeting.
The scenario of monetary policy expansion increases demand for risky assets, such as US equities, as lower interest rates boost loan growth and business investment.
At the time of writing, Dow Jones Futures gained 0.8% to near 45,300. S&P 500 futures add 16 points and jump to near 6,485.
The US PPI report showed on Thursday that inflation at the wholesale level rose by 0.9% on a month, the fastest pace seen in three years. Economists anticipated a 0.2% growth after remaining flat in June. A significant increase in producer inflation suggests that business owners have started passing the impact of tariffs to consumers, a scenario that could allow the Fed to stick to its “wait and see” approach.
However, traders remain increasingly confident that the Fed will cut interest rates in the September meeting. According to the CME FedWatch tool, the probability of the Fed cutting interest rates in September is 92.6%, marginally down from 94.3% seen on Wednesday.
Going forward, investors will focus on the US Retail Sales data of July, and the meeting between US President Donald Trump and Russian leader Vladimir Putin on Friday. Economists expect the Retail Sales data, a key measure of consumer spending, to rise moderately by 0.5% on month. In June, the consumer spending measure grew by 0.6%.
On Thursday, the comments from US President Trump in an interview with Fox News, expressed confidence that Russian leader Putin would agree to stop the war in Ukraine. “I think he's going to make a deal, Trump said and added that he would then call Ukrainian President Volodymyr Zelenskiy and his European allies to schedule a meeting for further talks.
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
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
