Tag: Dow

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All hail the rally?

U.S. stocks rally

U.S. stocks have had a good year in 2023, and a great start to 2024 with new record highs being set.

Many major indices have recorded double-digit gains. However, some analysts have warned that the rally may not last, as it has been driven by a few large-cap technology and growth stocks, while many other sectors and regions have lagged behind. 

A stock market rally is a broad and rapid rise in share prices, often defined as a 20% increase from a recent low. 

This could indicate a lack of breadth and sustainability in the rally, and potentially signal a market pullback, correction or even a crash in the future.

Bull bear, bull?

Chartists with their technical analysis might see a pattern that points to a substantial upside, but they should not get too carried away with their own observations, right now would be a sensible time for markets to find level ground, if only temporarily. 

The bullish view is that the ‘laggards’ should catch up the ‘mega cap’ stalwarts once again. The bearish view is that the ‘mega cap’ stocks’ will realise they’ve gone too far and need to ride back to the rest of the market. Too few stocks in the same sector hold the balance of power – go check out the Magnificent 7 or even the old FANG stocks.

Catch-up

Either way, there ought to be an opportunity for underrepresented sectors and industries to gain lost ground.

The question is, will there be a pause to allow laggards to catch-up, or will the mega caps simply continue on their march?

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S&P 500, Nasdaq 100 and Dow all hit new highs!

S&P 500, Nasdaq 100 and Dow all up at new highs!

The S&P 500 climbed again Wednesday 7th February 2024 and edged ever closer to the 5,000 level.

S&P 500 hit a new high of 4995

S&P 500 hit a new high of 4995 on 7th February 2024

The index, which first breached the 4,000 level in April 2021, added around 0.82% to close at 4,995.06. During session highs, the S&P hit 4,999.89. Quarterly results signalled a thriving U.S. economy.

The Nasdaq 100 jumped to a new high of 15,755

The Nasdaq 100 jumped to a new high of 15,755 on 7th February 2024

The Dow Jones Industrial Average rallied 156 points to close at 38,677 and an all-time high

DJIA closes at new high of 38677 on 7th February 2024

Euphoric

Are investors getting swept away with the latest wave of AI related tech results? Quite possibly, as some of what we’re seeing could be based on FOMO (fear of missing out) as traders/investors don’t want to be left behind like they were last year.

However, one undeniable fact is that the U.S. economy isn’t facing as recession any time soon as predicted by many.

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Dow hits new record high breaching 38000 for the first time ever

Dow Jones index up

The Dow Jones Industrial Average (DJIA) reached a new high on 22nd January 2024, closing at 38,001.81 points

One year chart for the Dow Jones Industrial Average (DJIA)

The Dow Jones Industrial Average (DJIA) reached a new high on 22nd January 2024, closing at 38,001.81 points

The index reached 38109.20 points in intraday trading. Recently the S&P500 and the Nasdaq set new highs.

The Dow

The Dow Jones is a market index that tracks the performance of 30 large US companies. It is also known as the Dow Jones Industrial Average (DJIA) or simply ‘the Dow’.

The DJIA is one of the oldest and most widely followed stock market indicators in the world. It reflects the health and sentiment of the U.S. economy and business sector.

The index was created in 1896 by Charles Dow and Edward Jones, who were journalists at The Wall Street Journal. The first calculation was done on 30th June 1896, with a base value of 40.

Some 128 years later, the index has a value of 38001 – a record high!

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December 2023 U.S. inflation data came in higher-than-expected

U.S. December inflation

Stocks moved lower Thursday 11th January 2024, reflecting the higher-than-expected December 2023 inflation data.

The S&P 500 in early trade edged lower by around 0.7%, while the Nasdaq Composite dropped nearly 0.8%. The Dow Jones Industrial Average dropped by 0.6%. The S&P 500 briefly touched 4800 after climbing above its record high of 4,796.

Higher than expected

December’s consumer price index figure came out slightly higher-than-expected, reflecting a 0.3% increase in consumer prices for the month, pushing the annual rate to 3.4%.

Core CPI, excluding volatile food and energy prices, came out in line with expectations, however, pointing to persistent, but easing inflation pressures. The new inflation data figures suggests that future interest rate cuts may be slower to come.

This move up in CPI is an absolute reminder of the unpredictable nature of economic recovery.

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Sudden sell-off confounds analysts – is it profit taking or economic woe?

Wall Street

The Nasdaq and Dow hit new all-time highs in recent days and the S&P 500 is hot on their heels.

After nine straight days of gains, Wall Street suddenly reversed an hour and a half before the closing bell on Wednesday 20th December 2023.

The sell-off expanded into Asia overnight, with Japan’s Nikkei 225 leading losses, before stocks across Europe also slid into the red on the Thursday morning, 21st December 2023.

Some indicated Wednesday’s sell-off was as simple as investors taking profits after a nine-day mini bull run, in the absence of any obvious catalyst and with U.S. stocks widely seen as overbought.

Other market analysts pointed to a high volume of zero-day options trading as the death knell for the winning streak.

