Dow Futures’ Muted Enthusiasm Nervy as Dangerous Headwinds Emerge



By: Harsh Chauhan

The Dow is leaning upwards during the Monday open but lingering doubts over a trade deal with China continues to cloud optimism| Source: REUTERS/Brendan McDermid
  • Dow Jones Industrial Average futures are up slightly today.
  • Boeing stock could head lower and dent the early optimism.
  • Doubts about the U.S.-China trade deal pose another challenge to the stock market.

Futures on the Dow Jones Industrial Average (DJIA) are up slightly this morning following a muted end to last week. The Dow and the stock market looked all set for an explosive performance last Friday as the U.S. and China struck a trade deal. But the enthusiasm waned quickly as other challenges appeared.

The Dow and the stock market went on a wild ride as Wall Street didn’t like the details of the U.S.-China trade deal. Meanwhile, another round of weak economic data out of the U.S. in the form of weak retail sales also nixed the stock market’s early momentum.

So, even though the Dow exited the prior week in the green, it remains to be seen if it can sustain the momentum in the closing days of the year. A clutch of economic data will be on the table this week, and a major Dow component could end up weighing on the entire index.

Dow futures trade tentatively higher as the stock market looks for new catalysts

Dow Jones futures are up 47 points, or 0.17 percent, at 6.25 am ET. This indicates a positive opening for the stock market this week considering that the other indexes are also swimming in positive territory.

Chart showing Dow futures.
Dow Jones futures are up today but Boeing could play spoilsport. | Source: Yahoo! Finance

S&P 500 futures are up 0.32 percent, or 10 points. Nasdaq Composite futures are up 0.39 percent, or 33 points, indicating that the Dow could face specific challenges today.

Several challenges could hurt the early optimism

Boeing, the Dow’s biggest component with a weight of 8.24 percent of the entire index, could witness a stock price plunge today. Boeing stock is down 2.39 percent in pre-market trading as the aircraft maker is reportedly considering cutting down on the production of the troubled 737 Max aircraft.

A source cited by CNN points out that Boeing could reduce the output of the aircraft or might even end up suspending the production of the 737 Max. Boeing CEO Dennis Muilenburg had already warned earlier this year of the same. The fact that the aircraft has remained under trouble with regulators is probably forcing Boeing to take this step, and this could end up weighing on the Dow today.

However, Apple stock could offset some of the weakness today for the Dow. The iPhone maker is the index’s third-largest component, and its stock is already in the green during pre-market trading early morning. Apple has managed to escape a 15 percent duty it would have been subjected to if a Dec. 15 tariff had come into force.

The stock market and the Dow could also be affected by the potential repercussions of the trade deal. The advantages of the U.S.-China trade deal seem to be priced into the stock market already, and any loopholes that emerge now will have a negative impact on the Dow.

There’s an opinion that the spats between the U.S. and China won’t end after the latest deal. That’s because the United States’ trade deficit with China won’t go down after the latest deal as Beijing has refrained from making firm commitments.

Not surprisingly, there are concerns that all might not be well between the two countries and implementing the pact could be a challenge. Amid all of this, the Dow and the stock market’s direction seem uncertain, and a major catalyst will be needed to prop up the index today.

Markets contributor for CCN since 2019 from India. You can Follow Me on Twitter | Email me | Connect on LinkedIn