The Dow Jones Industrial Average (DJIA) closed Friday with a loss of over 0.32%, weighed down by ongoing uncertainties surrounding the US-China trade war. While Beijing indicated a possible de-escalation by exempting some US goods from tariffs, the broader market sentiment remained cautious. A decline in US consumer sentiment further contributed to the DJIA’s struggles, keeping the index near the 40,000 mark instead of pushing towards the highs reached earlier in the week.
Mixed Signals from China and Trump’s Tariff Stance Weigh on Risk Sentiment
Despite China’s more flexible negotiation stance in trade discussions with Washington, risk appetite remains volatile. US President Donald Trump’s comments that he would consider a “total victory” if tariffs on foreign goods remain between 20% and 50% over the next year added downward pressure on the DJIA. This slight shift in tone from the White House impacted market sentiment, contributing to the index’s decline.
Additionally, US consumer sentiment showed further deterioration in April, according to the University of Michigan’s (UoM) latest poll. The Consumer Sentiment Index fell to 52.2, down from 57 in March, marking the fourth-lowest reading since the late 1970s. The survey revealed that expectations for the economy, income, stock market conditions, and homebuying prospects all worsened compared to the previous month.
Inflation expectations also rose, with Americans now anticipating prices to increase by 6.5% over the next year, and a 4.4% rise over the next five years, further adding to economic concerns.
Rising Recession Fears and Economic Uncertainty
US equities are facing additional pressure from growing concerns about a potential recession. Bloomberg’s latest survey of economists revealed that the likelihood of a US recession has increased from 30% to 45%, further weighing on market sentiment.
Meanwhile, gold prices were also under pressure, as the US Dollar regained strength. Gold saw a decline of 1.89%, trading at $3,285. The US Dollar Index (DXY), which tracks the performance of the dollar against a basket of six major currencies, rose 0.27% to 99.55.
Dow Jones Technical Outlook
The DJIA’s bearish outlook persists, despite the index finishing the week with gains of more than 2% above the 40,000 level. The Relative Strength Index (RSI) indicates neutral momentum, signaling that buyers are struggling to push the index higher. Should the DJIA break above 40,500, resistance would likely come at last week’s high of 40,790, with further resistance at the 41,000 level.
On the downside, if sellers push the index below the April 23 low of 39,486, a further test of the April 22 high of 39,271 may occur, closing the gap observed between the 22nd and 23rd of April.
