The Dow Jones Index Futures jumped by over 800 points on Monday as investors cheered the recent trade talks between the United States and China. The futures soared to over $42,000 for the first time since March, and have soared by over 14% from the lowest level this year. This article explores the top catalysts for the Dow Jones this week.
Rising Fear and Greed Index
The first main catalyst for the Dow Jones Index is the rising Fear and Greed Index, which signals that investors are embracing a risk-on sentiment. The index, which crashed to a multi-year low of 7 earlier this year, has moved to the greed zone of 62.
Its stock price strength index has moved to the greed zone, while stock price breadth, safe haven demand, and junk bond demand have moved to the extreme greed area. The market volatility index has moved to the neutral point, while put and call options and market momentum are at the fear and extreme fear zones, respectively.
Historically, the Dow Jones and other benchmark indices like the S&P 500 and the Nasdaq 100 Indices rise when the Fear and Greed Index has moved to the greed zone.
US and China trade talks
The Dow Jones Index will also benefit from the talks between the United States and China and other countries. Donald Trump and Scott Bessent have hinted that the first day of talks went well but offered no details. Chinese officials have also confirmed this.
A likely outcome is where the US and China agree to lower tariffs to a certain point temporarily and then pledge to hold more talks in the coming months. The final deal is expected to take place in over three years, according to Bessent.
There are also signs that the US will make deals with other countries in the coming months. It has already inked a deal with the United Kingdom, and analysts expect that the European Union, Japan, and South Korea will be next.
These trade deals will remove the risk that has remained in the market in the past few months. With that risk gone, analysts can start focusing on other parts of Donald Trump’s policies, like deregulation and tax cuts.
US inflation data
The other key catalyst for the Dow Jones Index is the upcoming US inflation data scheduled on Wednesday this week.
These numbers come a week after the Federal Reserve delivered its interest rate decision. The bank left rates unchanged at 4.50% and hinted that it will have a wait-and-see approach as it assesses the impact of tariffs on inflation.
A trade deal coupled with lower energy prices means that the Federal Reserve will likely start cutting interest rates in the coming months, which would boost the Dow Jones.
The key catalyst in this regard will be the upcoming US inflation data scheduled on Wednesday this week. Economists expect the data to show that the headline Consumer Price Index rose slightly to 2.5% in April, while the core CPI figure remained at 2.8%.
The other minor catalyst for the Dow Jones will be key earnings from top companies like Walmart and Applied Materials.
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