Dow Jones index hits record high
US stocks surged on Monday as tensions between the US and Iran appeared to lessen. The reduction in strain led to a drop in both crude oil prices and Treasury yields, which bolstered market sentiment. As August began, equity markets showed optimism, with investors looking ahead to important earnings reports and economic data set to be released this week.
Dow Jones index
Why it matters: Crude oil prices experienced a significant drop on Monday following US President Donald Trump's decision to postpone military action against Iran.
The President encouraged Iran to agree to a peace deal aimed at reopening the Strait of Hormuz and limiting Tehran's nuclear ambitions.
Treasury yields fell amid reduced inflation concerns, with investors largely anticipating the Federal Reserve will increase its benchmark interest rates by at least 25 basis points in September.
Communications services and tech stocks stood out as major gainers on Monday. Shares of Meta Platforms surged 6%, while Alphabet and Microsoft each saw gains of around 5%. Amazon's stock increased by more than 4.5%, reaching a record market value of $3 trillion.
Energy and consumer staples stocks went against the market trend, closing lower on Monday.
The earnings season has been impressive so far, with 85% of the 304 companies in the S&P 500 index that have reported earnings by Friday surpassing market expectations.
SpaceX shares rose about 5.7% on Monday in anticipation of the company’s first quarterly earnings report since going public, which is scheduled for Tuesday.
The Dow Jones index climbed 693.38 points, or 1.32%, closing at an all-time high of 53,178.41 on Monday. The S&P 500 increased by 1.48% to finish at 7,600.50, near the record high reached in early June. The Nasdaq 100 rose by 1.78% to settle at 28,776.80.
The Dow Jones Index
Investors are closely monitoring the discussions between the US and Iran. Key economic data from the US, including the balance of trade (at 16:30 UAE Time), JOLTs job openings (at 18:00 UAE Time), and factory orders (also at 18:00 UAE Time), will be released today. The US trade deficit, which expanded to $77.6 billion in May from $54.6 billion in April, is anticipated to narrow to $73 billion in June. Job openings, having increased by 9,000 to 7.594 million in May, are expected to decrease to 7.45 million in June. Analysts predict a 0.2% rise in US factory orders for June following a 1.3% drop in May. Earnings reports from Caterpillar, McDonald’s, and Pfizer are also set to be a significant point of interest today.
The History of the Dow Jones Industrial Average
The Dow was first introduced on May 26, 1896, by Charles Dow, who co-founded both the American publishing company Dow Jones & Company and the newspaper The Wall Street Journal. Although the index also shares the name of his business partner, Edward Jones, Jones himself did not actively contribute to creating the Dow Jones Industrial Average.
When it was first published, the Dow Jones stood at 40.94, representing a weighted average of the twelve original stocks. These initial companies included names like the United States Rubber Company, Iron and Railroad Company, and the National Lead Company.
Originally, the DJIA was calculated by adding up the stock prices of these twelve companies and dividing by twelve. Over the years, the index evolved. In 1916, it expanded to include twenty companies, and by 1928, it reached its current structure with thirty companies from various sectors.