The Dow Jones Industrial Average struggled to maintain gains on Friday as investors reacted to a forecast-thumping Nonfarm Payrolls report. Despite briefly climbing into a 0.2% gain, the index later slipped back into a -0.2% decline, shedding almost 90 points by the end of the trading day. The US added 272,000 new jobs in May, surpassing expectations of 185,000 and marking the third-best monthly job gains. Additionally, US wages rose faster than expected, with Average Hourly Earnings increasing by 0.4% month-over-month. However, the Unemployment Rate also ticked up to 4.0%, dampening hopes for a rate cut in September.
Following the strong US economic data, chances of a Federal Reserve rate cut in September have diminished significantly. Rate traders are now pricing in less than a 50% probability of a quarter-point rate trim, down from the previous 70% odds. The positive economic indicators have led investors to reassess their expectations for Fed policy changes. Despite this, market sentiment remains uncertain as the Dow Jones continues to fluctuate and waffle after falling from record highs.
In terms of specific stocks, 3M Co. saw gains of nearly 2.7% on Friday after being upgraded to a “buy” rating by Bank of America analysts. On the other hand, Unitedhealth Group Inc. tumbled -2.24% following a shareholder lawsuit related to securities fraud between March 2022 and February 2024. The Dow Jones tested the 39,000 handle in intraday trading on Friday but was unable to sustain the gains, falling back below the day’s opening range near 38,880. The index continues to trade within a firm demand zone between 38,000 and 37,500 while remaining above the 200-day EMA.
The Dow Jones Industrial Average, established by Charles Dow, is composed of the 30 most traded stocks in the US and is price-weighted rather than weighted by market capitalization. Factors driving the DJIA include the performance of its component companies, macroeconomic data, interest rates set by the Fed, inflation, and other metrics influencing Fed decisions. The Dow Theory, developed by Charles Dow, is used to identify the primary trend of the stock market by comparing the movement of the DJIA and the Dow Jones Transportation Average. Traders have various options for trading the DJIA, including ETFs, futures contracts, options, and mutual funds.
In conclusion, the Dow Jones Industrial Average faced volatility on Friday following the release of strong US economic data, leading investors to reassess expectations for Fed rate cuts. Despite gains in new jobs and wages, the index struggled to maintain momentum, reflecting uncertainty in the market. As investors continue to monitor economic indicators and Fed policy, the Dow Jones remains in fluctuation, hovering above key support levels while the future outlook remains uncertain.
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