NFP Preview: Can the Dow Jones extend its post-election rally?

The Dow Jones surged 3% yesterday, and futures are pointing to further gains today as the index posted its strongest post-midterm rally in 44 years.

The Dow saw its largest single-day percentage gain since April 2025, following a blue sweep in the U.S. midterm elections. The removal of uncertainty, combined with expectations that political gridlock could slow spending and a sharp 10% drop in oil prices, has helped pull Treasury yields lower. Democrats taking control of Congress could also ease pressure on the Federal Reserve, giving policymakers room to operate more independently.

The Dow is a standout performer against the ongoing sell-off in tech. Democrats have taken an anti-AI stance, or at least favoured a slower approach than the full-throttle rollout taking place now. This comes at a time when the AI trade is already vulnerable and could face further pressure.

As a result, tech is underperforming the wider market, with Nasdaq futures down 0.8%, as investors rotate out of tech and into the Dow.

What to expect from the NFP report?

The next challenge for the Dow Jones will be tomorrow's nonfarm payroll report, which is expected to show an improvement on September's weak reading and point to a generally steady labour market.

Expectations are for the U.S. to have added 65,000 jobs in October, an uptick from September's sluggish 29,000, which was well below the 130,000 forecast.

The unemployment rate is expected to remain unchanged after inching up to 4.2% in September, while wage growth is forecast to accelerate slightly, although it should remain below a pace that would add to inflationary pressures.

Leading indicators point to a slightly stronger-than-expected NFP report. ADP private payrolls were stronger than expected at 86,000. The employment component of the U.S. ISM Services PMI also rose to 51.4, up from 50.1 in September, while the ISM Manufacturing Employment Index slipped slightly to 52.4 in October from 52.7 in September. Meanwhile, U.S. job openings jumped in September, while layoffs are at their lowest level in 1.5 years.

The data comes as the market is pricing in an 80% probability that the Federal Reserve will hike rates by 25 basis points next month.

How could the market react to NFP data?

A stronger-than-expected U.S. nonfarm payroll report could help cement December rate hike expectations, lifting Treasury yields and weighing on stock indices such as the Dow Jones. A strong report, with over 100,000 jobs added and an unemployment rate of 4.1%, could trigger a market reaction and increase expectations of a more hawkish Fed next year.

A weaker report is unlikely to drastically change December rate hike expectations, given that the Fed has clearly stated it is more focused on the inflation side of its dual mandate. Inflation remains well above the 2% target, while Kevin Warsh has said he believes the unemployment rate and job growth are consistent with the Fed's mandate.

Dow Jones technical analysis

The Dow Jones has broken out of its descending channel. The price recently recovered from support at the upper band of the falling channel at 51,350, extending its rise above the 50 EMA and key resistance to 53,600. The constructive outlook is also supported by momentum, with the RSI above 50.

Buyers will look to test resistance at 53,800, the September high. A rise above here turns attention to 54,750 and fresh record levels.

On the downside, immediate support is seen at 53,000, the October high. A break below here exposes the 50 EMA at 52,200, ahead of yesterday's low at 51,300. Below here, attention turns to the 200 EMA at 50,800.