What’s Behind The Recent Dow Jones Stock Market Performance?

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Key takeaways

Last week, the stock market declined following the release of the Federal Reserve’s March meeting minutes
The Dow Jones Industrial Average kicked off this week with additional losses, egged on by declines in the tech sector
Dow Jones stock futures dropped on Monday, followed by a small bump Tuesday ahead of the consumer price index report

On Monday, the stock market continued its downward spiral as the major indices each took on sharp losses. The Dow Jones alone sold off 1.2% on the day, with Apple and Microsoft leading the charge at losses of 2.6% and 3.9%, respectively.

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Since the Federal Reserve released its March meeting minutes last week, the stock market has seen multiple declines. Amid other concerns, officials have indicated they may be open to raising interest rates more rapidly than previously planned. Additionally, the Fed is likely to begin selling off its burgeoning investment balance sheet at a rate of $95 billion per month beginning in May.

These changes are an unexpectedly aggressive pivot from the more dovish approach previously expected from the Federal Reserve. As a result, stocks, indices and Treasury yields all dropped last week as investors prepared for more hawkish actions.

Spurred by worries about higher interest rates and slowing economic growth, many investors have dropped their riskier stocks and slid into more defensive positions. These concerns compounded Tuesday thanks to reports that March saw inflation jump an additional 1.2%. Currently, year-over-year inflation sits at a 40-year high of 8.5%.

The Dow’s recent performance

After Monday’s decline, the Dow Jones Industrial Average rallied Tuesday morning following the consumer price index report. Amongst Dow Jones leaders, Apple rose 1.2%, while Microsoft gained 1.25% and Chevron popped 2.1%. However, the Dow closed down 0.3% for the day, egged on by Cisco Systems’ 2% decline.

The Dow has been on a bit of a bumpy ride in the last two months. In early March, the Dow dropped nearly 1,260 points in a week in anticipation of the Federal Reserve’s March meeting. The Dow recovered following a relatively muted announcement by Fed officials.

But the index began dropping again in early April when Federal Reserve Governor Lael Brainard indicated the central bank may take a more aggressive approach to tighten inflation in May. Among other concerns, the Fed stands to raise interest rates 0.5% in its May meeting after March’s 0.25% increase.

Examining Dow Jones stock futures

Dow Jones stock futures fell early Monday alongside declines in S&P 500 and Nasdaq futures. However, following Monday’s stock market sell-off, Dow futures rose again Tuesday, gaining about 0.1%. Most likely, market futures are responding to last week’s hawkish Federal Reserve report and the market’s broader downward performance.

It’s important to remember that stock futures reflect the future expected value of an index or security, not the value that’s necessarily achieved. Falling futures suggest that investors expect short-term stock declines, which appears to be the case here. Additionally, rising and falling futures outside market hours can indicate the starting performance of securities the next day.

The decline of Dow Jones stock futures—paired with poor tech sector performance—suggests broadly declining investor sentiment. However, patches of optimism remain.

What does this mean for investors?

The market isn’t likely to settle down anytime soon between the Fed’s anticipated aggressiveness and international concerns regarding the Russia-Ukraine conflict. However, there’s hope on the horizon as JPMorgan Chase, Delta and others prepare to release their earnings this week. These reports will set the tone for investor expectations in the new earnings season amid record-high inflation and rising labor costs.

But until the dust settles, it’s difficult to predict where Dow Jones stock market performance will land. All we can say for sure is that if you’re not preparing your portfolio for the long haul, then now’s the time to start.