Dow Jones Tests Key Resistance as Markets Price in De-escalation, MS Sees Stocks Up
Dow Jones pushed higher despite early weakness, with Morgan Stanley saying US stock correction is largely done, as investors balanced...
Quick overview
- The Dow Jones Industrial Average rose 0.36%, reflecting cautious optimism amid geopolitical risks and a potential resolution in the Middle East.
- Morgan Stanley believes the recent stock correction is nearing completion, maintaining a positive outlook on U.S. equities despite ongoing challenges.
- Investors are balancing improving sentiment with the risk of sudden geopolitical escalations, particularly concerning U.S. actions in the Strait of Hormuz.
- The S&P 500's forward price-to-earnings ratio has declined significantly, yet earnings growth is accelerating, indicating a divergence from typical recessionary patterns.
Live DOW Chart
Dow Jones pushed higher despite early weakness, with Morgan Stanley saying US stock correction is largely done, as investors balanced geopolitical risks with growing optimism around a potential Iran resolution.
Futures Reverse as Sentiment Improves
Major U.S. index futures opened lower during the Asian session but reversed course, with markets closing Monday in positive territory. The shift reflects improving sentiment, as investors increasingly price in the possibility of easing tensions in the Middle East.
Cautious optimism supported the move, even as geopolitical risks remain elevated and continue to influence intraday volatility.
Geopolitical Risks Keep Markets on Edge
At the center of market attention is Donald Trump, who has set a firm deadline regarding the Strait of Hormuz. He warned that the U.S. could begin targeting key infrastructure, including bridges and energy facilities, if the waterway is not reopened or broader agreements are not reached.
This backdrop is keeping markets highly sensitive to headlines. While hopes for de-escalation are lifting equities, the risk of sudden escalation continues to limit conviction.
Dow Jones Tests Critical Resistance
The Dow Jones Industrial Average gained around 0.36%, continuing its recent recovery but struggling to break above the 200-day moving average—a key technical resistance level.
Dow Jones Chart Daily – Can Buyers Push Above the 200 SMA?
This level has repeatedly capped upside attempts, and a sustained move above it would likely signal a return to a stronger uptrend. Until then, markets may remain in a consolidation phase with elevated volatility.
Morgan Stanley Sees Correction Near Completion
Morgan Stanley maintains a constructive outlook on U.S. equities, suggesting that the recent pullback represents a late-stage correction rather than the start of a broader downturn.
Chief U.S. Equity Strategist Mike Wilson argues that the current bull market, which began in April last year, remains intact despite multiple headwinds, including geopolitical tensions and global economic uncertainty.
The bank continues to favor a “buy the dip” approach, particularly in cyclical sectors and large-cap technology stocks.
Valuations Reset While Earnings Strengthen
A key point supporting the bullish view is the recent valuation reset. The S&P 500 forward price-to-earnings ratio has declined by roughly 18%, a move typically associated with recessionary conditions or aggressive monetary tightening.
However, neither scenario appears dominant at present. Instead, earnings growth is accelerating to multi-year highs, marking a notable divergence from past periods where rising oil prices triggered economic slowdowns.
A snapshot of the closing levels shows:
- Dow Jones Industrial Average: +165.21 points (+0.36%) to 46,669.88
- S&P 500: +29.14 points (+0.44%) to 6,611.83
- NASDAQ: +117.16 points (+0.54%) to 21,996.34
Below is a look at some of the top gainers and losers on the day.
Outlook: Optimism vs. Uncertainty
While improving sentiment is helping equities recover, markets remain highly sensitive to interest rates and geopolitical developments. The balance between potential de-escalation and escalation risks in the Middle East will likely dictate near-term direction.
If tensions ease and technical resistance levels break, equities could extend gains. However, persistent uncertainty suggests volatility is likely to remain a defining feature in the sessions ahead.
Dow Jones Live Chart
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