Dow Jones futures rise on US-Iran peace deal

Dow Jones futures surge as the US and Iran agreed to resolve their conflict and reopen the Strait of Hormuz.
US-Iran deal in Switzerland on June 19 will lift blockades and sanctions in exchange for dismantling Tehran’s nuclear program.
The US-Iran peace agreement lowered oil prices, easing concerns over global inflation and higher interest rates.

Akhtar Faruqui FXStreet

Dow Jones futures gain over 1%, trading near 51,750 during the European hours on Monday, ahead of the US regular opening. However, S&P 500 futures rise 1.24% to near 7,530, and Nasdaq 100 futures advance 1.97%, trading near 30,250 at the time of writing.

US stock futures rally as market sentiment improves following a breakthrough agreement between the United States (US) and Iran to end their conflict and reopen the Strait of Hormuz. The deal, set to be signed in Switzerland on June 19, reportedly includes the lifting of blockades, sanctions relief for Iran, and the dismantling of Tehran’s nuclear program. In a coordinated response, the United Kingdom (UK), France, Germany, and Italy announced they are prepared to lift sanctions on Iran following steps taken regarding its nuclear program.

The US-Iran peace agreement eases oil prices and concerns about inflation and higher interest rates. Market expectations for monetary policy have shifted dramatically. The CME FedWatch tool now indicates a nearly 47% probability that the Federal Reserve (Fed) will hold interest rates unchanged in December, a sharp increase from the 28% priced in just last week.

Major US indexes are coming off a strong week, with market sentiment fueled by SpaceX’s historic IPO on Friday. The company finished its debut session with a market capitalization above $2 trillion after soaring more than 19% from its initial offering price, highlighting robust investor appetite for high-profile growth stocks.

Dow Jones FAQs

What is the Dow Jones?

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.

What factors impact the Dow Jones Industrial Average?

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.

What is Dow Theory?

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.

How can I trade the DJIA?

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.

GBP/USD advaces beyond 1.3450 after BoE decision, US Q2 GDP

GBP/USD gains positive momentum on Thursday, surpassing 1.3450 and trading at fresh multi-week highs. The Bank of England decided to maintain the benchmark rate unchanged at 3.75%. The MPC voted 6-3 to keep rates on hold, with the 3 dissenters favoring a rate hike. US Q2 GDP missing expectations helped the pair advance, while renewed US Dollar weakness across the FX board pushed the pair further up ahead of the monthly close.

EUR/USD confortable around 1.1530, highest in six weeks

The EUR/USD pair trades around 1.1530 in the American session on Thursday, reaching fresh six-week highs. The US Dollar is in sell-off mode, with multiple factors weighing on the American currency. Not only did the Federal Reserve vote divided to keep rates on hold on Wednesday, creating doubts about a September hike, but US Q2 GDP missed expectations. A suspected JPY intervention adds pressure on the Greenback.

Gold sellers keep lurking above $4,100 as USD rebounds

Gold struggles to capitalize on its gains registered over the past two days and trades with a mild negative bias just below $4,100 in the Asian session on Friday. The US Dollar recovers slightly from its lowest level since June 17 amid a further escalation of US-Iran tensions, acting as a headwind for the bullion.

Bank of Japan set to keep interest rates unchanged after suspected Yen intervention

Investors are turning their attention to the Bank of Japan’s monetary policy announcement on Friday, after the Japanese Yen staged a dramatic rebound during Thursday's American session. The move came amid growing speculation that Japanese authorities intervened in the foreign exchange market after USD/JPY tumbled from above 163.00 to below 158.00 within minutes.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.