- The Dow Jones Industrial Average is up 1.17% so far this week.
- DJIA futures advanced 0.5% in Friday’s premarket.
- Walgreens Boots Alliance gained 9% on earnings.
- 34,600 remains the primary target for bulls to overcome.
- US Q1 GDP was revised higher to 2% annualized on Thursday.
The Dow Jones Industrial Average (DJIA) it bounced back this week after last week’s downtrend. There has been a lot of positive economic data this week, and on Thursday US Q1 GDP was revised down from 1.3% to 2%. The surprise cemented the view on Wall Street that a “soft landing” was indeed a reality.
On Friday, the DJIA rose 0.8% after opening, matching Thursday’s best performance of the week. The S&P 500 is even better, up 1.1%, and the NASDAQ is up 1.5% so far.
Dow Jones News: Economy Grows 1.3% to 2% in Q1
In the second half of 2022, the US economy moved from 3.2% annualized growth in Q3 to 2.9% in Q4. This was seen at the time as a sign that the Federal Reserve’s rate hikes were beginning to work as intended. When the economic office Analysis (BEA) released its preliminary Q1 GDP data of 1.3% earlier this year, the sudden drop was taken as further evidence that a recession was on the way.
Then on Thursday, the BEA revised the figure for the 1st quarter up to 2%. Now suddenly it seems that the worries are misplaced. Better economic results also seem to match the number of decent jobs that have emerged in recent months.
The Conference Board’s consumer confidence index beat expectations earlier this week. June’s figure was actually the highest in 18 months. OUR Sale of new houses it also beat expectations for a decline. In addition, France, Spain and Italy all reported positive reductions in headline inflation this week, demonstrating that more stable prices are once again becoming the norm among OECD countries.
This is another good news for the Dow Jones. The faster inflation falls while economic growth remains on a clear growth path, the faster Fed lowers interest rates. Powell walked Capitol Hill last week and reiterated his expectation of two more rate hikes in the second half of the year. However, further data confirming the soft landing will continue to give investors the impression that they have already seen the terminal rate.
Walgreens Boots Alliance continues long-term destruction with quarterly results
Dow stocks Walgreens Boots Alliance (WBA) reported earnings on Tuesday, July 27, which only continued the saga of the failing behemoth. Shares of Walgreens fell more than 9% to their lowest price level since September 2010 after it cut its full-year earnings outlook by more than 10%.
Earnings in the quarter came in ahead of consensus, but the 7-cent earnings-per-share miss left investors with further evidence that Walgreens has lost its competitive edge. The drugstore chain has announced the closure of 150 branches in the US and another 300 in the UK. The company began closing stores in 2015 to cut costs, but the closings grew into a 9-year theme.
Now, many analysts think Walgreens will soon be delisted from the Dow Jones, losing much of its stockholders who own it through index funds and ETFs. Deutsche Bank downgraded Walgreens and lowered its price target to $34 from $46 after the earnings.
Frequently asked questions about the Dow Jones
The Dow Jones Industrial Average, one of the oldest stock indexes in the world, is made up of the 30 most traded stocks in the US. The index is weighted by price rather than capitalization. It is calculated by adding the prices of individual stocks and dividing them by a factor that is currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years, it was criticized for not being representative enough, tracking only 30 conglomerates, unlike broader indexes such as the S&P 500.
The Dow Jones Industrial Average (DJIA) is driven by many different factors. The main one is the aggregated performance of individual companies published in the companies’ quarterly earnings reports. US and global macroeconomic data also contribute as they impact investor sentiment. The level of interest rates set by the Federal Reserve System (Fed) also affects the DJIA because it affects the cost of borrowing, on which many companies are heavily dependent. Therefore, inflation can be a major driver, as well as other metrics that influence the Fed’s decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. The 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 the confirming criterion. The theory uses elements of peak and minimum analysis. Dow theory assumes three phases of a trend: accumulation, when the smart money starts buying or selling; public participation when the wider public joins in; and distribution when the smart money leaves.
There are several ways to trade the DJIA. One is the use of ETFs, which allow investors to trade the DJIA as a single security, rather than having to buy shares of all 30 companies that make it up. A prime example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts allow 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 allow investors to buy a share of a diversified portfolio of DJIA stocks, thereby providing exposure to the overall index.
What They Said About Dow Jones – Kristina Hooper
Kristina Hooper, Global Market Strategist at Invesco, predicted this week that the US economy will avoid a full recession. Growth may remain uneven but should pick up in 2024, Hooper said.
“We still believe the US is likely to avoid a major deep recession. Instead, we expect some weakening in the second half of this year as policymakers hit a bumpy landing, but we expect activity to remain relatively resilient nonetheless.
Dow Jones Forecast
The Dow Jones has moved back to the 34,200 to 34,600 resistance zone. This region has pushed prices down at least seven times in the past seven months. Bulls need to break and close above 34,600 on the weekly chart to spark a real rally. A close higher would likely make the 35,500 level another bullish target
The 32,600 to 32,800 range remains the area of support for now. The 9-day simple moving average (SMA) looked like it was poised to break below the 21-day SMA last week, but now the rally seems to be back again. Breaking 34,600 is really all that matters. A break and close higher will be greeted with a rush into the index, while failure will automatically lead to a sell-off.