Learn what moves the Dow Jones’ price
If you want to make a profit trading the Dow Jones, you’ll need to open and close positions at just the right time. For this, it’s essential to have a good understanding of what moves the Dow Jones index’s price.
Here are a few of the main factors that will drive the index price up or down:
Strength of the dollar
The strength of the US dollar will have an effect on the price of the Dow Jones. A strong dollar often means that the index will rise in value, while a weaker dollar will generally mean it falls.
Value of Dow Jones companies’ shares
As the Dow Jones index is made up of companies on the New York Stock Exchange (NYSE) and the NASDAQ, the share prices of those companies will affect the index’s price in turn. As it is a price-weighted index, the performance of companies with a higher share price will have a greater effect over the value of the index compared to those with lower share prices, because they have a greater weighting in how the Dow is valued.
Earnings reports
Similarly to ordinary share prices, Dow Jones companies’ earnings reports will affect the index. Strong earnings in large companies that are heavily weighted in the Dow Jones will often cause an increase in the index’s price, and weak reports will usually mean a decrease.
Economic events
It’s not just the index’s companies themselves that affect the Dow Jones, macroeconomic factors can play a role too. Any geopolitical factors that’ll affect the dollar’s price will likely affect the Dow Jones’ price, too.
News
While macroeconomic events themselves will play a factor, so too will news articles. Widely viewed news, both positive and negative, will affect the index’s price. In particular, news about central bank announcements, changes to fiscal policy in the States and reporting on big events like Coronavirus-related developments or presidential elections will all move the value of the Dow.
