Dow Jones Industrial Average nurses its Warsh hangover
Wall Street's blue-chip index spent Thursday picking up the pieces of Wednesday's hawkish Federal Reserve (Fed) selloff, and not even a roaring chip trade could coax it back into the green. The Dow Jones Industrial Average (DJIA) had two reasons to rally on paper, a screaming semiconductor tape and a sharp drop in Crude Oil, and it brushed off both.
The index spiked toward 51,900 in overnight trade, ran into heavy selling, and slid back to hover close to 51,600, leaving it stuck in the lower third of its daily range while the chip names sprinted. The striking part of the session is that two genuine tailwinds showed up and the average still could not hold a bid.
A chip rally the Dow was never built to catch
The day's marquee trade lived in semiconductors. Intel jumped around 10% after the White House flagged a chip-design partnership with Apple, Micron climbed roughly 6%, Nvidia added more than 1%, and a benchmark semiconductor fund rose better than 5%.
None of that does much for an old-economy, price-weighted average. The Dow holds Apple and Nvidia but not Intel, which was dropped from the average in late 2024, so the single biggest mover of the day never touched it; the blue chips were always going to watch this rally from the sidelines.
Cheaper Crude Oil, and a Fed that isn't impressed
The other supposed tailwind came from energy. West Texas Intermediate (WTI) Crude Oil fell around 3% toward $74 and Brent slid nearly as much near $77 after the Vice President said tankers carrying more than 12 million barrels had cleared the Strait of Hormuz, following Wednesday's memorandum of understanding between Washington and Tehran. Some desks framed the move as Crude Oil doing the Fed's work, pulling inflation lower and easing the pressure on policymakers.
That tidy story leans on two assumptions the market cannot yet verify. It assumes the de-escalation holds well past the initial 60-day window, and it assumes the inflation problem is mostly an energy story when services and wages are doing the heavy lifting; the committee, for its part, just signaled it is in no mood to take the win.
Warsh keeps his cards close
Wednesday's Federal Open Market Committee (FOMC) meeting, Warsh's first as chair, is what the tape is still digesting. The updated dot plot showed nine of 18 officials now expecting higher rates in 2026, a hawkish lurch, while Warsh declined to submit a forecast of his own and leaned hard on the language of price stability.
A new chair who will not show his own dot, presiding over a committee split down the middle on whether the next move is a hike, is exactly the kind of communication vacuum equity markets punish. The blue chips capture none of the upside from the idiosyncratic chip trade while still carrying the weight of a hawkish Fed, which is much of why the average cannot rally with the tailwinds lined up in front of it.
Resistance: Near-term supply sits around 51,800, the level that capped every bounce through the session. Above it, the rejected overnight spike near 51,900 is the bigger barrier, with the 52,000 handle behind it.
Support: The 51,600 area is the immediate floor and has been defended repeatedly. A clean break opens the session low near 51,550, with the 51,500 handle beneath it.
Bias: Modestly lower while the index holds below the 51,800 area. A hawkish Fed, a chip rally the blue chips cannot share, and thin holiday liquidity all argue for more drift than recovery, and a daily close back above 51,800 is the minimum the bulls need to flip that read. The next real verdicts come next week, with flash Purchasing Managers Index (PMI) prints on Tuesday and the Core Personal Consumption Expenditures (PCE) Price Index on Thursday, the very release those hawkish dots are built around.
