Dow Jones Industrial Average lags as Anthropic's filing lifts tech
- DJIA gives back about two-thirds of an early climb and ends short of 52,400.
- Goldman Sachs adds about 105 points, most of the price-weighted index's gain.
- The Fed's decision is due Wednesday, and Microsoft and Alphabet report after it.
One stock, Goldman Sachs (GS), accounted for about seven of every ten points the Dow Jones Industrial Average added on Monday. The index rose to near 52,600 by the tenth five-minute bar, gave back about two-thirds of that climb by the session low near 52,250, and ended short of 52,400.
The Dow is weighted by share price, and at about $890 Goldman is its most expensive stock, so its 2% rise was worth about 105 points. UnitedHealth (UNH) and Merck (MRK) took about 70 points off between them, which left the Dow behind the S&P 500, where technology shares count for more.
Anthropic's filing to list on the Nasdaq says it will spend up to $120.5 billion on computing built on Nvidia chips, and Nvidia (NVDA) added about 30 points. The same filing commits up to $114.5 billion to Google through 2033, and Alphabet (GOOGL) fell about 1% and took about 20 points off the Dow.
On the calendar
The Federal Open Market Committee (FOMC) decision is due at 18:00 GMT on Wednesday, and futures price about a 10% chance of a hike from 3.75%-4.00%. Fed Chair Warsh's press conference follows at 18:30 GMT. The September Personal Consumption Expenditures Price Index (PCE) and third-quarter Gross Domestic Product (GDP) are due at 12:30 GMT on Thursday, and both bear on a December hike.
Boeing (BA), Coca-Cola (KO) and Sherwin-Williams (SHW) report before Tuesday's opening bell, and Visa (V) after it. Microsoft (MSFT) and Alphabet report after the Fed on Wednesday. Caterpillar (CAT), the Dow's second most expensive stock at about $690, reports with Merck on Thursday, and Chevron (CVX) on Friday.
On the charts
The Dow has given back about a quarter of its climb from the October 1 low near 50,500 to the October 22 high near 52,900. It's still above the 50-day Exponential Moving Average (EMA) near 52,100, and the August 5 high just short of 54,750 is about 4% above. Daily momentum has cooled from overbought since Thursday.
Dow Jones 5-minute chart
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
Joshua Gibson
FXStreet
Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.
