Dow Jones, the S&P 500, and Nasdaq weakened after FED switched to a more hawkish tone

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 Jun 20, 2021
  • For the week, the Dow Jones weakened -3.45%, the S&P 500 -1.91%, and the Nasdaq -0.28%
  • FED might raise interest rates sooner than previously expected
  • The positive news is that FED raised expectations for real GDP growth in 2021 to 7.0%

The Dow Jones, the S&P 500, and the Nasdaq weakened on a weekly basis as investors have started to behave nervously amid concerns that the U.S. central bank might raise interest rates sooner than previously expected. The U.S. Federal Reserve had a monetary policy meeting last week and left the interest rate unchanged but switched to a more hawkish tone.

Several Fed officials expect hikes by 2023 because inflation accelerated faster, and investors will continue to pay attention to the bank’s commentary looking for any clues. U.S. inflation rose in May at its fastest pace in almost 13 years, but the prospect of rate hikes could impact the U.S. economy’s growth.

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“I’m not surprised to see the market sell-off a little bit, given the strong run we’ve had for such a long period. Next week, we will have various Fed governors give speeches, and we’ll have the same thing: some governors will be more hawkish, and some will be more dovish, so you’ll see some back-and-forth,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

The positive news is that FED raised expectations for real GDP growth in 2021 to 7.0% as the U.S. economy continues to recover from the pandemic. The labor market also shows signs of recovery; the weekly unemployment claims continue to fall, and the U.S. central bank expects the unemployment rate to fall to 4.5% by the end of 2021.

S&P 500 down -1.91% on a weekly basis

For the week, S&P 500 SPX weakened by -1.91% and closed at 4,166 points.

Data source: tradingview.com

If the price falls below 4,100 points, it would be a strong “sell” signal, and we have the open way to 4,000 or even 3,900 points. The upside potential remains limited for now, but if the price jumps above 4,300 points, it would be a bullish confirmation for this index, and the next target could be around 4,400 points.

DJIA down -3.45% on a weekly basis

The Dow Jones Industrial Average DJIA weakened -3.45% for the week and closed at 33,290 points.

Data source: tradingview.com

Dow Jones remains under pressure, and if the price falls below 33,000 points, it would be a strong “sell” signal, and the next target could be around 32,500 points. The first resistance level stands around 34,000 points, and if the price jumps above this level, the next target could be around 34,200 points.

Nasdaq Composite down -0.28% on a weekly basis

The Nasdaq Composite (COMP) has lost -0.28% on a weekly basis and closed at 14,030 points.

Data source: tradingview.com

The strong support level stands around 13,500 points, and if the price falls below this level, it would be a strong “sell” signal, and we have the open way to 13,000 points.

Summary

Wall Street’s three main indexes ended sharply lower on Friday as investors have started to behave nervously amid concerns that the U.S. central bank might raise interest rates sooner than previously expected. For the week, the Dow Jones weakened -3.45%, the S&P 500 -1.91%, the Nasdaq -0.28%, and the risk of further decline is probably not over.

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