Time left for a Santa rally?

Markets have been on a tear in recent eeks and months, maybe it’s time for a breather. But some suggest U.S. equities are overbought in general – so, is this something more discerning?

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Dow Jones Industrial Average sets new all-time high

Dow Jones Index

The Dow Jones Industrial Average (DJIA) hit a new all-time high, on 13th December 2023. It closed at 36799 surpassing its previous record of 36585points that it had set on 4th January 2022. This was the fourth consecutive record close for the index.

Record high

The Dow’s record high was driven primarily by the Fed holding the interest rate at 5.5% and signalling that it expects to cut interest rates three times in 2024 to stimulate growth and inflation.

Other factors such as strong corporate earnings, optimism about the economic recovery from the COVID-19 pandemic, the emergence of AI and its effect on the economy and for a U.S. ‘soft landing’ all played their part.

Dow a bellwether for the U.S. economy

The Dow is not only a measure of stock market performance, but also a reflection of the overall health and confidence of the U.S. economy. It is often used as a benchmark for investors and analysts to evaluate their portfolios and strategies. The Dow is also closely watched by policymakers and media outlets as a measure of public sentiment and expectations.

Dow hits new all-time high

Dow hits new all-time high

The Dow, in intraday trading, continued to climb to over 37200.

More to come?

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U.S. 10-year Treasury yield hits 5% for the first time since 2007 – Dow closes down nearly 300 points

Dow

Stocks retreated Friday as a surge in the 10-year Treasury yield prompted broader concerns about the state of the economy.

The Dow Jones Industrial Average (DJIA) is one of the most widely followed stock market indices in the world. It tracks the performance of 30 large U.S. companies from various sectors, such as Boeing, Coca-Cola, Apple and Walmart.

The DJIA is often used as a proxy for the overall health of the U.S. economy and investor sentiment.

Market pressure

Lately, the DJIA has been under pressure as U.S. Treasury yields have climbed to their highest levels in over sixteen years.

Treasury yields are the interest rates that the U.S. government pays to borrow money by issuing bonds. When Treasury yields rise, it means that investors are demanding higher returns to lend money to the government, which reflects their expectations of higher inflation and economic growth.

Treasury yields

Higher Treasury yields can have a negative impact on the stock market for several reasons. Firstly, they increase the borrowing costs for companies and consumers, which can affect spending and profits.

Secondly, they make bonds more attractive as an alternative investment to stocks, which can reduce the demand for equities.

Thirdly, they can signal that the Federal Reserve may tighten its monetary policy sooner than expected, which can also dampen the stock market’s momentum.

The DJIA has fallen by more than 300 points in recent days as Treasury yields climbed above 5%, a level not seen since 2007. The rise in yields was driven by strong economic data, such as the September 2023 consumer price index (CPI), which showed that inflation remained elevated at 3.7% year-over-year. But only 1.7% off the Fed target of 2%.

Dow Johns Industrial Average close 20th September 2023

U.S. 10-year Treasury yield hits 5% for the first time since 2007 – Dow closes down nearly 300 points

The S&P 500 lost 1.26% to 4,224. The Nasdaq dropped 1.53% to 12,984. The Dow Jones Industrial Average lost 287 points, or 0.86%, to end at 33,127.28.

The yield on the benchmark 10-year Treasury crossed 5% for the first time in 16 years on Thursday 19th October 2023, a level that could easily spread through the economy by raising rates on mortgages, credit cards, vehicle loans and more. It retreated slightly from this value on Friday 20th October 2023.

Not to mention, it offers investors an attractive alternative to stocks.

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Dow up 300 points Friday, 6th October 2023 as stocks reverse sharp losses

Nasdaq

Stocks rallied Friday 6th October 2023 even after the release of stronger-than-expected U.S. jobs data and an increase in Treasury yields.

The U.S. economy added 336,000 jobs in September 2023, the Labour Department said. Economists expected 170,000 jobs. 

Confused?

Stocks posted a surprise turnaround on Friday, 6th October 2023 after initially falling on a hotter-than-expected jobs report. At its session low, the Dow had fallen some 270 points, then surged by more than 400 points at in intraday trading. The Nasdaq and the S&P 500 also lost ground too only but then quickly recovered the losses.

Unclear

Traders were unclear as to the reason for the intraday reversal. Some noted it could be the softer wage number in the jobs report that made investors rethink their earlier bearish stance. Others noted the pullback in yields from the day’s highs.

Rally

The rally may just be because the market had been extremely oversold with the S&P 500 at one point in the week down more than 8% from its high earlier this year.

Yields initially surged after the report, with the 10-year Treasury rate trading near its highest level in 16 years. The benchmark rate later eased from those levels, but was still up around 6 basis points at 4.78%.

Extreme market movements maybe here for a while yet.

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Dow drops to 33000!

Dow Jones Industrial Average (Dow) performance on 3rd October 2023.

The Dow fell more than 400 points, turning negative for the year. The main reason for the drop was the surge in U.S. Treasury yields, which reached their highest levels in 16 years.

