Dow Futures Eye Rally After Two-Day Sell-Off

As the dust settles from a sharp two-day sell-off, Dow futures are poised for a rally, signaling a potential turnaround in investor sentiment. The Dow Jones Industrial Average (DJIA) shed around 400 points on Friday, with most investors still out of the markets on holidays and thin volumes leaving the Dow Jones roughly a full percent lower. Holiday market flows have left equity indexes on the tepid side in the near term, as investors pull up stakes and engage in some light profit-taking ahead of the rollover into the new year.



The recent sell-off has been driven by a combination of factors, including the Federal Reserve's (Fed) recent pivot into expectations of less rate cuts in 2025 than previously expected, and the broad-base cooling effect in the long-run tech rally as investors pull up stakes and do some light profit-taking ahead of the rollover into the new year. The Fed's insistence that their approach to interest rates remains 'data dependent' has done little to reassure investors that incoming President Donald Trump's strategy of sparking a trade war with everybody at the same time won't have at least a marginal impact on the Fed's policy stance.

Despite the overall dip in the headline index number, losses are spread around on Tuesday, softening the blow and keeping roughly a third of the Dow Jones' listed securities in the green. Honeywell (HON) trimmed its yearly earnings outlook after announcing a tech partnership with Canadian aviation manufacturer Bombardier. Honeywell fell 2.2%, declining below $225 per share after investors balked at the cash outlay as part of the Bombardier deal that will crimp earnings for the year.

As the market looks to rebound, investors will be closely watching the Federal Reserve's next move, as well as any developments in the ongoing trade tensions and geopolitical uncertainties. The Dow Jones' recent plunge from all-time peaks has left near-term price action battling the charts below the 50-day Exponential Moving Average (EMA), a moving average that has provided technical support for bids through the last 13 straight months. Prices are still holding north of the 42,000 key handle, but bullish momentum remains limited as bids remain caught below the last swing low into 43,000.

In conclusion, the recent sell-off in the Dow Jones has been driven by a combination of factors, including changes in interest rates and inflation expectations, geopolitical tensions and global economic uncertainties, and earnings reports and guidance from Dow Jones component companies. As the market looks to rebound, investors will be closely watching the Federal Reserve's next move, as well as any developments in the ongoing trade tensions and geopolitical uncertainties. The Dow Jones' recent plunge from all-time peaks has left near-term price action battling the charts below the 50-day Exponential Moving Average (EMA), a moving average that has provided technical support for bids through the last 13 straight months. Prices are still holding north of the 42,000 key handle, but bullish momentum remains limited as bids remain caught below the last swing low into 43,000.