Indices News

The Dow is caught in a risk-off market mood. The tone has assumed a defensive turn following the re-emergence of tariff policy uncertainty, and this metric along with a key inflation print is expected to be the main driver of Dow forecasts for the week. The peculiarity in this case is that traders are having to negotiate between the Supreme Court's decision that has declared the tariffs illegal, and the response of the US Government in slapping a new 15% tariff on all countries in direct contravention of the court's ruling. The new tariffs are set to make exports to the US more expensive, introducing a new equities risk premium rising from renewed inflation fears and a shock to global growth. The Dow Jones Industrial Average initially traded about 820 points lower at a point in Tuesday's trading, before staging a recovery. DJ futures are up 0.41% as of writing, as markets are anticipating a brilliant result from Nvidia, which releases its Q4 earnings report in afterhours trading. What Should the Dow Expect for the Rest of the Week? Here is what the Dow should expect for the rest of the week, which is also the end of the month. The most capitalized US equities index can expect to be guided by the following: Information that details the duration of the 15% tariff regime. The political and legal dynamics of how any new tariffs will be implemented or challenged. Whether the US will indicate a willingness to negotiate or a tendency to escalate. 1. Tariffs policy uncertainty The Dow includes financials, global multinationals, and industrial stocks. These are the most capitalized assets in the Dow and show the greatest sensitivity to trade disputes, growth expectations, and inflation (via input costs). Regarding the tariff scenario, there is a two-sided measure (unlike last year's). Rhetoric from the US President and policymakers that points to an escalation of the current trade dispute tends to send the market into risk-off mode, leading to a selloff in the Dow. Comments indicating a de-escalation tend to trigger short covering, visible as sharp rallies. 2. News trigger: US PPI The US Producer Price Index is due to be released at 8.30 am EST on Friday, 27 February. This is the major news catalyst for the week as it concerns the Dow. The PPI this time around will be treated as an inflation check, given that global tariffs create an inflationary environment. An acceleration in producer inflation will strengthen the tariff-inflation correlation narrative, potentially driving higher yields that pressure equity multiples. Higher inflation usually prompts the Fed to aim for tighter financial conditions, which would run counter to the Fed's easing expectations for 2026; a Dow-negative situation. Dow Forecasts for the Week What are the base case, bull, and bear case scenarios for the Dow for the rest of the week? Base case: The base case scenario sees potential for two-way volatility, given the prevailing tariff overhang and the fragility of risk appetite. Policy clarity is needed to prevent a tilt toward rally selling. Bull case: The bull case scenario depends on a softening of tariff rhetoric, calls for more talks on tariffs, and a cooling of the PPI, which will cause a dissociation of the tariff-inflation narrative. A cooling of the PPI will signal a shift in the Fed's rate policy towards easing, which will cause the Dow to rally. Bear case: Renewed selling in the Dow can result from tariff escalation or retaliatory actions by other countries. Furthermore, a red-hot PPI print will lift Treasury yields, prompting broader de-risking across financials and cyclicals. Dow Forecasts for the Week: Technical Outlook The 20 June 2025 - 13 November 2025 upswing on the Dow produced several potential Fibonacci extension levels. The 27% Fibonacci extension at 50195 aligned with the close to the subsequent record high on 10 February. The ascending trendline that connects the lows remains intact, supporting the Dow's uptrend. Figure 1: Dow Jones Industrial Average showing key price levels (snapshot taken on 25 February) If the trendline remains intact and the bulls take out 50195, the next potential upside target is 52486, the 61.8% Fibonacci extension level. On the flip side, a breakdown of the trendline ushers in a potential decline towards 45903, the 38.2% Fibonacci retracement level. Below this level, the 1 August 2025 low at 43183 becomes the new downside target.