Dow Jones Industrial Average Forecast: Higher oil prices tank stock market

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The Dow Jones Industrial Average (DJIA) fell 0.56% on Tuesday in the week’s first outing after the Labor Day market close. On Wednesday, Dow futures

US Treasury yields fall across maturities, except for 3-month bill.UK, China, Germany experience drop in service sector dynamism simultaneously.fell 0.56% on Tuesday in the week’s first outing after the Labor Day market close. On Wednesday, Dow futures continue to slide alongside the entire US equity market. The Dow, NASDAQ 100 and S&P 500 all see their futures drifting about 0.2% lower.are sending shivers down the spine of global equity markets this week.

"If the oil price persists at current levels, it may slow disinflation rather than reignite inflation,” said UBS analyst Paul Donovan on Tuesday. The worry is that these contractions may be contagious. If the US ISM Services PMI for August shows contraction, then all hell will break loose. Analysts far and wide will say it foreshadows a coming global recession.

"[T]he curve remains very inverted, with longer tenor yields anticipating falls in official rates in the future. That’s a normal state of affairs. But as long as the economy continues to motor along, the wisdom of having many rate cuts at all is being questioned by the market. Less future rate cuts raise the implied floor being set by the fed funds strip. That floor continues to edge higher.”The Dow Jones index seems to be rolling over once again.

Another important hint is how the Dow index acts around 34,712. That was the high from December 13, 2022, that took most of 2023 to retake. A break above that level could mean that the market has forgotten about high oil prices or service sector weakness and is once again making a run at 35,200.Information on these pages contains forward-looking statements that involve risks and uncertainties.

 

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