The Dow Jones Industrial Average (DJIA) experienced a decline on Tuesday as US markets returned from the holiday weekend. The major equity index dropped by three-quarters of a percent, with healthcare and biotech stocks listed on the Dow Jones leading the losses. The Consumer Confidence Index and inflation outlook have both increased in May, making it challenging for the Federal Reserve (Fed) to implement rate cuts as quickly as investors hope for. The Fed’s options for lowering interest rates have been limited due to positive economic activity and consumer fears of inflation.
All four health-related stocks listed on the Dow Jones saw significant declines on Tuesday, contributing to the overall drop in the index. The Consumer Confidence Index rose to 102, exceeding expectations, and the 12-month inflation expectations also increased to 5.4%. Investors are now focusing on upcoming economic indicators such as the US Annualized Q1 Gross Domestic Product (GDP) and the Core US Personal Consumption Expenditure (PCE) inflation.
In terms of individual stocks, Merck & Co Inc. (MRK) and Amgen Inc. (AMGN) experienced notable declines, dragging the Dow Jones lower. The index fell below key support levels, indicating further potential downside in the near future. The Dow Jones is currently trading below the 200-day Exponential Moving Average (EMA) and is approaching the 50-day EMA, suggesting a bearish outlook for the index.
Investors are closely monitoring economic indicators such as the Core Personal Consumption Expenditures (PCE) Price Index, which measures changes in prices of goods and services purchased by consumers in the US. The PCE Price Index is the Fed’s preferred inflation gauge, and a high reading is bullish for the US Dollar (USD), while a low reading is bearish. Overall, the Dow Jones is facing challenges due to the ongoing uncertainties surrounding interest rate cuts and economic indicators, leading to increased volatility in the market.
