Where we are: Dow futures are trading slightly higher at 38,850, holding onto gains from the previous session. The index is consolidating within a tight range overnight, roughly between 38,780 and 38,880, and remains above the prior NY close. Technically, the index is testing resistance at the 38,900 level.
What’s driving it: The Dow’s resilience is underpinned by robust earnings reports, particularly from Apple, which beat expectations despite Tim Cook’s announced departure. However, the rise in US real yields, now at 1.96%, continues to present a headwind for risk assets, potentially limiting further upside. While solid corporate earnings and AI investment have buoyed US GDP, markets are closely watching for signs of slowing private consumption, suggesting a mixed backdrop for the Dow.
- Apple’s post-earnings rally (+3% premarket) is providing a tailwind for the index, especially given its large weighting.
- Rising US 10Y real yields (+4bp d/d) are tightening financial conditions and weighing on valuations.
- Speculator positioning in Dow futures remains modestly short (-1,731 contracts), suggesting limited scope for a major short squeeze despite the recent rally.
NY session focus: All eyes will be on the 10:00 ET release of the ISM Manufacturing PMI and ISM Manufacturing Prices. A beat on both could further support the Dow, while a miss may trigger a pullback. Key levels to watch are 38,900 as resistance and 38,700 as support. The trade that’s working is buying dips on positive earnings news. The trade at risk is chasing the rally on limited fresh catalysts. The pain trade would be a sharp rally in US yields and a simultaneous dovish surprise in the ISM data.