The stock market fell in the aftermath of the latest remarks. An acceleration of tapering would likely lead to short-term interest rate hikes sooner than anticipated at the November FOMC meeting. Last week, in testimony before the congressional oversight committees, Chairman Powell became even more hawkish, suggesting that the Fed could accelerate QE tapering if the November and December CPI reports continue to show rising inflation. While government stimulus continues, monetary policy needs to address the highest CPI levels in three decades. Moreover, it acknowledged that inflationary pressures are less " transitory" than structural. The President reached across the political aisle to support bipartisan cooperation that could pay dividends for his legislative initiatives. The nomination sent two signals since the Chairman comes from the opposition Republican Party. President Biden nominated Fed Chairman Jerome Powell for a second term in the wake of the November meeting. By decreasing government bond purchases by $10 billion and mortgage-backed securities purchases by $5 billion each month, QE will end in mid-2022, setting the stage for liftoff from a zero percent Fed Funds rate. At the November FOMC meeting, the US central bank began tapering quantitative easing at a rate of $15 billion per month. The prospects for rising US interest rates have been lurking behind markets over the past weeks. The Fed chairman became more hawkish last week While it closed at the 24,580.08 level on Friday, December 3, the DJIA was a lot closer to the low than the record high from early November. The DJIA reached a low of 34,006.98 on December 1. The chart illustrates the gap that led to lower highs and lower lows in early December. However, the stock market did not rest on Friday, November 26, as it gapped down on the opening and continued to fall over the next week. The selling began on November 26Īs the US enjoyed the Thanksgiving holiday on November 25, many people took a four-day weekend. As of Friday, December 3, we are short the DIA as the trend is lower. The Dow Industrials SPDR ( NYSEARCA: DIA) is an ETF product that reflects the price action and yield of the DJIA. The DJIA may be less reflective of the stock market than the S&P 500, NASDAQ, or even the Russell 2000, but it remains the oldest and most reported index followed by investors and traders worldwide. The divisor is adjusted in case of stock splits, spinoffs, or structural changes that impact the numerical value of the DJIA.Īs of November 4, 2021, the Dow Divisor is 0.15172752595384, to be exact. The DJIA is calculated by taking the sum of the prices of the thirty stocks and dividing it by a divisor. None of the original companies remain in the Dow thirty today. The editor of the Wall Street Journal and co-founder of Dow Jones & Company, Charles Dow, created the DJIA in 1884, making it the oldest index. The Dow Jones Industrial Average may not be the most representative stock market index, but it is a market barometer.
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