The Dow Jones Industrial Average fell back from the 48,000 handle on Monday as investor expectations for an upcoming interest rate cut from the Federal Reserve (Fed) were overridden by a fresh upswing in 10-year Treasury yields.
Rising Treasury yields batter investor sentiment
Stocks slipped on Monday as investors shifted their focus to the Federal Reserve’s December 10 meeting, where the central bank is widely expected to deliver a third straight interest rate cut. The S&P 500 (SP500) fell 0.5%, the Nasdaq dipped 0.4%, and the Dow lost 0.6%. Even with the strong expectations for another 25-basis-point cut, rising 10-year Treasury yields kept pressure on markets, reflecting investor uncertainty about inflation trends going into 2025. Futures markets now price in roughly a 90% chance of a rate cut, up sharply from a month ago.
Recent market gains, with multiple winning streaks across major indexes, suggest that investors have already “baked in” the likelihood of this cut. Analysts warn that if the Fed unexpectedly holds rates steady, stocks could fall quickly. Beyond the decision itself, attention is turning to what Fed Chair Jerome Powell will signal about the path ahead. With cooling labor data and Powell’s term running to 2026, analysts expect him to emphasize a cautious, data-dependent approach rather than offering clear clues about the pace of cuts next year.
AI tech rally continues to sputter along
Tech stocks were a bright spot in an otherwise muted session. Broadcom (AVGO) hit a record high on chip-development news with Microsoft (MSFT), while Confluent (CFLT) surged after IBM announced an $11 billion acquisition plan. Big movers elsewhere included Wave Life Sciences (WVE) and Structure Therapeutics (GPCR), both soaring on promising obesity-drug data, and Paramount Skydance (PSKY), which jumped amid a hostile bid for Warner Bros. Discovery (WBD). Berkshire Hathaway (BRK) also made headlines with a major leadership reshuffle as the company prepares for eventual post-Buffett transitions.
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.
Source: https://www.fxstreet.com/news/dow-jones-industrial-average-retreats-ahead-of-looming-fed-rate-decision-202512081947
