- Summary:
- The Dow Jones index is paring back some of the losses made on Monday and Tuesday as investors cheer some positive earnings and another stimulus package
The Dow Jones index rose by more than 200 points, partially offsetting the 600 points it lost yesterday. Investors were reacting to a new stimulus package passed by the senate yesterday, some positive corporate earnings, and slightly higher oil prices.
Senate passes stimulus package
The senate passed a $484 stimulus package that was passed by the senate yesterday. $320 billion of the amount will go to the Paycheck Protection Program while $60 billion will go to rescue other small businesses. About $75 billion of the funds will go to fund hospitals. This funding comes a few weeks after congress passed another $2.2 trillion stimulus package to help cushion the economy from the ongoing pandemic.
The bill will then go to the House of Representative where it will be passed before being signed into law by Donald Trump.
In the meantime, the White House and congress are negotiating another round of stimulus package that will provide another round of funding.
Positive earnings season
Investors also reacted to a series of relatively strong corporate earnings from the US. Some companies like Chipotle, AT&T, Delta Airlines, Kimberley-Clark, Biogen, and Netflix released earnings that were better than expected. For example, Kimberley-Clark earned $2.13 per share, which was slightly higher than the expected $1.97. Revenue rose by about 11% because people shopped more ahead of the lockdown. Another big winner was Netflix, which added more than 16 million new users beating the consensus estimates of about 5 million. Still, the company warned that its future guidance was “merely guesswork.”. Chipotle also reported better earnings, with online orders jumping by 80%.
Crude oil stabilizes
The Dow Jones index also rose because of the stability in the crude oil market. The price of oil bounced back slightly during the European session. Brent and WTI bounced back by more than 5% as investors reacted to news that Trump was seriously considering intervening in the market. Yesterday, he directed his energy secretary to come up with measures that will help stabilize the oil market and save US jobs. In response, the share prices of ExxonMobil and Chevron rose by more than 2.70% and 2.30% respectively.
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Dow Jones Technical Outlook
On the four-hour chart, the Dow Jones index shows three characteristics. First, the index has been on an upward trend since March 23. During this trend, the index has formed an equidistance channel that is shown in green. Second, the index’s jump today happened after it hit the lower side of the channel. Finally, the jump happened after the price tested the 100-day EMA. Therefore, I expect the index to attempt to recover as bulls attempt to retest the upper side of the channel.
On the flipside, it is possible that today’s bounce will be short lived. If this happens, the index will likely continue with the downward trend.