Higher yields mean higher borrowing costs for businesses and consumers, which could hurt the economic recovery and the housing market.

S&P 500 on 3rd October 2023

Nasdaq on 3rd October 2023

The tech-heavy Nasdaq Composite gained a 0.7% on October 3rd, 2023, as some investors saw an opportunity to buy some of the high-growth stocks that had been under pressure recently.

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U.S. stock market volatility continues

Yields

The stock market has been experiencing some volatility and uncertainty in September and October 2023, as investors fret about inflation, interest rates, and the possibility of a U.S. recession.

Main facts affecting the current stock market

The month of October has produced some severe stock market crashes over the past century, such as the Bank Panic of 1907, the Wall Street Crash of 1929, and Black Monday 1987.

October has also marked the start of several major long-term stock market rallies, such as Black Monday itself and the 2002 nadir of the Nasdaq-100 after the bursting of the dot-com bubble.

The S&P 500 dropped 4.5% in September 2023 and finished the third quarter in the red.

The U.S. Treasury yield curve has been inverted for months – which is a historically strong recession indicator.

The Fed maintained interest rates at the current target range of between 5.25% and 5.5% in September 2023, but signalled that it may need to raise rates again to combat inflation.

The consumer price index gained 3.7% year-over-year in August 2023, down from peak inflation levels of 9.1% in June 2022 but still well above the Fed’s 2% long-term target.

The bond market is currently pricing in an 81.7% chance the Fed will choose not to raise rates again on 1st November 2023.

Wall Street closed down on 3rd October 2023 as the yield on the U.S. 10-year treasury rose to 4.80%, reaching its highest level since 2007.

The Dow Jones Industrial Average was down at 33002, Tuesday 3rd October 2023.

Stocks fell as investors pulled money from equities and moved it to the hot bond market.

International markets also faced significant turmoil, sending mini shockwaves through global financial centres, which reverberated in equities.

The dollar rose to the highest since December and is heading towards the twelfth positive week in a row.

Uncertainty

Uncertainty in the U.S. political system is having a major affect too. Especially with the ousting of the speaker and the real fear of a government shutdown looming large.

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October and the stock market

Doom & Gloom

1987 October stock market crash

October is a special month in the stock market for several reasons. It is the month when some of the most spectacular market crashes have occurred, such as in 1929 and 1987. 

However, it is also a month that has historically performed well on average, with a 0.6% price gain for the Dow Jones Industrial Average from 1928 to 2022. 

The month of October also marks the beginning of a seasonal pattern that favours stocks, as the fourth quarter and the winter months tend to see strong rallies. The ‘Santa’ rally may also visit.

Swings

However, October can also be a volatile month, with significant swings in both directions. It is the only month where all major indices have recorded losses of at least 17% (in 1987 and 2008), but also the month where the S&P 500 and the Dow Jones Industrial Average have posted their highest percentage gains of any month (in 1974 and 2022).

Therefore, investors should be prepared for potential turbulence and seek professional advice to navigate the market. Do your research!

RESEARCH! RESEARCH! RESEARCH!

Read-all-about-it, 1987 October stock market crash!

Additionally, October may face some special factors that could affect the market performance this year, such as the ongoing strike action, the rising inflation and interest rates, and the political uncertainty in the U.S. over the debt ceiling and government spending. These factors could create headwinds or even opportunities for different sectors and industries, depending on how they are resolved.

Summary

In summary, October is a month that has a mixed reputation in the stock market, with both risks and rewards. Investors should be aware of the historical trends and the current events that could influence the market direction.

Doom & Gloom
‘How bad can October really get?’ ‘Remember the 1987 crash?’
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An August U.S. stock market stumble, or more?

Eurozone interest rates

August typically a rocky month

The U.S. stock market has experienced a 5.6% slide for the S&P 500 index over 15 trading sessions through 17th August 2023 and levelling off in the last trading day of that week. 

This is about as bad as August typically gets, as August is a rocky month with low volume and high volatility. Some of the reasons for the pullback include the rise in the 10-year Treasury yield, the strengthening of the U.S. dollar, and the signs of a slowing Chinese economy.

Pullback temporary for August?

However, some analysts argue that the pullback will likely prove to be temporary and not turn into a serious market rout. It has been suggested that the bull run isn’t quite over just yet, and that a 10% ‘pullback’ was on the cards.

Analysts also suggest that the rise in yields would need to threaten a serious shift or there would need to be an additional shock to cause a larger selloff. 

NASDAQ

NASDAQ drops some 7% in one month from 19th July – 18th August 2023

However, some suggest that the market is showing signs of stability, as the speed of the surge in the 10-year yield often occurs near the end of a selling cycle for equities. Investors should watch for indicators such as oil prices, wage pressures, and inflation expectations to gauge the market sentiment.

The S&P 500 and the Dow levelled off the week at the close of trading Friday 18th August 2023.

The NASDAQ did score its best first half of the trading year since 1983 January to June 2023 so a pullback was likely to happen.