HFMarkets (hfm.com): New market analysis services.

[HFM]

Date: 14th May 2025.

Is the Dow Jones Oversold Despite Pharmaceutical Stock Selloff?

Trading Leveraged products is Risky

All US indices rose in value on Tuesday except for the Dow Jones, which fell 0.64%. Very rarely, almost all global indices increase in value while one of the largest declines. What, then, is driving the Dow Jones’ decline despite the favourable market conditions?

Pharmaceutical Stocks Crash

One of the reasons why the Dow Jones was unable to mirror the bullish tone seen amongst the S&P 500 and NASDAQ was due to the Pharmaceutical sector. Approximately 14% of the weight within the Dow Jones is exposed to Pharmaceutical stocks, which significantly declined on Tuesday. The downward price movement within this sector was due to President Trump confirming that prescription drug prices must fall by almost 60%.

Here is the performance of pharmaceutical stocks in the Dow Jones on Tuesday:

* UnitedHealth Group stocks fell 17.79%
* Amgen Inc. stocks fell 1.57%
* Johnson & Johnson stocks fell 3.70%
* Merck & Co. stocks fell 4.72%

According to President Trump, the cost of prescription drugs in the US is sometimes up to 10 times higher than in other countries. This is despite the drug being ‘produced in the same laboratory’ using the same method and ingredients. Therefore, Trump is proposing that pharmaceutical companies lower the cost in the US and increase the cost elsewhere. However, this is triggering fear amongst investors and is prompting a selloff in the sector.

US Drug Prices Vs Other Countries

In addition to this, UnitedHealth Group stocks are under immense pressure due to the above and the company’s CEO has resigned. UnitedHealth Group in this quarter missed their earnings and revenue expectations for the first time since the 2008 banking crisis, and also gave poor guidance for the upcoming quarter.

Defensive Stocks Weaken Due To Improved Sentiment

Another reason for the Dow Jones’ weak price movement is its exposure to defensive stocks. Defensive stocks tend to do well during ‘risk-off’ conditions, while they may underperform in favourable stock market conditions. Defensive stocks within the Dow Jones include the following stocks:

McDonald’s - Stock fell 1.04% on Tuesday

Procter and Gamble - Stock fell 1.35% on Tuesday

Coca-Cola - Stock fell 0.82% on Tuesday

However, not all components are defensive stocks. The Dow Jones also has growth stocks within the index, which include the likes of NVIDIA and Microsoft. NVIDIA stocks were the best-performing stocks on Tuesday, increasing 5.63%. However, NVIDIA stocks only hold a weight of 1.78%.

Dow Jones - Upcoming Performance

The price movement of the Dow Jones is largely moving sideways on Wednesday after the decline on Tuesday. However, investors should note that some of the positive developments driving other indices higher also apply to the Dow Jones, even if its price has not reflected the same movement.

This includes the lower inflation figures from yesterday. The US Consumer Price Index (inflation rate) fell from 2.4% to 2.3%, the lowest since 2021, and core inflation figures remained at 2.8%. The lower inflation rate is likely to allow the Federal Reserve to opt for a cautious rate cut in July, even though this has not yet been signalled. Nonetheless, interest rate cuts and a better economic outlook are likely to positively influence all indices globally. Currently, the Dow Jones is 7.00% away from its all-time high.

Notably, analysts at Goldman Sachs Group Inc. yesterday reduced their projected likelihood of a US recession by year-end from 45% to 35%, while also raising their economic growth forecast from 0.5% to 1.0%.

Dow Jones - Daily Chart

The price of the Dow Jones is trading within a range during this morning’s Asian Session, but continues to remain above most trend lines. The VWAP is also slightly lower than the current price, giving a bullish bias. If the price increases above the $42,220.00, buy signals are likely to materialise due to the bullish breakout and crossover. However, if the range continues, the average price will be $42,174.18.

