Dow Jones, S&P 500, and Nasdaq weakened as uncertainty dented confidence

Written by: Stanko Iliev
January 17, 2021
  • For the week, the Dow Jones weakened -0.91%, the S&P 500 -1.5%, and the Nasdaq -1.5%
  • Wall Street analysts expect an equity pullback in the near-term
  • The U.S. will start the week with a holiday, celebrating Martin L. King day

The U.S. stock market weakened in the second trading week of 2021, and Wall Street’s three main indexes closed in the red. New lockdowns worldwide and concerns over fresh COVID-19 outbreaks in China could add further pressure to Wall Street’s three main indexes. However, President Biden’s $1.9 trillion COVID relief proposal still keeps the market in a positive mood.

The U.S. released December Retail Sales last week, which came in at -0.7%, much worse than expected. The country lost 140K job positions in December, and the terrible U.S. employment figures may indicate that even worse is coming.

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“The weaker-than-expected economic data, and especially in parts of the economy like retail sales, is a big driver. We are seeing sentiment through last week in extreme speculative frothy euphoric optimistic territory,” said Liz Ann Sonders, chief investment strategist at Charles Schwab.

It is also important to mention that Wells Fargo, JPMorgan, and Citigroup’s shares weakened on Friday even though they posted better-than-expected fourth-quarter profits. Exxon Mobil shares have weakened by 4.8% on Friday after the U.S. Securities and Exchange Commission launched an investigation that the company overvalued a crucial asset in the prolific Permian shale oil basin.

Earnings for S&P 500 companies are expected to decline 9.5% in Q4, but the U.S. Federal Reserve will support the economy for as long as needed. Wall Street analysts expect an equity pullback in the near-term, and the current risk/reward ratio is not good for long-term investors.

The U.S. will start the week with a holiday, celebrating Martin L. King day while investors’ attention still remains on the coronavirus stimulus package.

S&P 500 down -1.5% on a weekly basis

For the week, S&P 500 (SPX) weakened by -1.5% and closed at 3,768 points. Earnings for S&P 500 companies are expected to decline, but this index remains in a buy zone according to technical analysis.

Data source: tradingview.com

As long the price is above this trend line and 3,400 points, the S&P 500 index remains in a bull market, and there is no indication of the trend reversal. If the price jumps above 3,850 points, it would be a “buy “signal for the S&P 500, and the next target could be around 4,000 points.

DJIA down -0.91% on a weekly basis

The Dow Jones Industrial Average (DJIA) weakened -0.91% for the week and closed at 30,814 points. Wall Street analysts expect an equity pullback in the near-term, but as long the price is above 30,000 points, the Dow Jones Industrial Average index remains in a bull market.

Data source: tradingview.com

If the price jumps above 31,500 points, it would be a buy signal for Dow Jones Industrial Average (DJIA), but if the price falls below 30,000 points, it would be a firm “sell” signal.

Nasdaq Composite down -1.5% on a weekly basis

 The Nasdaq Composite (COMP) has lost -1.5% on a weekly basis and closed at 12,998 points.

Data source: tradingview.com

If the price jumps above 13,500 points, it would be a “buy “signal for the Nasdaq Composite index, but if the price falls below 12,500 points, it would be a strong “sell” signal, and we have the open way to 12,000 points.

Summary

The U.S. stock market weakened in the second trading week of 2021, and Wall Street’s three main indexes closed in the red. Dow Jones has lost -0.91%, the S&P 500 and Nasdaq have lost -1.5%, but all three indices remain in a bull market.