- The Dow Jones rose slightly on Friday to close out the week on the high side.
- Equities wrestled with tariffs, earnings and geopolitical headlines this week.
- Indexes recovered their footing after a choppy midweek pullback.
The Dow Jones Industrial Average (DJIA) found a bit of room on the high side on Friday, adding a little over 100 points to close out a back-and-forth week. United States (US) President Donald Trump’s long-awaited tariffs have come into effect, and markets are either bracing for fallout or hoping for another delay, in equal parts.
Despite recently tapping record highs near 45,130, the Dow Jones is struggling to maintain firm bullish momentum, with price action trapped near the 44,000 handle. The Dow is still finding a technical floor near the 50-day Exponential Moving Average (EMA), currently drifting above 43,700, but the next leg could land in either direction with the Relative Strength Index (RSI) stuck in the middle near 50.00.
Tariffs on… again?
With the Trump tariffs now in play, investors will be watching to see how the US’s newfound trade policy stance will play out. President Trump has threatened a tariff of 100% on all imported semiconductor microchips but added the caveat that chip tariffs will be waived for any company that “builds in the US”. For their part, tech companies have promised huge swaths of investment cash in the future for US-based manufacturing, spearheaded by Apple (AAPL), which has pinky-promised to invest up to $600B in US business development at some point in the next five years or so. Apple shares rose 4.5% on Friday, testing $230.00 per share.
There’s a chance that Trump’s tariffs could hit fast and early in the Gold market in particular. XAU/USD prices, which were already climbing ahead of Donald Trump’s tariff deadline, rose above $3,400 per ounce on Thursday after the Financial Times reported that some of the Trump tariffs could impose a levy on imported Gold bars, and could reach back and include pre-tariff sales that occurred between April and August.
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Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key 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. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits 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 exits.
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 in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.