Key Takeaway Points:

* The Dow Jones does not follow the market trend and remains one of the only global indices falling in value. However, some analysts believe the index is partially oversold.
* Dow Jones fell 0.64% as pharma stocks dropped sharply after Trump called for major drug price cuts.
* UnitedHealth stock fell nearly 18% after missing earnings, weak guidance, and news of the CEO’s resignation.
* Defensive names like Coca-Cola and McDonald's declined as risk-on sentiment hurt safe-haven stocks.
* Lower inflation and reduced recession fears support a positive outlook, but the Dow still trails other indices.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Click HERE to access the full HFM Economic calendar.

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!

Click HERE to READ more Market news.

Michalis Efthymiou
HFMarkets

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

 

[HFM]

Date: 15th May 2025.

The US Dollar, The Fed And Producer Inflation!

Trading Leveraged products is Risky

Lower inflation tends to have a negative impact on the US Dollar, particularly due to political pressure for the Federal Reserve to cut interest rates. However, the US Dollar has been increasing in value over the past week. The upward price movement is largely driven by less trade tensions and US economic deals with the Middle East. However, the producer inflation release will be key for the day.

The US Dollar And Upcoming US Data

The performance of the US Dollar is likely to depend on today’s economic data, which will be made public at 12:30 GMT. The US will release the monthly Producer Inflation, weekly unemployment claims and Retail Sales. Ideally, USD-buyers will be hoping for the producer inflation and retail sales to read higher than the current expectations, while the weekly unemployment claims to read lower. Analysts currently expect the producer price index year over year to fall from 2.7% to 2.5%.

A reading above 2.5% could notably support the US Dollar, reinforcing the Federal Reserve’s previous guidance. On Wednesday, Fed Vice Chair Philip Jefferson stated that, despite the newly agreed lower tariff levels, inflation is still expected to rise, even if temporarily. He also told journalists that the economy may experience a slowdown as a result of the tariffs. Nonetheless, most economists are lowering the possibility of a recession.

Some economists remain pessimistic, only lowering the possibility of a recession to 45%, while others are lowering it to 30%. Barclays is currently one of the only banks which advise the US is not likely to see a recession in 2025, and the current possibilities are no more than 10%.

The Currency Market

The US Dollar Index is trading lower on Thursday during the Asian Session. However, as the European market opens and the Asian session gets closer to its close, the US Dollar Index improves. If the US Dollar Index increases above 100.75, the price will be above the trend line and will form a breakout. As a result, the index will indicate a possible upward price movement. Currently, the best-performing currencies of the day are the Japanese Yen and Swiss Franc, while the worst are the US Dollar and Canadian Dollar.

USDCAD 1-Hour Chart

Based on the current performance of individual currencies, if the US Dollar were to increase in value, it would do so more easily against the Canadian Dollar. The Canadian Dollar has been the worst-performing currency of 2025 so far after the US Dollar.

The US and the Middle East

Over the past 2 days, President Trump has been undergoing a tour of the Middle East, including Saudi Arabia and Qatar. So far, the tour has been seen as a success. President Trump secured a comprehensive $600 billion investment commitment from Saudi Arabia, encompassing various sectors such as defense, energy, technology, and infrastructure. In Doha, Trump announced a landmark $200 billion agreement between Qatar Airways and Boeing for the purchase of 160 aircraft.

The deal signs are positive for the US and even the US Dollar in the long term. However, these developments will not mean much if the producer inflation and retail sales do not beat expectations. In the short to medium term, this will be key.

Key Takeaway Points:

* Despite falling inflation and rate cut pressure, the USD has strengthened, driven by easing trade tensions and Middle East deals.
* Producer inflation, unemployment claims, and retail sales will shape short-term USD performance. Stronger data could boost the currency.
* The US Dollar Index may break higher if it climbs above 100.75. The Canadian Dollar remains the weakest performer of 2025.
* Trump’s $800B in agreements with Saudi Arabia and Qatar support long-term USD sentiment, but near-term data remains critical.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Click HERE to access the full HFM Economic calendar.

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!

Click HERE to READ more Market news.

Michalis Efthymiou
HFMarkets

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

 

[HFM]

Date: 16th May 2025.

NASDAQ - Producer Inflation Down But Fed Will Not Budge!

