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    Dow Jones Drops as Trade War Shakes Markets

    February 4, 2025

    Key Points:

    • The Dow dropped 122.75 points (0.28%) to close at 44,421.91, paring earlier losses.
    • 10-year Treasury yields fell to 4.533% as traders sought safety in government bonds.

    The Dow Jones opened sharply lower as traders reacted to President Donald Trump’s latest tariffs on Canadian, Mexican, and Chinese imports. Traders initially dumped equities, fearing disruptions to global trade and higher inflationary pressures.

    The index fell over 300 points at the session low before recovering as the White House announced a temporary pause on Mexican tariffs after Mexico agreed to reinforce its border with the U.S..

    Despite the rebound, volatility remained high as traders navigated the risks of prolonged trade disputes and tightening financial conditions.

    Technical Analysis

    The Dow Jones (DJ30) closed at 44,575.92, posting a modest gain of 0.07%. The index continues to ride an upward trend, supported by key technical indicators pointing to sustained bullish momentum.

    Picture: Dow Jones rebounds from 43,858 support, testing 44,500 resistance amid improving momentum and bullish signals, as seen on the VT Markets app.

    From a technical standpoint, a sustained break above 44,700 could signal a continuation of the bullish trend, while a drop below 44,300 may indicate potential weakness and a possible pullback.

    Economic Data Suggests Fed Rate Cuts Could Be Delayed

    Data released Monday showed that U.S. manufacturing activity expanded for the first time since October 2022, while residential construction spending rebounded.

    A stronger economy may discourage the Fed from cutting rates too soon, a concern reflected in bond markets and the equity selloff. Analysts now expect interest rate cuts to be pushed further into the year, adding another layer of uncertainty for Dow components sensitive to borrowing costs.

    The Dow’s recovery from session lows shows resilience, but risks remain. With Fed policy in question, trade negotiations uncertain, and global growth concerns intensifying, traders will likely stay cautious in the near term.

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