The Dow Jones Industrial Average (DJIA) experienced a drop of over 0.29% or 100 points in early trading on Monday during the North American session. The financial markets are anticipating continued volatility as the US presidential election remains a close race, and fluctuations in the polls could lead to increased market uncertainty.
The ongoing US elections are playing a significant role in influencing the financial markets. Recent polls indicate that Democrat Vice President Kamala Harris and Republican former President Donald Trump are closely contesting the White House for 2024 to 2028. This has resulted in Wall Street trading negatively, with the CBOE Volatility Index (VIX) rising above 20.00, signaling heightened nerves among investors.
In the midst of this, US Treasury yields have seen losses across different maturities of the yield curve, while the US Dollar Index (DXY) has dropped by 0.47% to 103.84.
Factory Orders in the US for September showed a MoM decline of -0.5%, which was more than the estimated -0.4% decrease but an improvement from the previous month’s -0.8% contraction. Despite this data release, the focus remains on the US election and the upcoming FOMC monetary policy decision on Thursday, with expectations of a 25 bps rate cut and a subsequent press conference by Federal Reserve (Fed) Chair Jerome Powell.
The CME FedWatch Tool indicates a 98% likelihood of a 25 bps rate cut by the Fed, which would leave rates in the range of 4.50%-4.75%. Additionally, the US economic calendar will be packed with important releases like the Balance of Trade, S&P and ISM Services PMIs, Initial Jobless Claims, and the University of Michigan (UoM) Consumer Sentiment.
In recent development, Nvidia (NVDA) is set to replace Intel (INTC) in the Dow Jones, as announced by the S&P, for better representation in the semiconductor industry. Sherwin Williams (SHW) will also replace Dow (DOW) in the materials sector. These changes are expected to come into effect before the market opens on Friday, November 8.
Following this news, NVDA shares surged by 2%, while INTC saw a decline of over 4%. SHW stocks also jumped by 4% on the announcement. In terms of individual stock performance within the DJIA, Home Depot (HD) gained 0.50%, Boeing (BA) was up 0.25%, and Walmart (WMT) saw a minimal 0.17% increase. On the downside, Intel, Dow, and UnitedHealth Group (UNH) faced losses during the trading session.
Looking ahead, the Dow Jones is currently below the 42,000 threshold after a recent peak, suggesting a potential move towards support levels. If the index closes below 42,000, it could target support levels around 41,574 and 41,564. On the other hand, a daily close above 42,000 could lead to a challenge of resistance levels at 42,122 and 42,460, with further targets at 42,500 and 43,000.
In conclusion, the Dow Jones Industrial Average is experiencing volatility amidst the ongoing US elections and other economic factors. With upcoming events like the FOMC decision and various economic data releases, investors and traders will closely monitor market developments for potential opportunities. The recent changes in the Dow Jones constituents reflect the evolving landscape of the financial markets, as companies like Nvidia and Sherwin Williams are set to play a more prominent role in the index.
