The Dow Jones Index has held steady recently, underperforming the S&P 500 and Nasdaq 100, which jumped to a record high this year. It was trading at $49,613, a few points below the all-time high of $50,616. This article explores some of the top news that will move the index this week.
Dow Jones Index in focus ahead of Trump-Xi summit
President Donald Trump will visit Beijing for the first time in his second term this week, in a closely-watched trip that will have some major implications.
He will be accompanied by some of the top leaders of Dow Jones constituent companies, like Apple’s Tim Cook and NVIDIA’s Jensen Huang.
Some of the key announcements in this trip may push the index higher or lower. For example, NVIDIA stock price will react to a potential deal that will enable it to sell H200 chips in the country.
Additionally, Boeing stock will likely react to a potential big order from Chinese airlines. Rumors are that these companies will seek to buy up to 500 planes from the company, a deal that would benefit GE Aerospace.
The deal would also help Boeing to narrow its backlog gap with Airbus, the biggest player in the industry. Additionally, energy companies like Chevron and ExxonMobil may play a role in supplying China with American oil and gas.
US Consumer Price Index data
The Dow Jones Index drifted upwards on Friday after the US published strong non-farm payrolls data. This report revealed that the economy added over 115k jobs in April. The Bureau of Labor Statistics (BLS) also boosted the March jobs report to 185k.
Looking ahead, the next key data to watch will be the US Consumer Price Index (CPI) report that comes out on Tuesday. This is an important report that forms part of the Federal Reserve’s dual mandate.
Economists expect the report to reveal that the headline CPI jumped from 3.3% in March to 3.6% in April, the highest point in more than a year. This inflation has jumped because of the ongoing US-Iran war, which has pushed crude oil prices much higher.
A stronger-than-expected inflation report will be bearish for the Dow Jones as it will lead to higher chances of a hawkish Federal Reserve. In a recent note, analysts at Goldman Sachs predicted that the bank will cut interest rates in December. JP Morgan, on the other hand, expects the bank to maintain steady rates and then hike in the third quarter of next year.
Potential resumption of the US-Iran war
The Dow Jones Index will react to the potential resumption of the US-Iran war after the recent happenings. On Sunday, Iran sent the US a counteroffer that will see it reopen the Strait of Hormuz. In a statement shortly after that, Trump called the proposal unacceptable.
Meanwhile, Benjamin Netanyahu told 60 Minutes that the war was still not over. This was a direct contradiction to what the Trump administration told lawmakers recently. In the statement, the administration said that the Epic Fury was over because of the ceasefire.
Therefore, there is a likelihood that the US will launch an attack, as some of Trump’s closest allies have proposed. They argue that an attack will force the Iranians to the negotiating table. Iran has warned that any attack will lead to the largest barrage since the war started. A resumption in fighting would be highly bearish for the US stock market.
Key corporate earnings
The first quarter earnings season is about to end, with 89% of all companies in the S&P 500 Index having released their numbers. These companies have reported an average earnings growth of 27.7%, more than double what analysts were expecting.
Still, some more important companies will release their earnings in the next two weeks. The ones to watch this week are popular companies like Cisco and Applied Materials.
The most important ones that will release their results next week are NVIDIA, Walmart, Home Depot, and Lowe’s.
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