US stocks gain traction after opening flat

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The S&P 500 (SPX) index is up 0.2% at 5,037.33, the Dow Jones (DJIA) gains 0.35% at 38,804.15, and the Nasdaq (IXIC) rises 0.32% to trade at 16,042.31 at the time of writing.

Stock market news

  • The Energy Sector is the best-performing major sector in the S&P 500 so far on Monday, rising 0.8% on the day. On the other hand, the Health Care Sector is down 0.3%.
  • Diamondback Energy Inx. (FANG) is up more than 10% as the top gainer in the first half of the session. The biggest decliner is Motorola Solutions Inc. (MSA), down nearly 3%.
  • Nasdaq Composite rose more than 2% last week and the S&P 500 posted gains for the fourth consecutive week to post a record-high closing above 5,000. Dow Jones underperformed and was virtually unchanged for the week.
  • The US Bureau of Labor Statistics (BLS) announced on Friday that it revised the monthly Consumer Price Index (CPI) increase for December lower to 0.2% from 0.3%.
  • Dallas Federal Reserve (Fed) Bank President Lorie Logan said that there is no urgency to cut interest rates. Logan acknowledged that there has been “tremendous progress” on bringing down inflation but noted that she would want to see further evidence on inflation to confirm the progress is durable.
  • The US Department of Labor reported that there were 218,000 Initial Jobless Claims in the week ending February 3, down from the previous week’s revised 227,000.
  • On Tuesday, the BLS will release January CPI data. The headline annual CPI is forecast to rise 3% on a yearly basis, at a softer pace than December’s 3.4%. The Core CPI, which excludes volatile food and energy prices, is expected to increase 3.8%. 
  • Arista Networks Inc. (ANET), Cadence Design Systems Inc. (DNS) and Waste Management Inc. (WM) are among top companies that will release earnings reports after the closing bell on Monday.
  • Later in the week, January Retail Sales, Industrial Production and Producer Price Index (PPI) data will be featured in the US economic calendar.

Dow Jones FAQs

The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.

Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.

Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.

There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.