Dow Jones: Amazon Rallies but US 30 Industrials Take Warsh Rate-Hike Hit

The Dow Closed Flat but the Tape Underneath It Was Not

The Dow finished down 9.45 points at 53,559.99. That flat number hid a rough session. Warsh put a September rate hike back on the table at Jackson Hole. The 2-year yield jumped more than 10 basis points. Industrial stocks took the hit. Technology and consumer names absorbed the damage. Without Amazon, Microsoft, Apple and Alphabet the Dow would have closed much lower. The index gained 0.5% for the week. Friday’s leadership narrowed sharply.

Daily Dow Jones Industrial Average Technical Analysis

The Dow Jones Industrial Average settled lower on Friday after hitting 53,819.65, its highest level since August 14. The rally failed inside its retracement zone, leaving the index lower into the close.

The main trend is up according to the daily swing chart, but the minor trend is down. That has left momentum weak in either direction. A trade through 54,744.33 will signal a resumption of the uptrend. A move through 52,754.90 will change the main trend to down.

On the upside, retracement zone resistance comes in at 53,749.62 to 53,984.37. This zone stopped the rally at 53,819.65 on Friday.

On the downside, retracement zone support is at 53,143.20 to 52,765.33. The August 20 low at 52,754.90 came just below the lower boundary of this zone.

The major support and short-term trend indicator is the 50-day moving average at 52,793.75. It has provided support and guided the Dow higher since April 13.

Warsh Moved the 2-Year and the Industrials Felt It First

Warsh told Jackson Hole that better summer inflation readings do not mean the Fed is finished. Fed funds futures repriced September from 35% to 58% probability of a hike inside one session. The 2-year yield jumped more than 10 basis points to 4.35%. The dollar rose to its highest since August 19.

3M lost 2.51% to $174.34. Honeywell declined 1.34%. Cisco dropped 1.98%. Goldman Sachs fell $6.88. The industrial selling was about financing costs and inflation risk coming back into the conversation after a week where CPI and PPI had pushed them aside.

Caterpillar Took the Heaviest Hit in the Dow

Caterpillar fell 2.05% to $800.25, losing $16.75 on the session. The market was not willing to hold it through the weekend after Warsh made September live again.

Caterpillar shares extended their recent losses on Friday after crossing to the weak side of the 61.8% level at $819.70. Continued selling could drive the stock into the July 29 main bottom at $776.00, followed by the 200-day moving average at $767.31. A break through $776.00 would put the March 9 main bottom at $662.85 in play.

On the upside, the first resistance is $819.70. This is followed by the 50% level at $868.16 and the 50-day moving average at $893.91.

The stock has traded weakly since breaking below the 50-day moving average on July 15. That break shifted the focus to the July 29 bottom and the 200-day moving average.

Amazon Rallied 4% While the Rest of the Dow Fought Over Warsh

Amazon gained 3.97% to $266.43 after Evercore ISI raised its price target to $355 citing survey evidence that AI tools are generating more purchases inside the retail business. The stock bounced off the 50-day moving average Thursday and ran Friday. The bid was not about cloud spending. It was about AI showing up in consumer revenue, and that is a different story from the chip trade.

Amazon.com bucked the broader market trend on Friday with a solid gain. The move came one day after the stock posted its lowest level since July 16 at $255.02. That low came in just above 50-day moving average support at $251.66.

The new short-term range is $287.20 to $255.02. The 50% level at $271.11 is the next upside target. A sustained move over this level would indicate buyers are gaining control and could trigger a retest of $287.20. A failure at $271.11 would leave the stock vulnerable to renewed selling.

Nvidia Gave Back Thursday’s 9% Rally

Nvidia dropped 4.57% after surging nearly 9% Thursday. The company’s forward guide was strong enough to rally the entire Nasdaq one session earlier. Friday the same stock gave it all back with Warsh repricing rates above it. Microsoft added 1.68%. Alphabet rose 1.74%. Apple gained 1.63%. Salesforce climbed 1.57%. Those gains are the reason the Dow closed flat instead of down 150 points.

Consumer and Energy Names Filled the Gap

Nike jumped 3.02%. McDonald’s gained 1.90%. Disney added 1.20%. Buyers moved into beaten-down Dow names while the industrial group was under pressure. Chevron rose 1.05% with oil staying elevated.

JPMorgan gained 0.96%. Visa rose 0.51%. Goldman Sachs fell 0.66%. Johnson & Johnson gained 0.85% while Amgen, Merck and UnitedHealth finished lower. The rotation was selective. Buyers picked individual names, not sectors.

What to Watch

Warsh made September the main risk heading into next week. The Dow closed flat on the surface. Industrials weakened on the rate repricing and a handful of technology and consumer names absorbed the selling. The leadership narrowed Friday and the Dow’s weekly gain of 0.5% depends on whether Amazon, Microsoft and Apple keep holding.

The Dow rallied into its retracement zone Friday and got rejected. The 50-day moving average at 52,793.75 has been the floor since April. Caterpillar below the 61.8% at $819.70 and headed toward the 200-day moving average is the industrial read on what Warsh did to the rate trade. Amazon bouncing off the 50-day and running 4% is the growth-stock read. The Dow sits between those two signals heading into September.

More Information in our Economic Calendar.