The Dow Jones Index plunged by almost 2% on Friday as geopolitical risks between the United States and China accelerated. It plunged to a low of $45,480 as we had predicted a few hours before that. This article explores some of the top catalysts that will move the Dow Jones and its ETFs like DIA.
US and China trade war
The main catalyst for the Dow Jones Index and its ETFs is the ongoing geopolitical issues between the US and China.
The index plunged last week after a series of statements by Chinese and US officials. China launched an investigation into Qualcomm, a top American semiconductor company, and hinted that it would place export controls on rare earth metals, an industry that it dominates and one that American companies depend on.
In his response, Donald Trump threatened to impose new 130% tariffs on Chinese goods entering the United States if the two sides don’t reach an agreement.
The Dow Jones Index futures jumped by 450 points, while those linked to the S&P 500 Index and Nasdaq 100 rose by 100 and 460 points, respectively. This rebound was because the two sides made efforts to de-escalate the trade war, with Donald Trump and JD Vance hinting that the US wanted a trade deal.
A potential catalyst for the Dow Jones will be the upcoming APEC meeting that will happen in South Korea between October 31st and November 1. Trump is expected to meet with Xi Jinping and possibly reach an agreement, which would boost the stock market.
Read more: Dow Jones Index forms risky pattern ahead of earnings season
US government shutdown
The other notable catalyst for the Dow Jones Index will be the US government shutdown, which has now entered the third week. Democrats and Republicans have not made any progress on the deal to end it.
The ongoing government shutdown has an impact on the economy, especially now that many public sector employees are not being paid. Thousands of them have been furloughed and the Trump administration has started firing some of them, which is coming at a time when the labor market is not doing well.
The shutdown is also dragging the GDP, which is estimated to cost the economy between 0.1% and 0.2% a week. This amount is equivalent to between $7 billion and $15 billion per week.
As a result, the longer it continues, the higher the chances that the Federal Reserve will continue cutting interest rates in the coming meetings. The Dow Jones Index normally does well when the Fed is cutting interest rates.
Earnings season
The other notable catalyst for the Dow Jones Index this week will be the start of the earnings season, which will start on Tuesday when companies like JPMorgan, Johnson & Johnson, BlackRock, Citi, and Bank of America.
Analysts expect that the earnings season will show that earnings rose by 13% in the third quarter. A stronger result will be a good thing for the stock market as it will mean that companies are adopting the tariffs.
Federal Reserve cues
The other important catalyst for the Dow Jones and other American indices will be statements from some key Federal Reserve officials. Jerome Powell will deliver his statement on Tuesday.
Other officials like Christopher Waller, Susan Collins, Raphael Bostic, Stephen Miran, and Michele Bowman will also talk. These officials will provide more information on what to expect in the coming meetings.
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