Dow Jones futures inch higher due to rising odds of a bumper Fed rate cut

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Dow Jones futures move little, edging up 0.05% to trade around 45,600 during European hours on Monday, ahead of the United States (US) market open. Meanwhile, the S&P 500 futures advance 0.13% to trade above 6,500, while Nasdaq 100 futures climb 0.23% to trade near 23,850.

Dow Jones futures gain ground amid rising likelihood of a bumper 50-basis-point rate cut by the Fed in September.
Traders await the US Nonfarm Payrolls Benchmark Revision for guidance on the Fed rate cut size.
Chipmakers boosted US markets, with Broadcom rising 3.21% and Nvidia up 0.77%, while Amazon climbed 1.4%.

US stock futures received support amid rising odds of a bumper 50-basis-point rate cut by the US Federal Reserve (Fed) at its September meeting, driven by last week’s disappointing jobs data. Traders are keenly awaiting the US Nonfarm Payrolls Benchmark Revision due later in the day to gain fresh cues on the size of the rate cut in September.

In August 2024, the US Bureau of Labor Statistics (BLS) released the preliminary annual benchmark revisions with 818,000 new jobs added, fewer jobs than originally reported in the 12-month period through March 2024. In response, the Fed lowered the policy rate by 50 basis points (bps) in September 2024.

Read full article: Will Nonfarm Payrolls revisions hint at a 50 bps Fed cut next week?

The Dow Jones rose 0.25%, the S&P 500 added 0.21%, while the Nasdaq Composite gained 0.45% to close at a fresh record high in Monday’s session. US markets were supported by chipmakers, with Broadcom up 3.21% and Nvidia up 0.77%, while Amazon advanced 1.4%.

Focus will shift toward US inflation reports that could provide fresh impetus for the Federal Reserve policy outlook. The August US Producer Price Index (PPI) figures are scheduled for release on Wednesday, followed by the Consumer Price Index (CPI) data on Thursday.

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.