Dow Jones Industrial Average rises 550 points on Apple upgrade and shutdown optimism

The Dow Jones rose around 550 points on Monday.
Equities took a step higher after Apple stock fielded a ‘buy’ upgrade from analysts.
Signs that the US government deadlock may be loosening has sparked fresh investor confidence.

Joshua Gibson FXStreet

The Dow Jones Industrial Average (DJIA) caught a bullish tailwind on Monday, rising around 550 points to kick off the new trading week. Apple (AAPL) shares rose strongly, leading the charge into the high end as the tech rally gives fresh signs of life, and investors are hoping that rumors of a potential end of the US federal government shutdown will result in an end to the federal closure.

Apple shares rallied on Monday, dragging the rest of the tech-dependent bull market along with it. Analysts from Loop Capital raised Apple’s stock outlook from ‘hold’ to a ‘buy’, prompting loose market cash to pile into the iPhone maker.

Shutdown drags on, but hope for a near-term solution exists

The US federal government shutdown has entered its twentieth day and shows no signs of coming to a quick end. However, according to key White House officials, there may be a chance to pass a near-term funding agreement while the federal government works out a more meaningful budget resolution. The US government failed to reach an agreement on a funding bill at the start of the US government’s fiscal year on October 20, and House Republicans sent Congress into recess for this week after two weeks of little movement on budget proposals.

Q3 earnings season is in full swing, and the overwhelming majority of companies have beat analyst expectations heading into the fourth quarter. 76% of S&P-listed companies have beat forecasts on third quarter earnings, bolstering the general market’s upward momentum.

Dow Jones daily chart

Economic Indicator

Consumer Price Index (YoY)

Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

The US Federal Reserve (Fed) has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.

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.

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