Dow Jones Industrial Average (DJIA) futures fell at Sunday’s reopening towards the 49,100 area, but remained steadily higher during the US session to settle only slightly below Friday’s close near 49,400. The benchmark ended the day virtually unchanged, with the S&P 500 index down 0.4% and the Nasdaq Composite down 0.5%. Given the scale of the weekend’s events, the boarding of an oil tanker in the Gulf of Oman, the breakdown of peace talks and the expiration of the ceasefire this week, the refusal to discount any significant risk premium stood out.
A weekend of deterioration, barely a flinch
The situation deteriorated on several fronts at once. On Sunday, Trump said the United States fired on and seized an Iran-flagged cargo ship in the Gulf of Oman, citing previous U.S. Treasury sanctions for “illegal activities” as the reason. Iran then refused another round of US-brokered talks in Pakistan, and Trump threatened to destroy Iran’s power plants and bridges if Tehran did not reach an agreement before the current ceasefire expires at the end of the week. However, DJIA futures opened roughly three-quarters of a percent lower and spent the session recovering almost all of that gap, closing roughly where they started on Friday. In the case of the index, which fell sharply just a few weeks ago as a result of weaker provocations, stability was challenging to determine solely on the basis of geopolitics.
Oil affects the price
If stocks didn’t move, crude oil did. WTI rose 5% above $88 a barrel, and Brent crude rose a similar amount above $94. The offer came after confirmation that ship traffic through the Strait of Hormuz was restricted again on Saturday, with Iranian state media arguing that the United States had “failed to fulfill its obligations” after Iran briefly announced it had reopened the bottleneck following a ceasefire between Iran and Lebanon. Trump reiterated that the US naval blockade of the strait will remain in force until Iran accepts Washington’s terms. Investors in the oil market, exposed directly to physical supply risk, were the first to move and move difficult.
The “rearview mirror” call is still dynamic
“The war with Iran is a reflection on the market right now,” David Wagner, director of equities and portfolio manager at Aptus Capital Advisors, told CNBC. The confidence is striking given the variety of messages. Wall Street is coming off a week in which the S&P 500 gained 4.5% and the Nasdaq Composite rose about 7%, and the Nasdaq posted its 13th consecutive winning session on Friday, a streak last seen in 1992. Traders who bought after each decline in recent weeks were rewarded, and on Monday that momentum was on full display again.
Software leaders, no defensive offering
Software was the standout on the tape over the long term, with the iShares Expanded Tech-Software Sector ETF (IGV) gaining 0.6%. There was a distinct lack of any significant shift to the defensive on a day when a foreign ship was seized, a round of peace talks was canceled and the president was threatened with strikes against the country’s infrastructure. With key U.S. economic data absent from today’s report, the direction for Tuesday will likely be dictated by increasing U.S.-Iran headlines, any change in position on a ceasefire, and whether oil remains above $88 into the evening session.
Dow Jones 15-minute chart
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock indexes in the world, consists of the 30 stocks most frequently traded in the United States. The index is price-weighted, not capitalization-weighted. It is calculated by summing the prices of the company’s shares and dividing them by the coefficient, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years, it was criticized for not being representative enough because it only tracks 30 conglomerates, as opposed to broader indexes such as the S&P 500.
Many different factors influence the Dow Jones Industrial Average (DJIA). The most vital are the total results of the companies included in the group, disclosed in quarterly reports on the companies’ results. Macroeconomic data from the United States and around the world also matters because it influences investor sentiment. The level of interest rates set by the Federal Reserve (Fed) also affects the DJIA because it influences the cost of borrowing, on which many corporations depend heavily. Therefore, inflation may be a major factor, along with other indicators, that influence Fed decisions.
Dow Theory is a method of identifying the main trend in the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only track trends where both are heading in the same direction. Volume is a confirmatory criterion. The theory uses elements of peak and trough analysis. Dow Theory assumes three phases of a trend: accumulation, when astute money starts buying or selling; public participation when wider society is involved; and distribution when the astute money comes out.
There are many ways to trade the DJIA. One is the employ of ETFs, which allow investors to trade the DJIA as a single security rather than buying shares of all 30 companies that comprise it. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts allow investors to speculate on the future value of the index, and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds allow investors to purchase a portion of a diversified portfolio of DJIA stocks, thereby providing exposure to the entire index.
