Dow Jones
The Dow Jones is up by more than 535 points in the futures market. The surge in the blue-chip index comes a day after it recovered more than 800 points and ended the day up by more than 100 points. Other indices in the US are up as well. The S&P 500 and Nasdaq 100 are up by more than 1.50%. Meanwhile, in Europe, the DAX index, FTSE 100, and CAC 40 are up by more than 3%.
The first reason why the Dow Jones is up sharply today is the report that the Trump administration is preparing to launch a $1 trillion infrastructure package. In the report, Bloomberg said that the funds will go towards roads, 5G investments, and rural broadband issues.
The Dow Jones is particularly beneficial when it comes to infrastructure. This is because some companies would benefit by the funds. This includes companies like Caterpillar, Boeing, and banks like JP Morgan and Goldman Sachs.
Still, with the country being in an election mood, there is a possibility that Trump will not get what he wants. This is because some republicans are now starting to worry about the vast amount of debt that has been created recently.
Meanwhile, the Federal Reserve is also contributing to the rally. In a statement yesterday, the bank said that it will now increase its corporate bond buying program. It will achieve this by buying corporate bonds directly in the secondary market. This is an important thing because in the past, it was buying corporate bonds in form of ETFs.
This announcement was beneficial for the Dow Jones in two ways. First, it helped to slightly devalue the US dollar. Indeed, the dollar index is down by more than 20 basis points today. This is important because most companies in the Dow Jones benefit when the dollar is weak. Second, it sent a signal that the Fed is ready to intervene in the market as much as needed.
The Dow Jones also rose after data from the US showed that the economy is emerging from the recession. Data from the statistics office showed that retail sales bounced back by 17.7% in May. This is after they dropped by 16% in April. The core retail sales rose by 12.4% after falling by 17.2% in April. This is beneficial for the Dow Jones because the US economy is mostly about consumer spending. And as I wrote yesterday, some analysts have started to price-in a V-shaped recovery.
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The Dow Jones declined to an intraday low of $24,562 yesterday. As of this writing, the index is trading at $26,412, a record $1,800 gain. The price is now inches below the 78.6% Fibonacci retracement level at $27,185. Also, it is above the 100-day and 50-day exponential moving averages. At the same time, the fear and greed index seems to be moving back to the greed territory.
Therefore, there is a possibility that the index will continue rising as bulls approach the important level of $27,185. On the other hand, a move below the 61.8% retracement at $25,241 will send a signal that there are more bears to push the price lower.