- The Dow Jones lost more than 500 points during the midweek trading session.
- Investors were hesitant after the US PMIs showed a combination of positive and negative results, and essential earnings reports fell short of expectations.
- US Manufacturing is expected to experience a further slowdown, while Services PMIs showed expansion.
On Wednesday, the Dow Jones Industrial Average (DJIA) experienced a significant decline of more than 500 points as a result of the release of the figures for the United States Purchasing Managers Index (PMI), which were a combination of positive and negative results. This sudden reversal completely contradicted the predictions that were made earlier. Meanwhile, the interest rate markets continue to indicate that there is a strong likelihood that the Federal Reserve (Fed) will reduce interest rates in September.
The stock markets in the United States experienced a slight decline recently. With that being said, the upcoming calendar prints for the rest of the week will be subjected to additional strain as a result of an imbalanced release of economic data.
The Purchasing Managers’ Index (PMI) for the Manufacturing sector in the United States for July dropped to 49.5, showing a return to contraction territory for the first time since January. This represented a decrease from the reading of 51.6 recorded the previous month, which was higher than anticipated. The results of the US Services PMI survey, on the other hand, skyrocketed to a 26-month high of 56.0, surpassing the previous reading of 55.3 and significantly exceeding the predicted decline to 54.4.
A combination of positive and negative PMI data failed to boost overall market sentiment, which led to a decline in equity prices and caused investors to prepare for upcoming important data releases due to the United States. These releases are scheduled to take place later this week. It is anticipated that the Gross Domestic Product (GDP) for the second quarter will increase to 2.0% from the previous 1.4% on Thursday. On the other hand, the quarter-over-quarter GDP figure for the second quarter is anticipated to decrease to 2.6% from the last 3.1%.
The PCE inflation data release on Friday will be the most important economic indicator of the week. If the core PCE Price Index falls short of expectations, investors may react by either becoming more cautious and seeking safer investments or by taking on more risk in the hopes of a potential rate cut. It is anticipated that June’s year-over-year core PCE inflation will decrease slightly to 2.5% from 2.6%, while the month-over-month figure is expected to remain unchanged at 0.1%.
Latest updates from Dow Jones
Significant discrepancies in earnings reports for major stocks led to a retreat among investors during the latter part of Wednesday’s trading session, resulting in substantial declines in the Technology and Communication Services sectors.
Approximately two-thirds of the Dow Jones index stocks experienced declines on Wednesday, with Intel Inc. (INTC) leading the way by dropping 3.8% to $31.70 per share for most of the day. Nevertheless, Visa Inc. (V) experienced a sudden decline, plummeting by 4.0% in a single day to reach a price of $254.17 per share.
Technical analysis of the Dow Jones
The Dow Jones is continuing its decline from record levels as the index retraces towards the 40,000.00 mark. Last week, the DJIA reached an all-time high of 41,371.38, but it is currently experiencing a slight decline of -3.5%.
A significant retracement is expected to test the 50-day Exponential Moving Average (EMA) at 39,472.52, while the 200-day EMA at 37,862.50 serves as a solid long-term support level.