Ahead of US PCE data, Dow Jones futures move higher

Can Dow Jones futures extend gains as Tech weighs on S&P 500 and Nasdaq after Alphabet’s earnings slump?
Alphabet slides 10% in after-hours trade as AI spending worries weigh on sentiment; Microsoft advances 4%, supported by robust Azure cloud growth.
With inflation still elevated, the Fed leaves interest rates at 3.75%–4.00%; two officials oppose the decision.

US stock futures diverged in Thursday’s European session, with gains in Dow Jones futures contrasting with weakness elsewhere. Dow Jones futures advanced 0.37% to around 52,890, whereas S&P 500 futures declined 0.38% to roughly 7,750 and Nasdaq 100 futures shed 1.2% to about 29,620. Attention is shifting to the forthcoming US Personal Consumption Expenditures (PCE) price index. Traders are looking to the Federal Reserve’s preferred inflation gauge for a clearer indication of the monetary policy path ahead.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Earnings from major technology companies accounted for much of the split in market performance. Concerns about the substantial cost of artificial intelligence investments resurfaced after Alphabet posted third-quarter revenue below expectations across most of its core businesses, sending its shares down around 10% in after-hours trade. Microsoft, by contrast, climbed nearly 4% as robust expansion in its Azure cloud infrastructure helped quarterly results beat expectations.

There was little guidance on the next policy move from the Federal Reserve, which left interest rates at 3.75%–4.00% in line with broad expectations. Its official statement described an economy that continues to grow, underpinned by resilient domestic spending, robust capital investment and strong productivity gains. The Fed also noted that employment gains have kept pace with workforce expansion, with the unemployment rate holding relatively steady.

Although price pressures remain elevated, the Fed opted to keep further rate increases on hold while it collects more data to inform its next policy decision. Two officials opposed that approach: Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack both favoured an immediate rate rise.

At his post-meeting remarks, Fed Chair Kevin Warsh highlighted the economy’s underlying strength and reiterated the committee’s resolve to bring inflation back to its 2% target. He added that eight Fed meetings are planned for next year, one of which will not involve a formal vote, while six policy-setting meetings are anticipated in 2028.

Dow Jones: Key Questions Answered

What does the Dow Jones represent?

Comprising the 30 most actively traded US stocks, the Dow Jones Industrial Average ranks among the world’s oldest stock market indices. Its weighting is based on share prices, not market capitalisation: the constituent share prices are added together and divided by a factor that currently stands at 0.152. Charles Dow, who also founded the Wall Street Journal, established the index. In subsequent years, critics have questioned how broadly it represents the market, since it covers just 30 conglomerates, unlike wider benchmarks such as the S&P 500.

What drives movements in the Dow Jones Industrial Average?

The combined performance of its constituent companies, as reported in quarterly earnings, is the principal influence on the Dow Jones Industrial Average (DJIA). Other drivers include US and global macroeconomic releases, which shape investor sentiment. Interest rates determined by the Federal Reserve (Fed) also matter: they affect borrowing costs for corporations, many of which depend heavily on credit. Inflation can therefore play a significant role, alongside other indicators that influence the Fed’s decisions.

How does Dow Theory identify market trends?

Developed by Charles Dow, Dow Theory provides a framework for determining the stock market’s primary trend. It involves comparing the direction of the Dow Jones Industrial Average (DJIA) with that of the Dow Jones Transportation Average (DJTA), following a trend only when both move in the same direction. Trading volume serves as confirmation, while the approach also draws on the analysis of peaks and troughs. Dow’s framework identifies three phases in a trend: accumulation, as smart money begins buying or selling; public participation, as the broader public enters; and distribution, as smart money withdraws.

Which instruments offer ways to trade the DJIA?

Investors and traders can access the DJIA through several instruments. ETFs allow the index to be traded as one security, removing the need to purchase shares in each of its 30 constituent companies; the SPDR Dow Jones Industrial Average ETF (DIA) is a prominent example. Futures contracts on the DJIA allow speculation on the index’s future value. Options, meanwhile, confer the right, without an obligation, to buy or sell the index at a predetermined future price. Through mutual funds, investors can purchase a stake in a diversified portfolio of DJIA shares, gaining exposure to the index as a whole.