Dow Jones is entering a corrective phase after a prolonged rally since April this year, reflecting a broad risk-averse sentiment across the market.
This pullback is the result of several combined factors, including increasingly uncertain expectations regarding the Fed’s rate-cut trajectory—which supports a stronger USD—and rising concerns over valuations in the technology sector, particularly among AI-related stocks.
The USD (DXY around 99.2) has recovered following a series of cautious signals from the Fed, implying a high likelihood that there will be no rate cut in December.
This is putting pressure on multinational corporations in the Dow, as currency translation becomes less favourable.
As a result, capital is rotating back into safer assets, causing US30 to correct even though corporate earnings fundamentals remain positive.
The earnings performance of Dow Jones components is showing clear divergence, but defensive groups such as healthcare, pharmaceuticals, and consumer staples remain key pillars.
Companies like Merck (Q3/2025 global revenue 17.3 billion USD, +4% YoY), Amgen (Q3/2025 revenue +12% YoY, EPS beat ~11.9%), and Coca-Cola (Q3/2025 net revenue +5% to 12.5 billion USD, organic revenue +6%) continue to deliver stable growth and resilient margins thanks to strong brand power. The same applies to major retailers like Walmart (Q3 FY25: comparable sales +5.3%) and Procter & Gamble (P&G Q1 FY2026: net sales +3%, organic sales +2%, core EPS +3% YoY).
Meanwhile, the financial group (JPMorgan, Goldman Sachs, American Express, etc.) maintains profitability thanks to a healthy credit base and stable fee income. Industrial companies such as Honeywell (Q3/2025: revenue +7% YoY to 10.4 billion USD, adjusted EPS 2.82 USD, +9% YoY, ~10% beat; orders +22%, record backlog 39.1 billion USD, and raised 2025 EPS guidance) and Caterpillar (Q3/2025 revenue 17.64 billion USD, +9.5% YoY, adjusted EPS 4.95 USD, over 10% above estimates) are benefiting from supply-chain restructuring, infrastructure investment, and defense spending, creating an important support layer that helps US30 limit downside during correction phases.
However, in contrast to these bright spots are groups that are exerting downward pressure on Dow Jones. Although Microsoft, Salesforce, and Amazon continue to post impressive revenue growth, their share prices react less positively because expectations have moved too far ahead and valuations are sitting at sensitive levels. Just a cautious signal in outlook is enough to trigger a market pullback. Interest-rate-sensitive companies like Home Depot continue to reflect the slowdown in the housing market and discretionary spending, while UnitedHealth remains under pressure due to concerns over rising medical costs.
On the macro side, the U.S. economic picture is seen as entering a phase of slowing growth without a sudden deterioration. However, the nearly completed Q3 earnings season has painted a more optimistic reality. Double-digit earnings growth and high profit margins show that businesses are still capitalizing on stable consumer spending and effective cost control. This provides an important foundation for Dow Jones to maintain a high price range. Nevertheless, elevated expectations could make the market more sensitive to any signs of weakness in upcoming business results.
The outlook for Dow Jones in the coming period depends on the Fed’s policy path, movements in real interest rates, and the global geopolitical and trade environment. The Fed’s internal divisions regarding a potential December rate cut leave the market without a clear directional anchor, keeping real yields elevated and continuing to pressure growth stocks. At the same time, the complex geopolitical landscape creates a mix of risks and opportunities. Still, this environment partly supports industrials, defense, and energy—key components of Dow Jones—helping the index maintain relative stability compared to growth-tilted indices like the Nasdaq.
In my view, Dow Jones still has room to rise in the medium and long term thanks to stable earnings fundamentals, strong asset quality, and the defensive nature of some sectors. However, in the short term, it will be difficult to avoid pullbacks as the market enters a phase of reassessing valuation, earnings expectations, and the direction of monetary policy. At present, Dow Jones is likely to continue a mild correction as it searches for a new accumulation zone; this process may create both risks and opportunities for investors, especially as this week will bring several important economic releases following the prolonged U.S. government shutdown.