Running out of steam

Is the Dow Jones about to crack? Every star is aligned for a rebound, yet nothing works. The US index just can’t catch its breath.

With inflation running slightly cooler than expected and a labor market a touch weaker than forecast, the odds of a Fed pause next month have shot up. The scenario of rates staying inside their current range sat at 28% last Monday. It’s now the clear favorite at 82%.

In another era, this shift would have sent stock indices flying. But as autumn kicks off, the strength just isn’t there, and winter is shaping up to be a tough one.

When an index can’t find a second wind, running downhill with the wind at its back, pulled along in the slipstream of its teammates (the Nasdaq 100 and S&P 500), the risk of a blowout at the next hurdle is very real.