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Dow Jones outlook: further losses to index expected at Monday’s open

Dow Jones investors are steeling themselves for another week of earnings reports, with a renewed US-China trade dispute also thrown into the mix.

Dow Jones Source: Bloomberg

The Dow Jones is projected to open trading on Monday by continuing the downward trend from the end of last week, when the index shed 622 points on a particularly brutal Friday. The outcome of weekend trading with IG was an approximate 0.5% slide from the Friday close of 23,723.69, with the Dow Jones loitering around the 23,600.00 mark as of 07:35 GMT on Monday.

A tough end to the week didn't detract from the Dow Jones' overall strong performance in April, with the index surging by 11.1% throughout the month to deliver its best April showing since 1938. Yet, that sharp Friday fall hints at a turning of the tide, with stocks expected to pull back in May as the long-term economic consequences of the coronavirus pandemic become increasingly clear.

Uncertainty from Apple's earnings and US-China trade conflict sent the Dow Jones downwards

Apple Inc.'s quarterly news and President Donald Trump's threat to introduce import tariffs on China were among the highlights from last week's trading, although lowlights may come with a more apposite description.

Apple, one of the most influential Dow Jones components with an index weighting of 8.01%, announced that a rise in sales couldn't save the quarter from a decline in profits. The tech giant also opted against providing investors with a clear outlook for the current quarter, with the general sentiment very much 'no news is bad news' as Apple stocks dropped by 1.61%.

In a throwback to pre-pandemic trading news, the US-China trade dispute took centre stage at the back-end of last week. President Trump indicated that he might impose new tariffs on China as reparations for a perceived mishandling of the coronavirus pandemic.

This open threat played a significant role in the Dow Jones' downward shift at the end of last week, and any doubling down on that threat by members of the US government next week should provoke similar market movement.

With domestic unemployment figures skyrocketing, the Dow Jones' movement this week will reveal the extent of investors' confidence in the US economy to ride out a trade war escalation during a global pandemic. Many of the companies represented on the Dow Jones would be keenly affected by further disruption to global trade; an inevitable effect of the tariff threat to China.

Earnings reports from Disney and Raytheon among the key flashpoints for the Dow Jones in the week ahead

Just like last week, the Dow Jones will be guided by a batch of earnings reports released by major companies in the next few days of trading.

The Walt Disney Company will announce their Q2 earnings on Tuesday, with earnings per share expected to be around half of the $1.61 figure from this time last year. This report will reveal the extent that the Disney+ streaming service has mitigated the loss of cinema and theme park revenues during the pandemic.

Raytheon Technologies will declare earnings for the previous quarter this Thursday, with investors curious about how commercial aviation losses will stack up against the rest of the conglomerate's recent business.

Outside of Dow components, earnings reports are also expected from General Motors, CVS Health, and PayPal this week, revealing the impact of a contracting economy on the automotive, pharmaceutical, and payments industries. This may give new insight into what markets can expect when this current financial quarter concludes.

The health of the domestic economy will become clearer at the end of this week's trading, with the April employment report expected to paint a bleak picture. This report arrives on Friday, with early projections anticipating the confirmation of around 22 million April job losses and an overall unemployment rate of 16%.

That report will loom over the Dow Jones throughout the week of trading, though any news of a relaxation in social distancing measures or further progress towards a coronavirus vaccine, may soften the blow.

How much does it cost to buy US shares with IG?

There are three ways to ‘buy’ US shares with IG: trading CFDs or buying physical shares. How much it costs will depend on which method you choose. The table below illustrates how the costs to get exposure to $12,750 of Tesla stock, which is equivalent to 17 shares (quoted at $750 a share, at a GBP/USD rate of 1.305).

Remember, CFDs are derivatives, which come with higher risk and reward than investing.

Cost to get exposure to Tesla stock

CFD trading Share trading
Action Buy 17 share CFDs Buy 17 shares
Capital required to open £2550 £12,750
Total fees £24.24 £97.70

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Note: The above is accurate as of 10 March 2020, and amounts do not include overnight funding charges.

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