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DowJones - Will the Rebound Continue?

The DowJones managed to complete its first bullish week after an 8 week consecutive decline. Last week the DowJones increased by just over 6% and regained value lost over the previous 3 weeks’ decline. This has bought back the idea of a potential bullish “risk on” market. So many questions are being asked as to whether this may be the start of a potential rebound, in which case the index still has a further 11.50% to regain.

The price movement yesterday saw the index originally decline by 1.69% before regaining some of the loss, the day ended with a decline of 0.67%. DOWJONES - 01.06.2022 - 3.jpg

DowJones - Pre-market price

Traders should be aware that the price has the ability to move even outside of trading hours. This price movement outside hours is not necessarily truthfully reflecting the activity within the market as only certain participants are able to buy and sell. However, the pre-market price movement can still be used as part of investors' decision making process. Today the pre-market for the DowJones is slightly higher. The price originally increased by 0.50% but has since declined as we approach the market open.

Biden and Yellen meet with the Fed

Yesterday, the US President held a meeting with US Federal Reserve Chairman Mr Powell and Treasury Secretary Yellen. When the meeting was originally scheduled the market hoped that the government would pass on a word of caution over interest rates. However, the President advised the opposite after his meeting. Biden stated that he did not intend to interfere in the regulatory process and fully supported the plan of the American financial authorities to combat record inflation.

Market participants took this statement as a "hawkish" signal, backing the words of US Federal Reserve Board member Mr Waller, who did not rule out a 50 basis point increase in interest rates at each of the next FOMC meetings. Thus, the value by the end of the year may exceed 2.25%.

The "hawkish" policy of the regulator is designed to fight inflation; however, the rapid pace of adjustment of monetary policy, such as interest rate increases and less money supply, may have a negative impact on corporate profits and consumer spending. This is something we may also see in the next two earnings announcements over the summer and autumn.

At the moment, the main attention of traders is partially fixed to the bond market which is correlated to an extent. Today the bond yield growth resumed again: 10-year Treasuries rose by 0.89%, and global 20-year bonds rose by 0.40%. This could also indicate that safe haven assets remain in demand.

DOWJONES - 01.06.2022 - 4.jpg

The DowJone’s Top Performers and Losers

The growth leaders in the index are Nike which increased by 2.47%, Walt Disney by 1.02%, JPMorgan by 0.73%, and Travelers Companies by 0.68%.

Among the leaders of the decline are Salesforce which declined by almost 3%, UnitedHealth by 2.04%, and Chevron which declined by 2.03%.

Manufacturing PMI and JOLTS

Lastly, the stock market could also be influenced by today’s Manufacturing PMI and JOLTS Job Openings. Both economic releases could indicate whether the economy and employment sector has reacted to the rise and expected further rises in interest rates. Indications that the economic activity and employment sector is declining could cause concern as to whether company profits will also further decline.

Traders will be following both economic releases closely.

IMPORTANT NOTICE: Any news, opinions, research, analyses, prices or other information contained in this article are provided as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and therefore, it is not subject to any prohibition on dealing ahead of dissemination. Past performance is not an indication of possible future performance. Any action you take upon the information in this article is strictly at your own risk, and we will not be liable for any losses and damages in connection with the use of this article.
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