Dow Jones futures rise as US inflation data fuels Fed rate cut hopes
- Dow Jones futures advanced as US inflation data reinforced expectations of a Fed rate cut in September.
- The S&P 500 and Nasdaq Composite finished at all-time highs on Tuesday.
- Cava shares sank more than 22%, while CoreWeave slipped roughly 9% during futures trading.
Dow Jones futures edged up in early European trading on Wednesday, ahead of the regular United States (US) market open, hovering near 44,600 with a 0.09% gain. S&P 500 futures climbed 0.12% to above 6,450, while Nasdaq 100 futures advanced 0.19%, trading above 23,900.
US stock futures appreciate due to improved market sentiment, driven by the latest United States (US) inflation data, which strengthened expectations for a US Federal Reserve rate cut in September. Markets are now pricing in approximately 94% odds of a Fed rate cut at the September meeting, up from 86% a day ago, according to the CME FedWatch tool.
The US Consumer Price Index (CPI) climbed 2.7% year-over-year in July, matching the 2.7% increase seen in the prior month, and came in below the expected 2.8% increase. Meanwhile, the annual core CPI rose by 3.1% in July, compared to the 2.9% rise seen in June, above the market consensus of 3%.
The S&P 500 and Nasdaq Composite ended the previous regular session at record highs, boosted by easing inflation concerns. On Tuesday, the S&P 500 climbed 1.13% to 6,445, while the Nasdaq advanced 1.33% to 23,839.
Market sentiment also improved following the Trump administration’s decision to extend the implementation of sweeping tariffs on China for an additional 90 days. China also decided to suspend additional tariffs on US goods for the same period.
Moreover, US Treasury Secretary Scott Bessent said early Wednesday that US and Chinese trade officials will meet again within the next two to three months to discuss the future of their economic ties. Bessent added that “The US would need to see sustained progress on curbing fentanyl flows from China, potentially over months or even a year, before considering tariff reductions.”
During after-hours trading, Cava shares tumbled over 22% following weaker-than-expected second-quarter revenue growth and a downward revision to its full-year same-store sales forecast. CoreWeave shares fell around 9% after delivering a mixed quarterly report, despite strong revenue growth, per CNBC.
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.
