The Dow Jones (DJIA) is trading higher on Wednesday and is within 1% of its all-time high ahead of the Fed interest rate decision. A 25 bps reduction is the likely outcome with 94% odds, according to CME’s FedWatch tool, although the market could receive a shock if the central bank votes to slash rates by 50 bps, which carries a slim 6.0% chance.
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The press conference after the rate cut announcement at 2:00 p.m. Eastern Time will be closely watched, as Chair Jerome Powell will provide insight into the Fed’s outlook on inflation, economic growth, and the potential pace of future rate adjustments. It will also set the stage for whether the Fed is “dovish” or “hawkish.” A dovish Fed supports rate cuts in order to drive economic growth, while a hawkish stance supports keeping rates higher in order to control inflation and prevent the economy from overheating.
Lower rates could help a shaky real estate market by decreasing mortgage rates. Housing starts fell by 8.5% month-over-month to an annualized rate of 1.307 million in August, missing the estimate of 1.365 million and registering the lowest figure since May. Single-family housing starts dropped by 7% to an annualized rate of 890,000.
Meanwhile, Nvidia (NVDA), which carries a 2.2% weight in the Dow Jones, is trading lower after China urged top technology companies within the country to cease use and halt orders of Nvidia chips. Last month, Nvidia struck a 15% revenue-sharing deal with the U.S. government for H20 chip sales to China. At the same time, Nvidia’s guidance already excludes Chinese revenue.
“We’ve guided all financial analysts not to include China” in guidance estimates, said CEO Jensen Huang on Tuesday. “The reason for that is because that’s largely going to be within the discussions of the United States government and Chinese government.”
The Dow Jones is up by 0.51% at the time of writing.
Which Stocks are Moving the Dow Jones?
Let’s pivot to TipRanks’ Dow Jones Heatmap, which illustrates the stocks that have contributed to the index’s price action.
Nvidia (NVDA) is taking a hit from the China news, while Magnificent 7 peer Amazon (AMZN) is in the red as well after announcing that it would allocate $1 billion to raise pay and improve healthcare benefits for certain U.S. employees. On the other hand, Walmart (WMT) secured a new all-time high of $106.11, bringing its year-to-date return to about 17%.
Meanwhile, all of the stocks within the consumer defensive and financial sectors are trading higher, providing a boost to the Dow Jones. American Express (AXP) is leading financial stocks, shrugging off a price target downgrade to $280 from $296 by Freedom Broker. On Monday, the financial services company launched its Amex Travel App.
DIA Stock Moves Higher with the Dow Jones
The SPDR Dow Jones Industrial Average ETF (DIA) is an exchange-traded fund designed to track the movement of the Dow Jones. As a result, DIA is rising alongside the Dow Jones today.
Wall Street believes that DIA stock has room to rise. During the past three months, analysts have issued an average DIA price target of $504.67, implying upside of 9.48% from current prices. The 31 holdings in DIA carry 29 buy ratings, two hold ratings, and zero sell ratings.
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