The Dow Jones Industrial Average (DJIA) is poised to end the trading week close to where it started, with price action toppling familiar territory around the 47,500 region. Despite the Federal Reserve (Fed) delivering a widely expected interest rate cut this week and the Dow posting a new record just north of 48,000, equity markets are generally unimpressed. Bullish momentum has been thin throughout the week, with disappointment over the Fed’s cautious rate-cutting tone offset by hopes that the recent resurgence of US-China trade tensions will be tempered by the Trump administration’s general reluctance to follow through on its own threats.
AI spending remains both the golden goose and the Achilles heel of the ongoing tech rally. Key technology giants delivered strong earnings on the back of ever-expanding demand for hardware architecture to meet the bottomless demand for hardware and storage solutions for learning models. A notable lack of profit generation at the very point of contact between AI solution providers and the general market remains worryingly stagnant.
AI costs continue to rise, good news for shovel sellers
Amazon ( AMZN ) saw a strong Friday rally that single-handedly lifted key indexes into the green for the day, rising after noting a 20% increase in its cloud computing unit’s revenue in the third quarter. On the other side of the same coin, Facebook parent Meta Platforms ( META ) saw some declines throughout Friday’s US market session after quietly revealing that its spending in the LLM space has risen to tens of billions of dollars, functionally showing no revenue for its continued investment in catching up with other, more established competitors that remain equally unprofitable costs.
The recent flare-up in trade tensions between the US and China appears to have subsided for the time being. While nothing is official and no paperwork currently exists on a joint trade strategy for the Trump administration, talks between US President Donald Trump and Chinese President Xi Jinping appear to have been at least hypothetically successful, with both sides agreeing to cool recent protectionist threats for a one-year grace period. China has yet to remove any of the trade restrictions it recently imposed or make purchases of US agricultural products to the extent it promised. In return, Donald Trump has promised not to introduce new tariffs and trade restrictions that have not yet come into effect. How the trade truce will develop remains to be seen.
Dow Jones Daily Chart
Frequently Asked Questions About Dow Jones
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is composed of the 30 most traded stocks in the United States. The index is price weighted rather than capitalization weighted. It is calculated by summing the prices of the permanent shares and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In recent years, it has been criticized for not being broadly representative enough because it tracks only 30 conglomerates, unlike broader indexes such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The overall performance of the component companies, revealed in quarterly corporate earnings reports, is the most important. US and global macroeconomic data also contribute as it influences investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also affects the DJIA, as it affects the cost of credit, which many companies rely heavily on. Therefore, inflation can be a significant driver as well as other metrics that influence the Fed’s decisions.
Dow Theory is a method of identifying the primary trend of the stock market developed by Charles Dow. An important step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. The volume is a confirmatory criterion. The theory uses elements of peak and trough analysis. Dow’s theory indicates three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution when the smart money disappears.
There are a number of ways to trade the DJIA. One is to use ETFs, which allow investors to trade the DJIA as a single security, rather than having to buy shares of all 30 companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts allow traders to speculate on the future value of the index, and options give the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds allow investors to buy a share of a diversified portfolio of DJIA stocks, providing exposure to the overall index.