Dow Jones Industrial Average's 6-month drought is coming to an end – but important obstacles remain
Is it time Wall Street breaks out Dow 27,000 hats that were summed back in October when a stock market merger ran out of steam?
It's hard to say for sure, but the Dow Jones Industrial Average
DJIA, + 0.64%
is not just a recent psychological milestone, but also his first record of six months.
Starting Thursday, Dow stood at less than 2% (about 1.7%) shy of its record close to 26,828.39, which was launched on October 3. That all the time high gave way to a global equity route, which was widely known for a combination of concerns about the rate of interest rate hikes of the Federal Reserve and unresolved tariff conflict with China.
But both fears, which threatened to maintain a tariff for stock markets that have adopted for ten years as a historically reliable recession indicator in the US financial market last week blinked red, have faded.
Read: Here are three times when the Fed denied the yield curve warnings and was wrong
Also read: The yield curve inverted – here are 5 things investors need to know
What happened?
The Fed at the gathering of political attitude in late January stated that it would pause price increases when it took a wait-and-see approach. In March, it maintained a tough tone, confirming that it would end up pulling its balance earlier than had been expected. The movements reassured concerns about tightening economic conditions, although concerns remain about a slowing global economy.
In addition, one sees the two largest economies in the world towards a solution to a collective agreement that has hung over the market for a better part of a year.
Without these headwinds, especially Fed's rate hikes, few obstacles to highlighting racing remain higher, believe bullish market participants. Although corporate earnings are not expected to support further advances, and the slowdown that forced the European Central Bank to cut its 2019 gross domestic product forecast in the euro area to 1.1% from 1.7% – and introduce new action strategies – is starting to beat US Doors (The Fed also lowered US GDP forecast this year to 2.1% from 2.3%).
Read: Why the ECB's Transitional Political Movements Moves Sent Through Global Stock Markets
Underlined, the economic weakness, a recent service sector report, the ISM non-manufacturing index, went down to 56.1 last year from 59, 7 in February, with dealers and tech developers expanding in March at the slowest pace for 19 months. A reading of at least 50 indicates an extension of the activity. A report on private sector wages on Wednesday from ADP showed that employment fell to an 18-month low.
Read: How Stock Exchanges Risk To Be Caught By Another Ugly Job Report
Boris Schlossberg, CEO of the G-10 foreign exchange strategy at BK Asset Management, said he believes he believes the Market enjoys today a "Goldilocks" scenario of light monetary policy worldwide that can create stocks higher even though basics do not guarantee it.
"I think it's the Goldilocks scenario and the markets are very happy with monetary policy," he told MarketWatch. "It's 100% the reason we're up now," he said.
Having said that, the market needs further confirmation that recent weakness is no longer lasting.
Friday's jobs may be the key to the next catalyst, along with a Chinese trade pact, Schlossberg said.
"Torrid growth in the US economy is a false assumption," he said.
See: Expect a non-wage salary to surprise? Traders focus on these 2 currencies
The US economy has probably added 179,000 new jobs last month, according to economists asked by MarketWatch. If that figure, or better, comes true, it will ease many worries after hiring in February reduced to 20,000 – the smallest gain in 17 months.
Read: Job creation set back in March after February freeze
Meanwhile, outside the Dow, S & P 500 index
SPX, + 0.21%
sits about 1.8% short of its September 20 and Nasdaq Composite Index
