Dow Jones futures fall with Fed decision and big tech earnings in focus

3.75% to 4.0%: Fed set to hold rates as attention turns to Chair Kevin Warsh's outlook.
AI trade momentum faces scrutiny as Wall Street awaits Alphabet and Microsoft earnings after Wednesday's close.
Tuesday's stock gains were driven by technology, with Broadcom's $63B financing deal, Meta's offering and Oracle's partnership leading the advance.

A 0.22% fall leaves Dow Jones futures near 52,460. During European trading on Wednesday, S&P 500 futures advance 0.08% to around 7,760, while Nasdaq 100 futures climb 0.45% to near 29,950.

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

Ahead of the Federal Reserve (Fed) policy announcement and pivotal earnings from megacap technology companies, US equity futures were mixed. Corporate earnings dominate attention, with Wednesday's closing bell to be followed by results from Alphabet and Microsoft. Investors will scrutinise the numbers for evidence of the artificial intelligence trade's underlying strength and direction.

A 90.6% probability of unchanged rates at this meeting is currently priced into the CME FedWatch tool, alongside an 84.3% probability of a December rate increase. The Federal Reserve is widely expected to leave its benchmark rate in the existing 3.75% to 4.0% target range, keeping monetary policy firmly in focus. Investors will also scrutinise Federal Reserve Chair Kevin Warsh's forthcoming press conference for subtle signals about the central bank's wider economic assessment.

Tuesday's regular session ended higher before the latest cautious positioning, as technology stocks lifted the major benchmarks. Gains of 0.6% for the S&P 500 and 1.18% for the Nasdaq Composite accompanied a 0.03% rise in the Dow Jones Industrial Average. Chipmakers provided the main impetus after Broadcom announced that a banking consortium would supply $63 billion in financing tied to Anthropic's deployment of its technology. Elsewhere in technology, strong demand left Meta's $25 billion share offering five times oversubscribed, while Oracle broadened its strategic partnership with OpenAI.

US equities show resilience as technology leads gains

For Deutsche Bank analysts, robust data reinforced the technology-led advance: “the strong data yesterday also added to the resilience of US equities, which were already advancing amidst a continuing buoyant tech mood.” They identify chips as the rally's leaders, describing “the Philly semiconductor index (+3.60%)” as recording “a big gain,” and adding that “the Nasdaq (+1.18%) and the Mag-7 (+0.94%) also marched higher.” Deutsche Bank also singles out “notable tech moves” in “CoreWeave (+7.94%), Nvidia (+0.90%), and Broadcom (+4.00%),” highlighting the continued leadership of AI and semiconductor stocks in the latest advance.

Dow Jones: key questions answered

Dow Jones: index composition and calculation

30 of the most actively traded US stocks make up the Dow Jones Industrial Average, among the world's oldest equity indices. Weightings are based on share prices, not market capitalisation. To calculate the index, the constituent share prices are added together and divided by a factor currently set at 0.152. Its founder, Charles Dow, also established the Wall Street Journal. Critics in later years have questioned how broadly it represents the market: it follows just 30 conglomerates, in contrast to wider benchmarks such as the S&P 500.

Dow Jones Industrial Average: principal market drivers

Quarterly earnings reports reveal the combined performance of the constituent companies, the principal influence on the Dow Jones Industrial Average (DJIA). Other drivers include US and international macroeconomic releases, which shape investor sentiment. Interest rates determined by the Federal Reserve (Fed) affect borrowing costs for the many companies heavily dependent on credit, giving monetary policy another important role in the DJIA's performance. Inflation and other indicators that inform Fed decisions can therefore also exert a significant influence.

Dow Theory: identifying the market's primary trend

Developed by Charles Dow, Dow Theory seeks to establish the stock market's primary trend. It compares 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 the same way. Trading volume provides confirmation, while analysis of peaks and troughs also forms part of the approach. Three phases define a trend under Dow's theory: accumulation, as smart money begins buying or selling; public participation, as the broader public enters; and distribution, as smart money withdraws.

DJIA trading: available instruments

Investors can access the DJIA through several instruments. ETFs offer a way to trade it as one security without purchasing shares in each of its 30 constituents; the SPDR Dow Jones Industrial Average ETF (DIA) is a prominent example. Futures contracts allow traders to speculate on the DJIA's future level. Options, by contrast, confer the right, without an obligation, to buy or sell the index at a pre-agreed price at a future date. Investors can also obtain exposure to the overall index by buying a share in a mutual fund holding a diversified portfolio of DJIA stocks.