- Dow Jones recovers into fresh high but action remains tight.
- US equities broadly higher on Monday, but momentum is limited.
- Fedspeak to dominate headlines with quiet economic calendar this week.
The Dow Jones Industrial Average (DJIA) managed to gain some ground in today’s quiet trading session, following the volatility caused by last week’s Nonfarm Payrolls (NFP) report. However, the market is still showing signs of weakness, with some stocks keeping the averages in check.
Fedspeak will be the key driver this week as investors try to pin down the likelihood of accelerated rate cuts from the Federal Reserve (Fed). The economic calendar is notably thin from the US this week, though traders will watch for Friday’s consumer sentiment survey results from the University of Michigan. The UoM Consumer Sentiment Index for May is expected to tick down to 77.0 from 77.2.
Dow Jones news
The Dow Jones is up a scant sixth of a percent on Monday as investors recover risk appetite on renewed hopes of Fed rate cuts, but upside momentum remains tight. Around half of the 30 securities that make up the Dow Jones Industrial Average are down or flat on the day.
Walt Disney Co. (DIS) leads the top of the Dow Jones gainers on Monday, climbing around 2% and trading near $116.00 per share ahead of Disney’s latest earnings report due Tuesday morning. On the low side, Amgen Inc. (AMGN) fell nearly 4% as traders pull back from the biotech stock following last week’s surge. Amgen is due to bring its own weight loss drug to market, a category of drugs that have seen wild demand surges and investors initally bet that Amgen would be able to carve out some of the high-demand drug market.
Dow Jones technical outlook
The Dow Jones climbed in early Monday trading to test a fresh daily high at 38,872.18 before a midday pullback to 38,687.46. The DJIA continues to trade north of 38,700.00 as equities look for firmer gains.
Longer-term, the Dow Jones is still trading into bullish territory above the 200-day Exponential Moving Average (EMA) at 36,798.86. Despite long-run bullish momentum, the Dow Jones has struggled to recover ground after falling back from March’s record peaks near the 40,000.00 price handle.
Dow Jones five-minute chart
Dow Jones daily chart
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
