Dow Jones Industrial Average climbs 350 points on risk-on Friday

FXStreetSep 14, 2024 7:47 AM

The Dow Jones is grinding its way back into record bids on Friday.
US markets are leaning firmly into bets of a 50 bps cut from the Fed.
Mixed US sentiment figures keep investor sentiment on the high side.

The Dow Jones Industrial Average rallied for a third straight day on Friday, climbing around 350 points and coming within reach of record highs above 41,500 as market sentiment tilts further into rate cut hopes. According to the CME’s FedWatch Tool, rate traders are pricing in a 45% chance of an initial 50 bps rate cut from the Federal Reserve (Fed) when the US central bank gathers to make its rate decision on September 18.

The University of Michigan’s Consumer Sentiment Index rose to 69.0 in September, reaching a four-month high as surveyed consumers’ outlook on the US economy slowly improves following months of declining economic expectations. The upside tilt in UoM survey results helped to anchor rate cut expectations heading into next week, despite the UoM also noting an uptick in 5-year Consumer Inflation Expectations to 3.1% in September from the previous 3.0%.

US Export and Import Price Indexes also declined sharper than expected in August, with the Export Price Index printing a -0.7% contraction versus the expected -0.1%, reversing the previous month’s 0.5% as inflation pressures appear to ease in trade conditions. The MoM Import Price Index in August contracted 0.3%, below the expected -0.2% and down from the previous period’s 0.1%.

Dow Jones news

With equities leaning firmly into rate cut hopes, the Dow Jones equity index is broadly in the green on Friday, with all but three of the DJIA’s constituent securities on the rise to wrap up the trading week. Gains are being led by Caterpillar Inc (CAT) and Home Depot Inc (HD), with both stocks climbing nearly 2% for the day. Caterpillar is testing above $346 per share while Home Depot is breaking above $381 per share for the first time since March.

Elsewhere on the Dow Jones, Boeing Co (BA) is facing steep declines on Friday, tumbling to a daily performance of -3.5% and falling to $157 per share as the airplane manufacturer sees its first worker strike in over 15 years.

Dow Jones price forecast

The Dow Jones is within a stone’s throw of fresh all-time highs, testing into 41,500 with eyes on late August’s current record high bid of 41,574. The Dow Jones has rallied nearly 4% in the last three days, recovering from a near-term plunge below the 50-day Exponential Moving Average (EMA), catching a technical bounce from 39,989.

Dow Jones daily chart

Economic Indicator

Michigan Consumer Sentiment Index

The Michigan Consumer Sentiment Index, released on a monthly basis by the University of Michigan, is a survey gauging sentiment among consumers in the United States. The questions cover three broad areas: personal finances, business conditions and buying conditions. The data shows a picture of whether or not consumers are willing to spend money, a key factor as consumer spending is a major driver of the US economy. The University of Michigan survey has proven to be an accurate indicator of the future course of the US economy. The survey publishes a preliminary, mid-month reading and a final print at the end of the month. Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

Why it matters to traders?

Consumer exuberance can translate into greater spending and faster economic growth, implying a stronger labor market and a potential pick-up in inflation, helping turn the Fed hawkish. This survey’s popularity among analysts (mentioned more frequently than CB Consumer Confidence) is justified because the data here includes interviews conducted up to a day or two before the official release, making it a timely measure of consumer mood, but foremost because it gauges consumer attitudes on financial and income situations. Actual figures beating consensus tend to be USD bullish.

Reviewed byTony

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