The Dow Jones Industrial Average (DJIA) caught a firm bid on Wednesday, driving into fresh record highs as investors eased back from overexposure to the AI tech rally and moved deeper into more traditional investing mainstays, primarily major banks and healthcare stocks.
The Dow Jones rose around 430 points, setting a new intraday high of 48,419 as the tech-light major index gets a boost from traders piling back into traditional investments. The Dow is now up around 4% over a four-day period after falling to 46,490 in a mild pullback from the last record swing high near the 48,000 handle.
Banking stocks push the Dow higher
The financial sector bolstered the Dow Jones, with investor favorites such as Goldman Sachs (GS), JPMorgan (JPM), and credit card company American Express (AXP) all rising to record highs. Materials and construction also added a further boost, with building darling Caterpillar (CAT) climbing as well.
Investors continue to grow leery about revenue prospects within the AI space, despite eye-watering valuations for shovel sellers during the LLM data gold rush. Advanced Micro Designs (AMD) CEO Lisa Siu claimed that she could see total AI tech demand climbing to $1 trillion per year by 2030, a lofty investment and expenditure goal for an industry where most, if not all, of the revenue is contained entirely within data center suppliers.
Short-term resolution is better than no resolution
The US government continues to grind closer toward a short-term resolution to the longest federal government shutdown in American history. A temporary stopgap bill that would fund the US government through January passed in the Senate this week, and the bill is expected to be voted on by the lower House of Representatives as soon as 19:00 EST Wednesday or 03:00 GMT Thursday.
Dow Jones daily chart
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.