Trading Leveraged products is Risky

The NASDAQ increased in value for a third consecutive day and has now fully recovered all previous losses in 2025. The NASDAQ is now trading 1.70% higher in 2025 and is in the positive zone for the first time since February 27th. The upward price movement continues due to investor confidence rising, particularly after yesterday’s lower producer inflation.

NASDAQ - US Inflation and Economic Data

The NASDAQ during the Asian and European sessions fell lower, witnessing only the second dip of the week. However, the price action quickly changed after the US released its producer inflation and retail sales. The positive developments from the US-China trade negotiations will now start to fade, meaning investors will need further price drivers. As the price fell during the first two sessions of the day, this price driver can be derived from the latest US data.

The US producer inflation (Producer Price Index) read 0.5%, which is 0.7% lower than the previous expectations. The Core Producer Price Index read 0.4%, again significantly lower than what the market was expecting. As a result, the producer inflation over a period of 12 months fell from 2.7% to 2.4%. The lower inflation figures continue to support the stock market as it is known to boost consumer demand while pressuring the Federal Reserve to lower interest rates.

The inflation data from Tuesday (consumer inflation) and yesterday (producer inflation) was one of the main price drivers. However, the NASDAQ also reacted positively to the Retail Sales, which rose above expectations. The weekly US unemployment claims came in at 1.881 million, lower than expected.

However, a negative development came from Applied Materials’ quarterly earnings report, which was that the company’s revenue failed to meet expectations. As a result, the stock fell 5.50% after the market close. Applied Material is the 26th most influential company within the NASDAQ, holding a weight of 0.89%.

Even though the NASDAQ managed to increase after the inflation announcement, investors were concerned that only 51% of the most influential stocks rose in value. The upward price movement was largely due to the strong performance by Cisco Systems (+4.85%), Netflix (+2.34%) and PepsiCo (+2.37).

NASDAQ Companies Performance

The NASDAQ - The Federal Reserve

One of the main risks for the NASDAQ is connected to the trade policy with Europe, which remains one of the only trade partners to not sign a trade policy. In addition to this, a possible external risk remains the Federal Reserve, which is yet to indicate any concrete rate cuts.

The Federal Reserve Chairman Jerome Powell highlighted the agency’s cautious stance. He stated that borrowing costs are likely to remain elevated over the long term due to structural economic shifts and ongoing uncertainty in government policy. We can see here that the Federal Reserve is reluctant to give an indication of any rate cuts despite the lower inflation figures. However, the next inflation announcement in June will be the first release after the US tariffs on China and Europe. This is likely to be the most important inflation reading of 2025.

Currently, based on the Chicago Exchange, there is an 8% chance of a rate cut in June, a 38% chance in July and a 75% chance in September. The report indicates that by the end of 2025, the most likely scenario is the Fed lowering rates to 3.75%–4.00%.

NASDAQ - Technical Analysis

For the NASDAQ, technical analysis indicates a neutral signal for the short-term with a bullish bias in the long-term. In the short term, the price is forming a symmetrical price pattern, which indicates range-bound trading conditions. The price is also at a key psychological level as the index rises to the previous highs. Due to this, investors are now contemplating what the asset’s intrinsic value is.

However, in the long term the price is obtaining bullish signals as the price trades above the trend-lines, moving averages and above the 50.00 level on the RSI.

NASDAQ 15-Minute Chart

Key Takeaway Points:

* The NASDAQ has risen for three straight days, now up 1.70% YTD and in positive territory for the first time since February.
* Lower-than-expected producer and consumer inflation boosted investor sentiment, reinforcing hopes for rate cuts and supporting retail sales growth.
* Despite index gains, only 51% of the top NASDAQ stocks rose. Applied Materials missed earnings, dropping 5.5%, while Cisco, Netflix, and PepsiCo outperformed.
* Powell signalled no immediate rate cuts despite cooling inflation. Markets expect a 75% chance of a cut by September, with rates likely to fall to 3.75%–4.00% by year-end.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Click HERE to access the full HFM Economic calendar.

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!

Click HERE to READ more Market news.

Michalis Efthymiou
HFMarkets

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.