|

Dow Jones Industrial Average tumbles 640 points as tariff threats weigh on markets

  • The Dow Jones backslid on Monday,  falling 740 points.
  • Equity markets await the latest news on Trump tariff plans; details are expected on Tuesday.
  • Manufacturing expectations dipped again, but price worries continue to rise.

The Dow Jones Industrial Average (DJIA) spun in a worried circle on Monday, opening the gates on a new trading week and holding near the 43,800 level before ongoing investor worries took hold and dragged the DJIA lower by around 740 points at its lowest and ending Monday's US market session 640 points in the red. The major equity index continues to churn out a volatility-burdened pattern near key moving averages as investors await the latest iteration of United States (US) President Donald Trump’s tariff threats. Paradoxically, Trump’s tariffs are claimed to be both a masterful negotiating tactic by the Republican platform runner who doesn’t actually intend to impose import taxes on his own citizens, but also a critically necessary form of revenue generation for the US government that will be getting imposed no matter what. Whichever form the tariffs take tend to depend on who in the Trump administration is talking.

US President Donald Trump: 25% tariffs on Canada and Mexico to start Tuesday

PMI figures miss the mark ahead of another NFP Friday

Another Nonfarm Payrolls (NFP) week is on the books, with Friday’s key jobs data looming ahead. Things are off to a soft start after US ISM Purchasing Managers Index (PMI) survey results came in softer than expected. According to a sampling of key business operators, business activity expectations for March shrank slightly, with the ISM Manufacturing PMI falling to 50.3. The economic indicator is still holding above the key 50.0 level that typically separates contraction versus expansion expectations, but the one-month fall from February’s 50.9 accelerated through median market forecasts of a slight trim to 50.5.

US ISM Manufacturing Prices Paid accelerated however, bringing renewed inflation fears back into the picture. The indicator rose to nearly a two-year high as tariff fears continue to squeeze higher price pressures into the market. ISM Prices Paid expectations rose to 62.4 in March, rising from the previous print of 50.9 and blowing through the forecast of 56.2.

Dow Jones news

The Dow Jones started Monday on an almost hopeful note, but fresh social media posts from US President Donald Trump ended the day's bullish potential, and now the majority of the DJIA is testing into the red. Reports surfaced that Nvidia (NVDA) products have been making their way to China despite US restrictions on Chinese access to US-produced microchips. Singapore is officially probing some of Nvidia’s key customers, including Dell (DELL) and Super Micro Computer (SMCI), who may have been putting Nvidia’s latest chipset, Blackwell, into servers and then shipping them to China in order to subvert export restrictions. Nvidia is down around 9%, tumbling below $114 per share.

Dow Jones price forecast

The Dow Jones continues to churn into the 50-day Exponential Moving Average (EMA) at 43,850, and price action is set for further downside explorations after the latest swing low found the 43,200 level. The DJIA is still holding well into bull country on the north side of the 200-day EMA at 42,100, however the ongoing bullish trend is beginning to grow long in the tooth. It has been 14 consecutive trading weeks since the Dow Jones set a new all-time high, and signs of exhaustion are beginning to set in as bidders get used to trading below the 44,000 handle.

Dow Jones daily 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

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.

More from Joshua Gibson
Share:

Editor's Picks

AUD/USD climbs to four-month highs near 0.7230

AUD/USD keeps its bid tone well in place for yet another day, this time advancing to the 0.7220-0.7230 band to hit fresh four-month high on Monday. The persistent uptrend in the pair comes on the back of the resurgence of the bearish trend in the Greenback amid unabated tensions in the Middle East. Next on tap in Oz will be the Westpac’s Consumer Confidence index, housing data, and speeches by the RBA’s Hunter and Hauser

USD/JPY holds on just above 154.00

USD/JPY weakens further and remains close to the 154.00 neighbourhood, or seven-month lows, ahead of the opening bell in Asia. The pair’s severe retracement comes in response to rising bets of a rate hike by the BoJ at its next meeting coupled with repatriation speculation, while the offered stance in the Greenback adds to the overall bearish mood.

Gold bounces off lows, back above $4,400

Gold builds on Friday’s losses, although it manages to regain some composure and reclaim the $4,400 mark per troy ounce on Monday. The yellow metal’s decline follows the move lower in the Greenback and steady caution ahead of key US data releases toward the end of the week.

Bitcoin and Gold Outlook: BTC and XAU remain pressured amid sticky US-Iran tensions
Bitcoin (BTC) is correcting below $79,000 on Monday, mirroring the broader cryptocurrency market’s lethargic, bearish-shifting outlook. The Crypto King was rejected near $81,500 last Thursday, suggesting investor exhaustion. Meanwhile, Gold (XAU/USD) remains pressed against the near-term $4,400 support, as focus shifts to the upcoming United States (US) Consumer Price Index (CPI) data on Friday.
Strong US jobs, Middle East tensions and key inflation data ahead
Good morning all, hope you enjoyed your weekend. Markets are starting the week after Friday’s stronger-than-expected US jobs report, which increased expectations that the Fed could raise rates at its September meeting. However, US markets are closed today for the Labor Day holiday, so liquidity should be lower and we may see slower price action.
Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.