Market Analysis: The Stock Market And Dow Jones!

The Dow Jones rarely tops the performance charts due to its focus on stable, less volatile stocks, but Wednesday was an exception. The index’s upward momentum was driven by strong earnings reports from Cisco Systems and Caterpillar. Investors now shift their focus to Walmart’s upcoming quarterly earnings report.

On Wednesday, 80% of the Dow’s stocks gained value, fueled by improved investor sentiment. The drop in the US inflation rate from 3% to 2.9%, along with steady core inflation at 3.2%, boosted market confidence, particularly supporting the Dow Jones.

Cisco’s latest earnings report added to the momentum. Earnings per share exceeded Wall Street predictions by 2.49%, and revenue increased by nearly $1 billion from Q1 to Q2, driving the stock up 5.75% after market close. American Express and Goldman Sachs also performed strongly. Walmart, which will release its earnings report before the market opens, is now in the spotlight.

Analysts expect Walmart’s earnings per share to rise from $0.60 to $0.65, with revenue increasing from $159 billion to $167 billion. Walmart has consistently exceeded earnings expectations over the past year as budget-conscious consumers turned to the retailer amid high inflation. On Wednesday, Walmart’s stock rose 0.78%, with an additional 0.52% gain after market close, signaling investor confidence in the company’s continued strong performance. Walmart holds a 1.12% weight in the Dow, while Cisco Systems holds 0.74%.

Following lower inflation data for both consumers and producers, there’s a 64% chance of a 25-basis point rate cut in September. Analysts predict the Federal Reserve will reduce rates by 0.75% by the end of 2024, with some expecting a full 1.00% cut. The CME Group data suggests a 44% chance of a 1.00% cut by December.

Investors are now eyeing US Retail Sales, Core Retail Sales, and Weekly Unemployment Claims. Ideally, they hope for data slightly above expectations but not so strong as to diminish the likelihood of rate cuts. The Empire State Manufacturing Index and Philly Fed Index could also cause market fluctuations, though to a lesser degree. Rising tensions in the Middle East remain a potential concern.

Currently, the VIX shows no major changes, and bond yields are stable, but a decline throughout the day would benefit the stock market.

Dow Jones – Technical Analysis

Technical analysis shows that buyers are maintaining momentum. On the 2-hour chart, the price is trading above the 75-Period and 100-Period EMAs, with the RSI above 70, indicating strong momentum but not an overbought condition. On the 5-minute chart, bullish crossovers continue to form, and the price remains above the VWAP. Price movement as we approach the US session will largely depend on the global stock market performance and Walmart’s earnings report.