The Dow Jones Index dropped for three consecutive days as jitters surrounding the artificial intelligence (AI) industry continued. It dropped to $48,115, down modestly from the year-to-date high of $48,847.
Dow Jones Index has pulled back amid AI jitters
One main reason why the Dow Jones Index has pulled back in the past few days is that investors remain concerned about the artificial intelligence (AI) industry, which has driven it in the past two years.
These jitters accelerated last week after Oracle published its quarterly financial results, which showed that its revenue and backlog accelerated. However, its debt soared as its free cash flow turned negative, a notable thing for a company with big maturities coming up.
Oracle’s and Broadcom’s woes have had a major impact on other AI companies in the Dow Jones Index, including popular names like Nvidia, Microsoft, and Salesforce.
Still, some analysts like Tom Lee believe that the AI sector has more room to run in the coming year. For example, the average estimate for the S&P 500 Index among top Wall Street analysts is highly bullish, with some pros predicting that it will move to over $7,600 next year, driven by the AI boom.
Dow Index has pulled back ahead of the BoJ interest rate decision
The Dow Jones and other American indices have pulled back as investors wait for the upcoming Bank of Japan interest rate decision, which will happen on Friday this week.
Data compiled by Polymarket shows that the odds that the bank will hike interest rates have jumped to 98%. Most traders anticipate that the bank will hike by 0.25%, bringing the benchmark rate to 0.75%, the highest level in years.
These odds explain why Japanese bond yields have jumped in the past few months, with the 30-year rising to 3.52%, up from October’s low of 3.037%.
Crude oil price rises amid Venezuela jitters
The Dow Jones Index also reacted to the ongoing crude oil price rebound, with Brent and WTI rising to $59 and $56, respectively.
Crude oil price rose after Donald Trump announced a major blockade of sanctioned oil tankers, a move that will put more pressure on Caracas. However, the impact on the global oil market because of the diminished role of the country in the oil market.
Key earnings ahead
The next key catalyst for the Dow Jones Index will be the upcoming earnings by some of the biggest companies in the United States.
Micron Technology, a company that makes DRAM and NAND products, will publish its financial results. Analysts expect the results to show that the normalized EPS rose by 123% to $3.94.
The other notable companies to watch will be General Mills and Jabil. Also, the other companies that will publish their results this week will be Accenture, Nike, Cintas, FedEx, Darden Restaurants, CarMax, and KB Home.
Dow Jones Index technical analysis
The daily chart shows that the Dow Jones Index rose from a low of $36,645 in April this year to a record high of $48,847.
It has formed an ascending channel and is now slightly below the upper side. It remains above the 50-day and 100-day Exponential Moving Averages (EMA).
The most likely scenario is where the index will resume the uptrend, and possibly retest the all-time high of $48,847. A move above that level will point to more gains, potentially to the next key resistance level at $50,000.
On the other hand, a move below lower side of the channel will point to more downside, potentially to the next key support level at $47,000.
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