Dow Jones 5-minute chart
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
ROI - For the Trump-led Treasury, the "tail" of the auction is the most difficult part: McKeever
The views expressed in this article are solely those of the author, Reuters columnist Jamie McGeever. Reuters, Orlando, Florida, October 6 – U.S. Treasury auctions are typically dull, predictable, and not newsworthy. But these are not ordinary times, and the Trump administration now faces the risk of sluggish U.S. debt sales making headlines. The U.S. Treasury plans to issue nearly $120 billion in Treasuries this week, the first non-bill bond sales in two weeks: $58 billion in three-year notes on Tuesday, $39 billion in ten-year notes on Wednesday, and $22 billion in thirty-year bonds on Thursday. These auctions would usually be insignificant events, but due to the exceptionally weak performance of auctions from September 22 to 24—especially the five-year note auction on September 23, which triggered the largest spike in bond yields since April last year—they are attracting growing attention. Since then, yields have not only failed to retreat but have surged across most tenors to multi-decade highs. It's worth noting that the possibility of a U.S. Treasury auction "failing" is almost zero. Primary dealers—currently 26 Wall Street banks and institutions authorized by the New York Fed as market makers for Treasuries—are always involved. They effectively underwrite the sales, ensuring the smooth operation of the $30 trillion U.S. Treasury market, the most liquid market in the world. This, in turn, allows the entire global financial system to function, given that trillions of dollars in global debt, assets, and market derivatives are benchmarked against U.S. Treasuries. Treasuries are also the primary collateral for lubricating the financial “pipes” of the U.S. and global markets, including repo agreements, interbank loans, and financing. In short, as long as U.S. Treasuries remain the pillar of the global financial system, there will always be buyers at Treasury auctions. The question, as always, is at what price these bonds will be sold. Currently, borrowing costs in the secondary market are at their highest levels since the mid-2000s, so it's reasonable to expect that the Treasury will pay relatively high rates in the primary market as well. But as recent auctions have shown, negative surprises remain possible. "Too big to be absorbed by the market"? The $70 billion five-year auction on September 23 was among the most worrisome in years. Demand, as measured by the bid-to-cover ratio, was at a nine-year low. The Treasury ended up selling the notes at a yield of 5.033%, more than 3 basis points above the market yield at the close of bidding. Three basis points might not sound like much, but it's exceptional for a five-year note auction. This is the largest so-called "tail" since June 2022. According to JPMorgan analysts, the last time a five-year auction had a three-basis-point tail was back in 2011—amid the brewing debt ceiling crisis that eventually led to a U.S. credit rating downgrade in August that year. Currently, concerns over the U.S.'s daunting fiscal outlook are driving up long-term borrowing costs. As a result, markets generally expect the Trump administration to gradually shift the Treasury’s massive funding needs toward the lower-yield (and therefore lower-cost) short- and medium-term segments of the curve. That's why the five-year note auction two weeks ago sparked such concern. A three-basis-point tail is common in long bond auctions, but not in the "belly" of the yield curve. If the Treasury is forced to pay a higher premium to issue these bonds, then Houston, we have a problem. A large auction tail can be caused by many factors, including market volatility on the day of the auction or more concerning, fundamental issues that may erode demand over time. The two are often hard to distinguish because they are not mutually exclusive. On a brighter note, this unease has not yet spread to the short end of the yield curve. At least, not yet. Three-year and ten-year Treasury yields are up about 50 basis points from the last auction a month ago, hovering around 4.96% and 5.32%, respectively. The thirty-year yield is up roughly 35 basis points to 5.65%. These levels should be high enough to attract strong demand and ensure smooth sales, right? Maybe. But if surprises do occur, volatility and uncertainty could spill over across the market. Investors will be watching developments as closely as hawks. (The views in this article are solely those of the author, a Reuters columnist.) Like this column? Check out Reuters' "Unhedged" (ROI), your essential new source for global finance commentary. Follow ROI on LinkedIn and X. You can also listen to the daily "Morning Bid" podcast on Apple, Spotify, or the Reuters app—subscribe for in-depth market and finance news, seven days a week. US 5-year auction has biggest 'tail' since 2022 https://fingfx.thomsonreuters.com/gfx/mkt/dwpkmkzogpm/TAIL.png (For the convenience of non-English speakers, Reuters provides automated translations of its reports
Money market fund inflows plummet to 158 billion—Is short-term US Treasury liquidity flashing a warning sign?
Money market fund inflows have sharply dropped to $158 billion in the first three quarters of this year, driving Treasury yields higher. Increased volatility at the short end has raised market concerns about tightening short-term financing.
Crypto prices
More
