Dow Jones, the S&P 500, and Nasdaq remain in a bull market despite tax worries

Wall Street's three main indexes ended higher on Friday as companies continued to report strong first-quarter earnings. Despite this, the Dow Jones, the S&P 500, and the Nasdaq weakened on a weekly basis as investors remain careful after the news about capital gains tax.

The U.S. President Joe Biden is planning a tax hike of up to 39.6% on those with income over $1 million, which may negatively affect the stock market.

"There's also uncertainty over what will ultimately pass Congress; some congressional Democrats, not to mention most Republicans, are likely to oppose the proposed increase. There's uncertainty over when the tax would be likely to take effect, but the rate would likely rise to 28% rather than the proposed 39.6%," Goldman Sachs reported.

On the other side, the global battle against the coronavirus continues, and the Federal Reserve will probably keep interest rates unchanged in 2021. The U.S. economy continues to recover from the pandemic faster than lots of other countries, and the country published better than expected data last week.

The U.S. reported the preliminary estimates of April PMIs, and it is important to say that the manufacturing index hit 60.6 while the service index hit 60.4. The U.S. policymakers said they would focus on ensuring that the labor market makes a full recovery despite inflation worries.

Dow Jones, the S&P 500, and Nasdaq remain in a bull market; still, Wall Street's three main indexes' upside potential remains limited for now.

S&P 500 down -0.13% on a weekly basis

For the week, S&P 500 (SPX) weakened by -0.13% and closed at 4,180 points. This is the S&P 500's first weekly drop since the week ended March 19, but for now, there is no risk of the positive trend reversal.

If the price falls below 4,000 points, it would be a strong "sell" signal, and we have the open way to 3,900 or even 3,800 points.

DJIA down -0.46% on a weekly basis

The Dow Jones Industrial Average (DJIA) weakened -0.46% for the week and closed at 34,043 points.

If the price jumps above 34,500 points, it would be a bullish confirmation for Dow Jones Industrial Average (DJIA). On the other side, if the price falls below 33,000 points, it would be a firm "sell" signal, and the next target could be around 32,000 points.

Nasdaq Composite down -0.25% on a weekly basis

 The Nasdaq Composite (COMP) has lost -0.25% on a weekly basis and closed at 14,016 points.

This index continues to trade above 14,000 points, but if the price falls below 13,500 points, it would be a strong "sell" signal, and the next target could be 13,000 points.

Summary

The U.S. stock market ended higher on Friday as investors took solid economic data and the companies earnings as signs of momentum in the U.S. pandemic recovery. Despite this, the Dow Jones, the S&P 500, and the Nasdaq weakened on a weekly basis as investors remain careful after the news about capital gains tax.