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Dow Jones Forecast: DJIA falls on Middle East worries & post jobless claims

Article By: ,  Senior Market Analyst
October 3, 2024 2:27 PM

US futures

Dow future -0.39% at 42041

S&P futures -0.27% at 5692

Nasdaq futures -0.48% at 19707

In Europe

FTSE -0.05% at 8288

Dax -0.59% at 19031

  • Stocks fall as Middle East worries remain
  • US jobless claims rise to 225k
  • ISM services PMI is due shortly
  • Oil rises for a third day on Middle East worries

US jobless claims rise & Middle East worries remain

U.S. stocks are falling as the market digests the latest labor market data for clues on the economic outlook whilst also watching for potential escalations in the Middle East.

The mood is cautious amid fears that Israel could retaliate against Iran following missile strikes earlier in the week. The concerns offset data showing that the US labour market remains resilient.

The latest jobless claims data showed that the number of unemployed claiming benefits rose by 6k to 225k at the end of the week of September 28th, ahead of expectations of 220k. Although filings and benefits have remained subdued even as hiring has slowed this year and joblessness has risen, in an encouraging sign for the labor market and the US economy.

The data comes after ADP payrolls rose for the first time in five months and as jolts job openings also unexpectedly increased, painting an encouraging picture ahead of Friday's nonfarm payroll report. Should tomorrow's nonfarm payroll report confirm that the jobs market is performing well, equities could rebound even if this means fewer rate cuts from the Fed down the road.

Looking ahead, attention is now turning to the ISM services PMI, which is expected to show that service sector activity grew at a slightly faster pace in September, to 51.7, up from 51.5. This is important as the service sector makes up the majority of the US economy. Weaker growth could be a cause for concern.

Corporate news

Levi Strauss is set to open over 10% lower after the jeans maker announced it had put its Docker brand up for review for a potential sale and lowered its group-wide full revenue forecast.

Tesla is set to fall another 1.5%, extending losses of 3.5% yesterday, after the EV maker posted disappointing Q3 deliveries and production numbers. Tesla's total deliveries in Q3 were 462,890, which was below expectations of 463,310.

Stelliantis set to open 4% lower after Barclays downgraded its stance on the carmaker to equal weight from overweight after the auto giant cut its guidance for the year.

Dow Jones forecast – technical analysis.

The Dow Jones continues to hover around 42k, at the upper band of the rising channel and just shy of its all-time high. While the price holds onto most of September’s gains, it lacks momentum to make further progress. The price looks set to remain in consolidation for now; it would take a fall below 41850, last week’s low, and 41600, the August high, to negate the near-term uptrend.

FX markets – USD rises, GBP/USD falls

USD is rising for a 5th straight day, boosted by safe-haven flows amid ongoing concerns regarding the Middle East and expectations that the Fed could cut rates more slowly owing to solid jobs data.

EUR/USD is falling amid the stronger USD dollar and after mixed PMI data. While the composite and services PMI were revised higher, the composite still pointed to a contraction, dropping to 49.8 in September. Meanwhile PPI fell -2.3%, after CPI eased below 2% earlier in the week. The data paves the way for an October rate cut.

GBP/USD is falling after dovish comments from Bank of England governor Andrew Bailey, who suggested that the central bank could cut rates more aggressively if inflation data supported this. Following his remarks, the markets reassessed the speed at which the BoE could cut rates, pulling GBP lower.

Oil rises amid Middle East tensions

Oil prices jumped 2% on Thursday, marking the third straight day of gains. This comes amid growing concerns that the Middle East conflict could disrupt the region's crude oil supply.

The markets are fretting over an increasing likelihood that Israel could target Iranian oil infrastructure as it retaliates for the missile attack, which in turn raises the chances of a counterattack from Iran. From here, it is a matter of waiting to see how this plays out And if the risk premium on oil should rise further.

That said, fears have also been tempered by the fact that OPEC has sufficient output capacity to cover Iran if needed. Therefore, global supply could withstand disruptions in Iran.

Meanwhile, gains are being capped by a 3.9 million barrel rise in US crude oil inventories in the week ending September 27. This was ahead of the 1.3 million barrels forecast.

 

 

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