The Dow Jones (DJIA) is trading lower on Wednesday as the rally takes a breather.
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The Buffett Indicator, or the total market capitalization-to-GDP ratio, is “probably the best single measure of where valuations stand at any given moment,” said Warren Buffett in an interview with Fortune in 2021. The indicator divides the total market cap of all U.S. stocks by its gross domestic product (GDP) and just reached an all-time high of 216.8%, well above its average of 85% since 1970, according to LongTermTrends. The ratio is even higher at 328.7% when including private companies.
On the other hand, Bank of America expects more upside during the fourth quarter, calling it “the most wonderful time of the year.” Tech stocks in particular perform well during the period, rising 80% of the time with an average return of 6.64%. The bank also points out that stocks generally perform well during the last five trading days of December and the first two trading days of January, a seven-day stretch that has been coined the “Santa Rally.”
Meanwhile, Treasury Secretary Scott Bessent reiterated his stance that rates should come down even further after the Fed cut interest rates by 25 bps last week, the first reduction since December 2024.
“Rates are too restrictive, they need to come down,” Bessent said in an interview with Fox Business on Wednesday. “I’m a bit surprised that the chair hasn’t signaled that we have a destination before the end of the year of at least 100 to 150 basis points.” The market is currently pricing in two additional rate cuts by the end of 2025, according to CME’s FedWatch tool.
The Dow Jones is down by 0.31% at the time of writing.
Which Stocks are Moving the Dow Jones?
Let’s pivot to TipRanks’ Dow Jones Heatmap, which illustrates the stocks that have contributed to the index’s price action.
Tech components Nvidia (NVDA), Microsoft (MSFT) and Apple (AAPL) are in negative territory, dragging the Dow Jones lower. In addition, Amazon (AMZN) is flat, despite Wells Fargo raising its price target to $280 from $245 on rosier Amazon Web Services (AWS) revenue acceleration prospects.
Elsewhere, most sectors are experiencing muted price action. Bucking the trend is UnitedHealth Group (UNH), which is now up by 16% during the past month and mounting a comeback from a Department of Justice investigation into its Medicare billing practices. Disney (DIS) is also trading higher after announcing price increases for several of its streaming subscriptions.
DIA Stock Moves Lower with the Dow Jones
The SPDR Dow Jones Industrial Average ETF (DIA) is an exchange-traded fund designed to track the movement of the Dow Jones. As a result, DIA is falling alongside the Dow Jones today.
Wall Street believes that DIA stock has room to rise. During the past three months, analysts have issued an average DIA price target of $503.71, implying upside of 9.10% from current prices. The 31 holdings in DIA carry 29 buy ratings, two hold ratings, and zero sell ratings.
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