The Dow Jones is coming off a volatile week of trading, driven primarily by the US Federal Reserve's future monetary policy. After Fed Chair Kevin Warsh struck a significantly more hawkish tone in Jackson Hole the previous Friday, the probability of another interest rate hike in September rose sharply. This was compounded by rising oil prices and higher bond yields. Toward the end of the week, a surprisingly strong US jobs report ultimately triggered renewed selling pressure.<\/p>\n\n\n\n
Rising bond yields weigh on the Dow Jones<\/strong><\/h2>\n\n\n\n
The Dow Jones got off to a correspondingly weak start last week. On Monday, the index lost 0.7 %, followed by another decline of just under 0.8 % on Tuesday. As a result, the Dow temporarily fell to around 52,770 points. Rising yields in the bond market, in particular, created headwinds. The yield on 10-year U.S. Treasury bonds climbed at times toward 4.8 %, reaching its highest level since early 2025.<\/p>\n\n\n\n
The rise in yields was driven primarily by renewed inflation concerns. On the one hand, Warsh had recently made it clear that the Fed intends to continue consistently pursuing its inflation target of 2 %. On the other hand, the renewed escalation between the U.S. and Iran led to a sharp rise in oil prices. Brent briefly rose to just under $95 per barrel, while WTI surpassed the $90 mark.<\/p>\n\n\n\n
As a result, the Iran conflict remains relevant for the stock market as well, less due to geopolitical uncertainty itself and more through the inflation channel. If energy prices remain at an elevated level for longer, this could delay the decline in inflation and give the Fed additional room for further interest rate hikes.<\/p>\n\n\n\n
ISM data shows robust US economy<\/strong><\/h2>\n\n\n\n
The ISM data also showed a continuing robust US economy alongside high price pressures. The ISM Services PMI rose to 55.4 points in August, while the Prices Paid Index remained significantly elevated at 72.6 points.<\/p>\n\n\n\n
Fed Governor Christopher Waller provided some temporary relief on Thursday. He pointed to progress on inflation and, assuming this trend continues, argued for keeping interest rates unchanged in September. As a result, the probability of an interest rate hike fell from around 65 % to about 50 %, bond yields declined, and the Dow Jones rose by 1.18 %, or more than 600 points. However, the relief did not last long.<\/p>\n\n\n\n
On Friday, the official U.S. jobs report came in as a significant positive surprise. In August, 162,000 new nonfarm jobs were created. The consensus estimate had been only about 55,000. At the same time, the figures for June and July were revised upward by a combined 55,000 jobs. The unemployment rate remained low at 4.1 %.<\/p>\n\n\n\n
Wage trends, however, were interesting. Average hourly wages rose by only 3.1 % compared with the previous year. The report thus pointed to a robust labor market without, at the same time, providing any new clear indications of an acceleration in wage inflation.<\/p>\n\n\n\n
Nevertheless, the stock market initially reacted with a negative outlook. A continued strong economy gives the Fed more leeway to further raise interest rates to combat inflation. Immediately after the figures were released, the probability of an interest rate hike in September, as priced in by the market, rose again to around 65 %. The two-year U.S. yield briefly reached its highest level since January 2025, and the Dow lost about 0.5 % by the end of the week.<\/p>\n\n\n\n
Inflation data comes into focus<\/strong><\/h2>\n\n\n\n
All in all, despite significant fluctuations in the meantime, the Dow Jones ended the week only slightly in the red. At the same time, the fundamental starting point has changed little: the US economy remains very robust, while inflation is still above the Fed's target.<\/p>\n\n\n\n
Therefore, the new inflation report is likely to be the main focus in the coming week. Following the strong labor market report, it will be particularly crucial to see whether the progress on inflation recently highlighted by Waller is confirmed. If price pressure remains high, another interest rate hike in September is likely to become increasingly probable. Conversely, if inflation turns out weaker, the recently renewed nervousness in the bond and stock markets could subside somewhat.<\/p>\n\n\n\n
Technical outlook for the Dow Jones<\/strong><\/h2>\n\n\n\n
With the Dow breaking above the round 53,000-point mark, the upward trend was recently confirmed. A correction to the previous breakout level is a very typical behavior in technical analysis. Exactly this happened over the past four weeks. The Dow corrected down to the support level at 53,000 points.<\/p>\n\n\n\n
Currently, the 50-day EMA also runs through here. As long as this price zone can be defended, from a chart analysis perspective, nothing speaks against a direct continuation of the trend.<\/p>\n\n\n\nDow Jones daily chart<\/figcaption><\/figure>\n\n\n\n
A breakout above the short-term resistance at 53,750 points would confirm this scenario. If, on the other hand, the Dow Jones Index were to slip below the support zone in the area of the 50-week EMA (green), the correction is likely to extend at least to the 20-week EMA at around 52,000 points in the short term.<\/p>\n\n\n\n
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