By Linh Tran, Market Analyst at XS.com
After a strong rally in October, the Dow Jones experienced a notable pullback in the first week of November, retreating from its peak near 48,000 points as it faced pressure from a stronger U.S. dollar and a correction in major technology stocks.
Following the Federal Reserve’s 25-basis-point rate cut in October 2025, which brought the federal funds target range down to 3.75%–4.00%, Chair Jerome Powell emphasized that this was “not yet the start of a rate-cutting cycle,” but rather a technical adjustment as inflation gradually moves closer to the 2% target.
In that context, the U.S. dollar strengthened significantly, with the DXY index briefly returning to the 100-point level — its highest in three months — exerting downward pressure on the stock market, including the Dow Jones.
Recent economic data suggest that the U.S. economy remains on a relatively solid footing. According to the Bureau of Economic Analysis (BEA), GDP grew 3.8% annualized in Q2 2025, exceeding expectations and showing that domestic consumption and the services sector continue to be the key drivers of growth. However, the manufacturing PMI has fallen below the 50-point threshold, signaling a slowdown in industrial activity. Overall, while services remain resilient, the production side of the economy is losing momentum.
According to the latest data from the Bureau of Labor Statistics (BLS), headline CPI rose 0.3% month-over-month and 3.0% year-over-year in September, while core CPI increased just 0.2% m/m and 3.0% y/y — both slightly below expectations. These figures reinforce confidence that inflationary pressures have eased, yet they are not sufficient for the Fed to signal aggressive monetary easing, thereby maintaining valuation pressure on equities.
Nevertheless, the Dow Jones remains more resilient compared to the Nasdaq or the S&P 500. Companies within the index typically have stable cash flows, low leverage, and attractive dividend yields, making them less vulnerable to rising funding costs. At the same time, the Q3 earnings season delivered several encouraging results, and the solid profitability base has helped the Dow maintain its footing even as monetary policy remains in flux.
Meanwhile, geopolitical risks continue to be a key uncertainty. Russia has recently hinted at the possibility of resuming nuclear testing, while U.S.–China trade relations remain in a fragile truce. Any unexpected escalation on these fronts could quickly trigger a “risk-off” sentiment and prompt capital outflows from equities.
In the near term, the Dow Jones is likely to continue a mild correction before moving sideways, as investors await clearer signals from the Fed and the November inflation report. If CPI data continue to cool and the Fed acknowledges that conditions for policy easing are aligning, the index could extend its gains into the year-end. Conversely, if labor or consumption data exceed expectations and push bond yields higher, the Dow may retreat toward lower support levels.