Dow Jones Index Stays Up As Focus Turns to Fed Rate Cut

Summary:
• The AI hype steered the market in the first half of the year, but the Dow Jones Index stock will need fresh impetus as AI sentiment weakens.

The Dow Jones Index ended the day up on Monday as traders bet on increasing prospects of Fed interest rate cuts. The Index gained 0.1 percent to accumulate 39,169 points, but largely remained stuck to sideways action as an eventful second half of the year got underway. The AI hype provided fuel that at times almost single-handedly pushed the markets up when odds were stuck up against the US economy.

As the second half of the year gets underway, most analysts opine that the AI industry may have run out of steam, and the markets will need new innovations around the technology to inject fresh volatility. US inflation cooled down in May, raising the prospects of a September rate cut. However, FOMC members have emphasised that they might need more data before voting for rate cuts, and that could slow down near-term gains.

Apple rose by 2.9 percent  on Monday as investors reacted positively to news that the company intended to raise prices for its high-end iPhones to increase the sales on its price-sensitive cheaper models.  Microsoft shrugged off the new crackdown by EU antitrust regulators to gain 2.1 percent on news that the tech giant had signed a landmark deal with Craneware. The deal will see the UK company bring its AI-driven healthcare offerings to Microsoft’s Azure platform, opening it up to the US healthcare industry.

Golman Sachs was another big gainer of Monday, rising by 2.5 percent. The investment bank’s decision to raise dividend from $2.75 to $3.00 per pair is likely to continue influencing its share price trajectory in the near term.  Also, its $20 billion stock buyback program will weigh in on the Dow Jones Index, especially in view of the fact that Goldman Sachs is the Index’s second-largest company by weight.

Looking ahead, investors will turn their attention to Fed Chairman Jerome Powell’s statement on Tuesday for cues on possible interest rate cuts. However, the highlight of the week will be the US Non- Farm Payrolls data set for release on Friday.

Technical analysis

The momentum on the Dow Jones Index favours the sellers as long as the action stays above 39,093. The upward movement will likely encounter the first resistance at 39,162, beyond which the next barrier could come at 39,217 if the buyers extend their control. Conversely, a move below 39,093 will favour the sellers to take control, and the downside movement will likely find the first support at 39,052. Extended control by the sellers beyond that point could break the support and invalidate the upward narrative. Also, it could strengthen the downward momentum to test 39,995.