Dow Jones Industrial Average advances as US data feeds rate cut expectations
- Dow Jones maintains a moderate bullish tone on Thursday, favoured by soft US Jobless Claims data.
- Hopes of Fed rate cuts are buoying all sectors with tech firms leading gains.
- The index is still far from the historic highs seen in March, investors remain cautious ahead of Friday’s NFP report.
The Dow Jones Industrial Average (DJIA) advances for the second day in a row as higher-than-expected US Jobless Claims figures endorse the view of three interest rate cuts in 2024, starting in June.
Applications for unemployment benefits rose to their highest level in two months in the last week of March, according to data released by the Labor Department on Thursday. These figures come after the weak services sector activity data on Wednesday eased market fears that a strong US economy would force the Federal Reserve (Fed) to dial down its monetary easing plans.
Fed Harker reiterated Chair Powel’s warning that the central bank might need more time to start rolling back its tightening cycle, but they have failed to dampen the positive sentiment. Investors remain focused on Friday’s US Nonfarm Payrolls (NFP) report for more clues about the rate outlook.
All Wall Street indexes are posting gains on Thursday. The NASDAQ is leading with a 0.95% advance to 16,435, followed by the S&P 500, up 0.75% at 5,249, and the Dow Jones, which adds 0.5% to 39,321.
Dow Jones news
The positive market sentiment is buoying all 11 Wall Street sectors on Thursday with Technology stocks leading gains, up 1.03%, on the back of hopes of lower interest rates. The Consumer Discretionary sector with a 1.02% advance and the Industrial sector, up 0.99%, are next. The Health and Energy sectors are lagging behind with gains of 0.13% and 0.31%, respectively.
Microsoft (MSFT) is the best performer of the Dow Jones Index, up 1.63%, to $427.39, followed by Travelers Companies (TRV) with a 1.5% advance to $232.50. On the negative side, Salesforce (CRM) drops 0.58% to $302.85, and 3M (MMM) loses 0.4% to $92.92.
Dow Jones technical outlook
The technical picture has improved somewhat, as the improving market sentiment triggered by soft US data is contributing to a moderate recovery after the downside correction seen earlier this week.
The near-term bias remains neutral with upside attempts limited below the 39,457 level. The Index might need additional support from soft NFP data to revisit the 40,000 resistance area.
The broader trend remains bullish with 39,025 closing the path to trendline support at 38,885 and the 38,435 level.
Dow Jones 4-Hour Chart
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.