Dow Plunges on Trade Fears Despite Upbeat CPI
- Good news for investors! The Dow Jones showed some early pep on Wednesday as US CPI inflation cooled off more than anticipated.
- However, that positive vibe didn’t last long. Market worries about trade wars quickly resurfaced, casting a shadow again.
- Those global tariffs on steel and aluminum? They’re expected to hit US consumers right in the wallet.
Wednesday saw the Dow Jones take a hit, dropping around 150 points. Why? Trade war jitters are back in a big way. The US has just slapped a 25% tariff on steel and aluminum imports from pretty much everywhere, and it’s US consumers who are likely to feel the pinch. And get this – officials are hinting that copper and other key goods could be next in line for tariffs.
On the brighter side, US inflation, as measured by the Consumer Price Index (CPI), actually cooled down more than expected in February! Headline CPI dipped to 0.2% month-over-month and 2.8% year-over-year – a bit better than what market watchers were predicting. While inflation is still higher than the Federal Reserve’s (Fed) 2% target, this cooler number gave a little boost to hopes that the Fed might still have room to maneuver with interest rates down the road. In fact, according to the CME FedWatch Tool, rate markets now think there’s a better-than-even chance the Fed will cut rates as soon as June, shifting from previous expectations of a July move.
Believe it or not, it’s been almost four years since we last heard the word “transitory” thrown around when talking about US inflation. And aside from a brief dip in the third quarter of 2024, top-level inflation numbers haven’t really budged much from where they were back in June 2023. That’s when the post-Covid inflation rate first eased to around 3% annually.
For those keeping a close eye on commodities, February’s CPI report, while cooler overall, still has some potential red flags. Think of it like this: while gasoline and heating oil prices did drop – falling 3.1% and 5.1% year-over-year respectively – natural gas prices jumped a hefty 6%. And shelter costs? They keep climbing, up another 4.2% year-over-year. Even a slight 0.3% dip in new car prices couldn’t hide the fact that food prices are still accelerating upwards, rising 2.6% compared to last year.
Despite that slightly encouraging CPI report, market pessimists weren’t buying it on Wednesday. The Dow Jones initially popped up a bit in early trading, but quickly lost steam. Sellers returned, driven by concerns over the US administration’s newly imposed 25% tariff on steel and aluminum imports. Trade war anxieties are definitely simmering on the front burner, and US Commerce Secretary Howard Lutnick even warned that more protectionist measures, possibly on copper, could be coming down the pike.
Dow Jones news
On Wednesday, about two-thirds of the stocks in the Dow Jones Industrial Average were in negative territory. However, some of those losses were cushioned by a rebound in Nvidia (NVDA), the darling of the tech rally that’s been a bit beaten down recently. Nvidia bounced back with a 5.6% gain, pushing back up to $115 per share as the company gears up for its big GTC AI conference next week.
On the downside, Verizon Communications (VZ) took a 3.3% tumble, falling below $42 a share. McDonald’s (MCD) also had a rough day, down 2.7%, which pulled the fast-food giant below the $300 mark for the first time since early February.
Dow Jones price forecast
It was a bit of a seesaw day for the Dow Jones on Wednesday. We saw it dip to new 26-week lows, testing the critical 41,000 price level. However, buyers seem reluctant to completely throw in the towel, suggesting this might be a potential turning point around that key number. Overall, the DJIA is still down about 3.5% for the week so far, and if you look back to last November’s record highs, we’re now over 8% lower, edging closer to what’s considered correction territory.
Dow Jones daily chart
Dow Jones FAQs
Ever wondered what the Dow Jones Industrial Average really is? Well, it’s one of the granddaddies of stock market indices, tracking 30 of the most actively traded companies in the US. Interestingly, it’s based on price-weighting, not market cap. The calculation is pretty straightforward: add up the stock prices of those 30 companies and divide by a special number (currently around 0.152). Charles Dow, who also founded the Wall Street Journal, cooked up the index way back when. Over time, some folks have pointed out that it might not be fully representative of the broader market since it only looks at 30 big players, unlike wider indices like the S&P 500.
What makes the Dow Jones Industrial Average (DJIA) tick? Lots of things, actually! A big one is how the companies within the index are doing – you’ll see that reflected in their quarterly earnings reports. Broader economic news, both in the US and globally, also plays a role because it shapes how investors are feeling. And interest rates, set by the Federal Reserve (Fed), are a major factor too, as they impact how much it costs companies to borrow money, something many of them rely on. So, inflation and other economic indicators that influence the Fed’s decisions are also important drivers for the DJIA.
Heard of Dow Theory? It’s a way to try and figure out the main direction of the stock market, developed by, you guessed it, Charles Dow. One of the key ideas is to compare the Dow Jones Industrial Average (DJIA) with another index, the Dow Jones Transportation Average (DJTA). According to the theory, you should only trust a trend if both indices are moving in the same direction. Trading volume also comes into play to confirm the trend. The theory looks at peaks and troughs in price movements and suggests the market moves in three phases: accumulation (where smart money starts to make moves), public participation (when everyone else jumps in), and distribution (when the smart money takes profits and exits).
Want to trade the DJIA? You’ve got a few options! Exchange Traded Funds (ETFs) are a popular way – they let you trade the entire Dow Jones as easily as buying a single stock, instead of having to buy shares in all 30 individual companies. A well-known example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts let you bet on where the index will be in the future, and options give you the right, but not the obligation, to buy or sell the index at a set price later on. Mutual funds also offer a way to invest in a mix of DJIA stocks, giving you broad exposure to the index.
