Market Data 
- Dow Jones recovers risk appetite as Fed holds rates.
- Equities leaning bullish after Fed guidance soothes market rate fears.
- NFP Friday will solidify market outlook on US labor market.
After this week’s backslide, the Dow Jones Industrial Average (DJIA) is gaining ground after the Federal Reserve (Fed) held rates as broadly expected but leaned into the recent rate outlook despite a lack of firm progress on recent inflation figures.
Powell speech: Unlikely that next policy rate move would be a hike
The US ISM Manufacturing Purchasing Managers Index (PMI) for April came in softer than expected, but Wednesday morning’s April ADP Employment Change came in above forecasts. Despite a declining US economic outlook, a tight labor market makes it difficult for the Fed to adjust policy rates without drastic knock-on effects that could include re-igniting inflation, which still remains higher than many hoped.
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Dow Jones news
Of the 30 securities that comprise the Dow Jones, most are now in the green after starting Wednesday on soft footing. Johnson & Johnson is leading the charge up the boards, climbing around 5% to $151.72 per share, followed closely by Amazon.com Inc. (AMZN), climbing 4.5% to $183.16 per share. On the downside, Nike Inc. (NKE) is still struggling on Wednesday, falling around a full percent to $91.37 per share.
Dow Jones technical outlook
The Dow Jones continues to struggle with the 38,000.00 handle, kicking Wednesday off with a dip to 37,708.46 before recovering into the previous day’s closing bids. The major equity index continues to trade into the low side, eating away at chart paper as the Dow Jones heads back towards the 200-day Exponential Moving Average (EMA) at 36,780.70.
The Fed sparked a near-term bullish bid, driving the Dow Jones back towards the 38,000.00 handle,
Dow Jones five-minute chart
Dow Jones daily chart
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
