- Dow Jones Index is down for the second successive session with eyes on US trade policy as new trade tariffs threaten markets.
The Dow Jones Index (INDEXDJX: .DJI)was down for the second successive session in early hours of trading on Tuesday, dropping 138 points to be at 44,269 at the time of writing. The downward momentum seems to be strengthening, building on Monday’s loss of 422 points. Investors are increasingly becoming risk averse as trade tariff fears mount. US President Donald Trump announced a fresh round of reciprocal tariffs, at 25% against two of its key partners, Japan and South Korea.
New US trade tariffs will kick in from August 1 and the Trump administration has slapped rates as high as 40% on some countries. Export-reliant companies that dominate the Dow Jones Index will likely feel the heat as the affected countries could retaliate. Down the week, the Federal Reserve’s last meeting minutes will be released, and will give a broader perspective of the central bank’s interest rate posture relative to trade tariffs.
Meanwhile, the pressure has been transmitted to the bond market. Yields on benchmark 10-year U.S. Treasury have climbed to around 4.41%, driven by expectations of higher government spending and fears of inflation. Rising yields often signal a more hawkish interest rate environment, which tends to make equities less attractive. That could put downward pressure on the Dow Jones Index in the near-term. Furthermore, the prospect of tighter financial conditions has added to the bearish sentiment across Wall Street.
Dow Jones Index Forecast
The momentum on Dow Jones Index points to the downside below the pivot mark at 44,400 points. The first support will likely be at 44,200. Breaking below that level will signal a stronger momentum that could push the action lower to test 44,170 points.
On the other hand, action above 44,400 will favour the buyers to take control. With that, the upside action will likely encounter initial resistance at 44,595 points. Breaking above that level will invalidate the downside narrative, and could clear the path to test 44,800.
