+

Cookies on the Business Insider India website

Business Insider India has updated its Privacy and Cookie policy. We use cookies to ensure that we give you the better experience on our website. If you continue without changing your settings, we\'ll assume that you are happy to receive all cookies on the Business Insider India website. However, you can change your cookie setting at any time by clicking on our Cookie Policy at any time. You can also see our Privacy Policy.

Close
HomeQuizzoneWhatsappShare Flash Reads
 

Dow erases 2020 losses as Fed policy overhaul lifts stocks

Aug 27, 2020, 22:31 IST
Business Insider
REUTERS/Lucas Jackson
  • The Dow Jones industrial average erased its 2020 losses on Thursday as stocks rallied on the Federal Reserve's new monetary policy framework.
  • The 30-stock index gained as much as 1.1% in the session. Microsoft and Walmart led the index higher following news of their joint bid for TikTok.
  • The Dow lagged its peers in turning positive for the year, largely due to its smaller exposure to rallying tech giants.
  • The industrial average now sits roughly 1,000 points away from notching a record high.
  • Watch the Dow update live here.
Advertisement

The Dow Jones industrial average rose above its December 31 closing level on Thursday, becoming the last of the three major US stock indexes to erase its year-to-date losses.

The 30-stock index gained as much as 1.1%, or 302 points, in Thursday trading amid the broader stock market rally. Equities gained through the morning after Federal Reserve Chairman Jerome Powell unveiled the central bank's new framework for controlling inflation, maximizing employment, and padding against future economic downturns. The S&P 500 and Nasdaq composite both notched record highs on the news.

The index rode a second boost later in the morning when Walmart announced its joint bid with Microsoft to acquire TikTok. Both stocks leaped higher on news of the potential deal.

The Dow's smaller exposure to surging tech stocks hindered its rise in recent months. The Nasdaq composite rode tech mega-caps higher to wipe out its 2020 losses in May, while the S&P 500 turned positive for the year in early June.

Walmart gained the most out of the Dow's constituents as of 12 p.m. ET, followed closely by Travelers and American Express. Home Depot declined the most.

Advertisement

Read more: Bank of America shares a trading strategy designed to boost returns from a 'potential blow-off' rally in Apple's stock as it surges past big-tech peers

The Dow's run-up comes just a few days after it announced the biggest shakeup to its index membership since 2013. The industrial benchmark will ditch Exxon, Pfizer, and Raytheon at the end of the month for Salesforce, Amgen, and Honeywell. The update was prompted by Apple's upcoming five-for-one stock split. Since the Dow is price-weighted, the split cuts away at its tech exposure and led S&P Dow Jones Indices to rebalance the lineup.

The stock market has also surged in recent sessions on better-than-expected economic data, strong corporate earnings, and falling new COVID-19 infections. Most recently, durable goods orders in July climbed 11.2%, trouncing the consensus economist estimate of a 4.8% increase. Earnings beats from Salesforce, Urban Outfitters, and HP Enterprise lifted stocks on Wednesday.

Still, hurdles remain for the Dow and its peers. The US continues to grapple with the coronavirus and its economic fallout, with slowed hiring and spending activity suggesting the recovery has weakened. Weekly jobless claims stabilized at historic highs after weeks of steady declines. Market strategists also warn that the rally's reliance on tech giants poses a major downside risk should any one of the mega-caps falter.

Should the Dow overcome such obstacles, it stands to break through its pre-pandemic peak. The index sits roughly 1,000 points, or a 3.5% gain, from setting a new record.

Advertisement

Now read more markets coverage from Markets Insider and Business Insider:

Fed to overhaul approach for controlling inflation to better handle future downturns and reach full employment, Jerome Powell says

Chinese Tesla competitor Xpeng upsizes IPO, will now raise $1.5 billion amid strong demand

MORGAN STANLEY: Buy these 12 stocks underappreciated stocks that offer strong profit growth and are due for a surge

Markets Insider
You are subscribed to notifications!
Looks like you've blocked notifications!
Next Article