US futures traded mixed while European markets rallied on optimism about the Ukraine war. Falling oil prices hurt energy names, while yesterday’s hot US CPI inflation data kept yields underpinned and held back growth stocks. The focus will turn to PPI inflation and jobless claims data, with retail sales to come Friday.
US indices remain in a holding pattern for now, but soon that could be resolved. In today’s report, we will concentrate on the Dow Jones from a technical perspective.
Ukraine optimism lifts Eurozone markets
In Europe, the DAX hit yet another new all-time high with markets across the Eurozone and the single currency both showing relative strength as oil extended its decline amid speculation that risks to Russian supply may be easing. That put pressure on energy stocks and weighed on indices such as the UK’s FTSE and Dow futures.
Overall, risk appetite remains strong after improving further since yesterday afternoon as attention turned to President Donald Trump’s discussions with Russia over a potential peace deal for Ukraine. In a phone call with Russian President Vladimir Putin, Trump agreed to begin negotiations aimed at ending the conflict. While no concrete agreements have been announced, markets—particularly in Europe—reacted positively to the prospect of diplomatic progress.
There is still a long way to go, but the mere fact that talks are commencing has been reflected in the pricing of European assets. A resolution to the conflict could remove war-related costs, especially in the energy sector, while reducing uncertainty and potentially boosting business confidence—an outcome that would be particularly beneficial for Europe’s largest economies.
Meanwhile, the UK’s economy unexpectedly registered growth, with Q4 GDP rising by 0.1% quarter-on-quarter and 0.4% month-on-month in December, an improvement on the stagnation seen in the previous three months.
Rising Yields a Potential Tailwind for US Markets
The improved risk appetite in the Eurozone somewhat helped to offset disappointment over fading hopes for imminent US interest rate cuts, after yesterday’s inflation data came in hotter than expected and led to further strength in bond yields. Fed President Jay Powell acknowledged that more work is needed to be done on inflation, and the markets pushed back their rate cut expectation to December.
With yields on the rise again, this is something that may hold back US stocks from showing the same level of enthusiasm as before. In fact, if you look at major US indices, especially the more tech-heavy ones, you will note that they haven’t gone anywhere since December.
Dow Jones Technical Analysis and Trade Ideas
From a technical point of view, the major US indices, including the Dow and S&P 500, remain trapped within their respective ranges, struggling to breach new all-time highs—unlike their European counterparts, where the DAX has once again surged to fresh record territory.
A mixed bag of corporate earnings, ongoing trade uncertainty, and rising yields have certainly taken the edge off the prior rally, yet the broader bullish trend remains intact—until the charts suggest otherwise.
For the Dow, the big drop in energy prices is a potential headwind for the energy sector (XLE), while the likes of financials (XLF) have been holding their ground relatively well.
The key question is whether sectoral performances can provide the necessary momentum to propel the Dow to new highs, or if broader macroeconomic concerns will ultimately weigh on sentiment, leading to a correction first.
From a technical perspective, the Dow is currently maintaining its footing above the 21-day exponential moving average, with short-term support emerging around 44,200. As long as this level holds, the short-term bias remains skewed to the upside.
However, a decisive daily close beneath this zone could open the door to a more pronounced retracement, with the next significant support level not appearing until the 43,385 area. A deeper pullback could even see the index testing the long-standing bullish trend line that has been in place since October 2023, which currently converges around the 42,500–42,600 region.
Conversely, should the aforementioned support hold firm, the Dow could finally muster the strength for a breakout above key resistance in the 44,800–45,000 zone. This region has repeatedly been tested and defended, but recent encounters have only led to moderate selling pressure. The more a key resistance level is tested, the greater the likelihood of a breakout.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.