After a night of rough trading, the Dow Jones is finding it hard to stand firm. The Trump administration’s recent announcement regarding tariffs has sent U.S. stocks tumbling, sparking a whirlwind of investor uncertainty, with markets clashing head-on with the current economic growth and inflation scenarios.
The Dow Jones Industrial Average (DJIA) found itself hitting rock bottom near 40,800 following a significant overnight drop. The sweeping tariffs proposed by the Trump administration have caused a ripple of negative sentiment in the market, pushing stocks to new lows.
The Dow plummeted nearly 1,300 points from the previous day’s close, falling over 3% and dipping below the 41,000 mark for the second time in four weeks. Meanwhile, the S&P 500 has clocked in a seven-month low, dropping 225 points and losing 4% throughout overnight trading and into Thursday’s market activities. The Nasdaq Composite, focusing on technology, suffered the most, crashing 1,150 points and losing almost 6% from peak to trough in the midweek sessions.
Check out more stock news: Amazon stock takes a hit amid tariff concerns.
This tariff initiative, dubbed “Liberation Day” by the Trump administration, has sparked a global outcry. Former U.S. Treasury Secretary Larry Summers criticized the government for calculating tariffs without using proper data. According to documents from Trump’s team, tariffs are worked out by dividing a country’s net exports to the U.S. by imports from the U.S. and then halving that figure, with a minimum tariff floor set at 10%. This peculiar calculation method even led to a 10% “reciprocal” tariff on the uninhabited territory of Heard Island and McDonald Islands, home only to penguins.
President Trump has signed off on a straightforward 10% tariff on all imports starting April 5, with the calculated “reciprocal” tariffs to follow on April 9.
Fitch Ratings warns that this is just the beginning. They believe U.S. economic growth will likely fall short of their already-revised-down forecast from March. The repercussions from these tariffs are expected to extend to the Federal Reserve, with Fitch suggesting that interest rate cuts might be on hold longer than anticipated as the Fed waits to gauge the tariffs’ impact on inflation and employment.
However, interest rate traders remain unfazed. According to the CME’s FedWatch Tool, the market is pricing in four Fed rate cuts by year’s end, despite officials adopting a more cautious tone lately to manage expectations.
Adding to the gloomy outlook, the U.S. ISM Services Purchasing Managers Index (PMI) hit a nine-month low at 50.8, dropping at one of the fastest rates since the pandemic. Business activity and consumer confidence are fizzling out as the tariffs loom, making a swift sentiment rebound unlikely.
Dow Jones price forecast
The Dow Jones is teetering on the edge. The DJIA touched a new seven-month low on Thursday, predominantly ending in the red weekly since mid-February. The 200-day Exponential Moving Average (EMA), hovering around 42,065, is likely to act as a resistance rather than support as March prices trend below this key moving average.
Dow Jones daily chart
FAQs about the Dow Jones
The Dow Jones Industrial Average, one of the world’s oldest stock market indices, includes the 30 most traded U.S. stocks. It’s price-weighted, not based on market capitalization, calculated by summing the stock prices and dividing by a factor, currently 0.152. Founded by Charles Dow, who also established the Wall Street Journal, the index has faced criticism for not being comprehensive enough compared to broader indices like the S&P 500.
Several elements drive the DJIA. Key among them is the performance of its component companies, reflected in quarterly earnings reports, along with U.S. and global economic data, which influence investor sentiment. Interest rates, managed by the Federal Reserve, also play a big role as they affect borrowing costs for corporations. Inflation is another major influencer, along with other metrics that impact Fed decisions.
Dow Theory, developed by Charles Dow, is a strategy to identify the stock market’s primary trend by comparing the DJIA and the Dow Jones Transportation Average (DJTA), tracking consistent direction between both. Volume acts as a confirmation, utilizing peak and trough analysis. The theory outlines three phases: accumulation by informed investors, public participation, and distribution where early investors exit.
Investors can approach trading the DJIA through various methods. Exchange-Traded Funds (ETFs), like the SPDR Dow Jones Industrial Average ETF (DIA), let investors trade the index as a single security. Futures contracts allow speculation on its future value, while options provide the right to buy or sell the index at a future date. Mutual funds offer exposure to a diversified portfolio of DJIA stocks.
