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Could the Dow Jones Industrial Average Index Rise Today?

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  • The Dow Jones Industrial Average Index rose by more than 5.0% or almost 1,300 points during trade on Monday. Last week, the index lost 12.3% in what was the worst week since the 2008 financial crisis.
  • Meanwhile, the rise on Monday was the sharpest since 2009. Was the spike an anomaly or could US stock markets rise more? Futures are pointing to a strong opening today.
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Dow Jones Industrial Average Index today

The Dow Jones Industrial Average Index gained almost 1,300 points in Monday’s trade. The increase was the highest percentage gain since 2009. The spike comes after last week’s sell-off where the Dow Jones lost almost 3,600 points. In percentage terms, the S&P 500 (NYSEARCA:SPY) and the Dow Jones (NYSEARCA:DIA) fell 11.4% and 12.3% in what was the worst week since the 2008 financial crisis. Notably, US stock markets showed strength in yesterday’s trade and closed almost near the day’s high. In contrast, markets showed strength in early trade during a few trading days last week but eventually closed with massive losses.

What’s driving the gains in US stock markets?

Expectations of a globally synchronized stimulus, both monetary and fiscal, have driven stock markets higher. Taking cues from the sharp rise in the Dow Jones Index and the S&P 500 yesterday, global markets traded on a strong note today. Meanwhile, after the sharp rise yesterday, Dow Jones futures are pointing to a strong opening today. The sentiments can change as the day progresses. Previously, futures were pointing to a weak opening. However, they recouped the losses and the Dow Jones Index looks like it will open with gains today.

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Could rate cuts lift the Dow Jones and the S&P 500?

Financial markets expect that the US Federal Reserve will slash rates to boost sentiments. Last year, Fed Chair Jerome Powell attributed the rate cuts to trade uncertainty among other factors. The yields on US government treasuries have fallen to all-time lows. The yield on the 10-year Treasury note is hovering near 1.0%. While rate cuts might not help clear the coronavirus uncertainty, they would help boost market sentiments. Incidentally, the Dow Jones crashed in the fourth quarter of 2018 partially due to the Fed’s rate hikes. Similarly, the Fed’s easing was one reason why US stock markets catapulted to a record high last year.

Looking at the futures, the Dow Jones Industrial Average Index might open on a weak note today. However, developments related to the coronavirus and global response to the deadly disease could drive US stock markets over the next few weeks. There’s a lot of uncertainty about how far the coronavirus could spread before the situation starts to stabilize.

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