Dow Jones caught between two opposing forces

The Dow Jones (US30) edged lower in yesterday’s session after the release of the U.S. Producer Price Index (PPI) came in higher than expected, raising concerns that inflationary pressures at the production level have not yet fully eased.

Specifically, July PPI rose by 0.9% month-over-month, far exceeding the forecast of 0.2%, which could prompt the Federal Reserve (Fed) to maintain a more cautious stance on interest rate cuts.

This development weighed on investor sentiment, particularly as the index trades near record highs and remains sensitive to key macroeconomic data.

However, while profit-taking pressure may emerge as the index approaches its peak and faces mixed economic data, the momentum of the Dow Jones is still underpinned by a temporarily stable macroeconomic backdrop and mostly positive Q2 earnings results.

These opposing forces—rate cut expectations versus macroeconomic stability—have kept the Dow Jones trading cautiously just below its all-time highs.

Notably, the recent earnings season has provided significant support for the index. A majority of companies listed on the Dow reported earnings that exceeded expectations, particularly in the industrial, financial, and consumer goods sectors. These positive results have not only strengthened investor confidence in the health of U.S. corporates but also highlighted their ability to adapt to a high-interest-rate and inflationary environment.

On the macroeconomic front, the easing of global trade tensions has been a notable factor supporting stability in equities and the Dow Jones in particular. The U.S. and China’s agreement to extend the suspension of tariffs for another 90 days (the second extension) has somewhat reduced trade-related risks, supporting investor risk appetite and reinforcing the positive trend in the equity market.

In the short term, market focus will be on the upcoming meeting between U.S. President Donald Trump and Russian President Vladimir Putin, scheduled for the end of the week. Should the talks make significant progress toward a ceasefire agreement in Ukraine, global risk appetite could rise sharply, providing the momentum for the Dow Jones to break out and set new record highs. Conversely, if the meeting fails to deliver positive results or sparks new disagreements, geopolitical risks could quickly resurface, triggering defensive sentiment and putting considerable downside pressure on the index.

Overall, the Dow Jones remains in a “wait-and-see” mode, with its long-term uptrend intact thanks to the combination of strong corporate earnings and a calmer macro environment. In the near term, fading rate-cut expectations could act as a drag on the equity market. Volatility is likely to increase in the coming sessions as the market digests the outcomes of key events, particularly developments from the U.S.–Russia summit scheduled for today.