Dow Jones

Dow Jones Falls as Dismay McDonald’s Earnings Sends a Wake-Up Call

Dow Jones futures are down by more than 0.53% as investors focus on the weak earnings by McDonald’s and the ongoing debate on stimulus. The index is trading at $26,357 while the S&P 500 and Nasdaq futures are down by 0.35% and 0.45%, respectively. At the same time, the fear and greed index is at 66, which is a sign that investors are getting a bit greedy. Similarly, the VIX index is up by more than 3.50%.

McDonald’s earnings disappoint

McDonald’s is one of the biggest firms in the Dow Jones. In a statement today, the company said that its revenue declined by 30.5% in the second quarter to $3.76 billion. This was better than the $3.68 billion that investors were expecting.

Its global same store sales declined by 23.9%, dragged by foreign locations like in the UK and France. This decline was worse than the 23.24% that analysts were expecting. Meanwhile, in the US, its same store sales rose by 8.7%.

McDonald’s share price has tanked in the premarket. It is down by 2% to $196, which is lower than the yesterday’s close at $201.

McDonalds share price
McDonald’s share price YTD performance

Meanwhile, investors are waiting for corporate earnings from leading companies in the Dow Jones like Apple and Visa. In a statement, Pfizer said that its net income fell to $3.43 billion from $5.05 billion. Its share price is up by more than 3%. Other Dow components that have released their earnings are Raytheon and 3M.

At the same time, the Dow Jones is reacting to the ongoing debate about stimulus in the US. Yesterday, senate Republicans unveiled a $1 trillion spending package that is relatively different from the one unveiled by the Democrats. For example, their legislation has a clause that shields companies from coronavirus-related liability.

Dow Jones futures are also moving in anticipation for the Fed interest rate decision that will come out tomorrow. Analysts expect that the bank will have a dovish tone because of the changing tone in the economy.

Fear and greed index

The fear and greed index is an important tool that was developed by CNN Money to gauge sentiment in the market. The index is currently at 66, which is sign that investors are getting a bit greedy. The stock price breadth and safe haven demand are in the extreme greed category.

At the same time, the junk bond demand, stock price strength, and market momentum are in the greed level. Put and call options and market volatility are in the neutral level.

Fear and greed index
Fear and greed index

Dow Jones technical forecast

The Dow Jones is trading at $26,465, which is below last week’s double top at $27,158. On the daily chart, the price is slightly above the 50-day and 100-day exponential moving averages. It is also above the ascending trend line that is shown in pink, which means that the index has formed an ascending triangle pattern.

Also, the Dow Jones is below the 78.6% Fibonacci retracement level. Therefore, the index is likely to continue moving higher as bulls target the resistance at $27,158. On the flip side, a move below the ascending trend line will invalidate this trend.

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