The Dow Jones Index declined for the third successive session on Thursday reading 41,860 points at the time of writing, as concerns mount over the health of the US economy. Traders are currently weighing the implications of the House of Representatives narrowly passed President Donald Trump’s tax bill that could potentially add $3.8 trillion to the current $36.2 trillion Federal debt. Risk aversion has declined significantly in recent days, underlined by Bitcoin’s rise to an all-time high price above $111k.
Six of the top ten weighted stocks in the Dow Jones Index registered declines on Wednesday, with only two of the thirty-stocks in the index recording gains of more than 1%. Yields on benchmark 10-year US Treasury bonds have risen to 4.69% as of this writing, hitting three-month highs.
The rising yields have made the safe haven assets more attractive than high-risk equities, putting downward pressure on equities, hence the downward pressure on the Dow Jones Index. Also, there are concerns over higher-for-longer Fed interest rates, which could keep inflation elevated. However, the Dow has support from Initial Jobless Claims figures released on Thursday, which came in at 227k, lower than analysts forecast figure of 230k.
Later on Thursday, S&P Global PMI and New Home Sales figure will inject fresh propulsion into the Dow Jones Index momentum. Also, FOMC Member John Williams will speak, and traders will be keen to pick cues on Fed interest rate policy direction ahead of next week’s release of Personal Consumption Expenditure (PCE) figures.
Dow Jones Index Forecast
Dow Jones Index pivots at 41,920 points and the momentum currently points to the downside. The first support will likely be at 41,690 points. However, an extended control by the sellers will break below that level and could potentially send the action lower to test 41,490 points.
Alternatively, the Index could shift to the upside if it breaks above 41,920 points. That will likely see the first resistance encountered at 42,100 points. Breaking above that level will invalidate the downside narrative and could potentially send the index lower to test 42,320.
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