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Dow Jones Skyrockets in a Day and Here Is Why

Maya Mandzikasvili | Dec. 27, 2018
Dow Jones Skyrockets in a Day and Here Is Why

December 27, 2018 | AtoZ Markets-On Wednesday, the Dow Jones Industrial Average ( DJI), noting its worst Christmas Eve in history, suddenly began to rise. According to the financial analysts, Dow noted its greatest gain in history. Shares began the session on a positive note the day after Christmas, returned to growth at noon, and then took off before closing.

What Happened to Dow Jones?

According to the financial analysts, there are at least three reasons that explain the unprecedented jump in the Dow Jones index. One of the reasons for changes in the market, according to the experts, is the activity of the US President on Twitter. When Donald Trump the president of the United States tweets that now is the best time to buy stocks after a three-month debacle, many investors will follow his recommendations. In a recent interview on Christmas Eve at the White House, Trump told reporters: "We have the largest companies in the world and they have really good results. They have record numbers. So I think this is a great opportunity to buy. " As one US financial news portal explains, Trump's “effective” investment calls on Twitter often work in the short term.

The next factor that had a positive effect on the stock index was the White House activity aimed at strengthening confidence in the Federal Reserve Chairman Jerome Powell, which after Trump's verbal attacks, which gained strength. On Wednesday, Kevin Hassett, chairman of the Council of Economic Consultants, told reporters that Powell’s work is "100% safe." Hassett added that Trump still supports Finance Minister Stephen Mnuchin and that there is no liquidity crisis. Last weekend, Mnuchin was negatively criticized for negotiating with the top managers of banks to discuss liquidity issues. The act of the minister served as a signal for the market, at least for one day, that Mnuchin could have known something bad.

Lastly, according to the analysts, the shares were in the oversold zone before the Dow's growth on Wednesday. “The call-put ratio - a measure of protection against falling on the stock market - has reached its highest level since Thursday 2003”, SunTrust chief market strategist Keith Lerner said. Meanwhile, the multiplier of the forward price and profit on the S & P 500 has fluctuated 13 times near levels not seen since 2013. Despite the one-day movement, the market suffered great technical damage. According to the financial experts, a one-day trader will need more tweets to bring markets out of despondency for any sustainable period. A trade deal and a positive profit forecast from Corporate America in early January will be welcomed just as the government is completely open to business.

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Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ Markets.com, nor should they be attributed to AtoZMarkets.