Wall Street’s three main indexes remain under pressure after news about reducing stimulus by tapering bond purchases

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on May 23, 2021
  • For the week, the Dow Jones weakened -0.51%, the S&P 500 -0.43%, while the Nasdaq advanced 0.31%
  • U.S. policymakers started to talk about reducing stimulus by tapering bond purchases
  • Dallas Fed President Robert Kaplan said that tapering should start "sooner rather than later"

Wall Street’s three main indexes remain under pressure; the Dow Jones and the S&P 500 weakened on a weekly basis while the Nasdaq posted a minor recovery. According to the latest news, U.S. policymakers are ready to talk about reducing stimulus by tapering bond purchases, while Dallas Fed President Robert Kaplan said that tapering should start “sooner rather than later.”

At the beginning of May, the U.S. policymakers said they would focus on ensuring that the labor market makes a full recovery, but the U.S. Federal Reserve will probably have to tighten its ultra-loose monetary policy sooner than anticipated.

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Atlanta Federal Reserve President Raphael Bostic said on Friday that he is concerned about high inflation, while Patrick Harker said that the Fed should start discussing tightening. Macroeconomic data are signaling a steady economic comeback; still, if FED decides to tighten its ultra-loose monetary policy, the U.S. stock indices will probably be at lower price levels.

“The Fed is going to find it increasingly difficult to justify its extremely easy monetary policy stance” as inflation expectations increased, said Will Denyer, from research house Gavekal.

Rising inflation in the U.S. hit investor confidence, and the upcoming days may bring more pain for stock market investors. 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 -0.43% on a weekly basis

S&P 500 (SPX) closed the week at 4,155 points, and for now, there is no risk of a positive trend reversal.

Data source: tradingview.com

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 -0.51% on a weekly basis

The Dow Jones Industrial Average (DJIA) weakened -0.51% for the week and closed at 34,207 points.

Data source: tradingview.com

The Dow Jones Industrial Average continues to trade in a bull market; still, if the price falls below 33,000 points, it would be a strong “sell” signal, and the next target could be around 32,000 points.

Nasdaq Composite up 0.31% on a weekly basis

 The Nasdaq Composite (COMP) gained 0.31% on a weekly basis and closed at 13,470 points.

Data source: tradingview.com

The upside potential for the Nasdaq Composite remains limited for now, but if the price jumps above 13,500 points, the next target could be around 13,600 points. The strong support level stands around 13,000 points, and if the price falls below this level, it would be a strong “sell” signal, and we have the open way to 12,500 points.

Summary

Wall Street’s three main indexes remain under pressure, the Dow Jones and the S&P 500 weakened on a weekly basis while the Nasdaq posted a minor recovery. U.S. policymakers started to talk about reducing stimulus by tapering bond purchases, and the U.S. Federal Reserve will probably have to tighten its ultra-loose monetary policy sooner than anticipated.

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