• US futures indices showed mixed movement as traders evaluated inflation figures and upcoming corporate earnings.
  • September’s CPI exceeded expectations, boosting market probability of a hawkish Federal Reserve rate hike.
  • S&P 500 and Nasdaq declined during Wednesday’s regular trading, with tech shares leading the downturn.

Dow Jones futures rise by 0.46% to trade near 52,090 during European hours on Thursday. S&P 500 futures decline 0.33% to trade around 7,740, while Nasdaq 100 futures fall by 1.30% to near 29,780.

US stock futures posted mixed results as investors continued to evaluate the Federal Reserve’s (Fed) monetary policy outlook following stronger-than-expected inflation data. Market participants are now awaiting Thursday’s producer inflation report, alongside the latest retail sales figures and weekly jobless claims. On the corporate front, earnings reports are anticipated from major companies including Charles Schwab, US Bancorp, and Freeport-McMoRan.

The Bureau of Labor Statistics reported on Wednesday that the US Consumer Price Index climbed 0.6% month-over-month in September, bringing the 12-month headline rate to 3.7%. Both figures topped economists' forecasts of 0.6% and 3.6%, respectively. Meanwhile, core CPI, which strips out volatile food and energy costs, advanced 0.3% for the month and 2.6% on an annual basis, both exceeding market estimates of 0.2% and 2.5%.

This hotter-than-anticipated inflation report reinforced expectations of a potentially more hawkish Federal Reserve, bolstering arguments for an interest rate hike at the upcoming Federal Open Market Committee meeting on October 27–28. Following the release, futures traders raised the probability of a rate hike at the late-October meeting to approximately 31.6%, according to CME Group’s FedWatch tool.

During Wednesday’s regular US trading session, major indexes closed lower, with the S&P 500 falling 1.11% and the Nasdaq Composite dropping 1.88%. Technology stocks led the selloff, driven by growing investor concerns over AI-related investments.

AI jitters keep pressure on chip stocks and data centers

Analysts at Deutsche Bank note that equity sentiment remained fragile, with “AI concerns” continuing to weigh on the market. They highlight that “it wasn’t the best day for equities either, as AI concerns meant there was a fresh drag from chip stocks and data centers,” underscoring how renewed pressure in these segments added to the broader index’s downside bias.

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.

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.