Dow Jones, the S&P 500, and Nasdaq price forecast after last week’s dip

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Wall Street’s three main indexes weakened last week as the U.S. Federal Reserve decided to lift the funds rate by 75 bps, the largest hike since 1994.

The aggressive move came despite signs that the economy is beginning to cool while Federal Reserve Chair Jerome Powell said that the next meeting could well be a decision between 50 bps and 75 bps.

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Federal Reserve Chair Jerome Powell said that inflation data has become more worrisome, and because of this, the Federal Reserve needs to be more aggressive in raising interest rates to combat inflation.

The market is absorbing the potential of a recession, and it is important to mention that government data released Friday showed that industrial production increased less than expected in May. Industrial output has increased only 0.2% in May, below April’s upwardly revised print of a 1.4% rise, according to the Federal Reserve.

Industrial production will continue to face near-term headwinds from supply chain disruptions, while a more aggressive monetary policy from the U.S. central bank also represents an issue. Lindsey Piegza, Chief Economist at Stifel Nicolaus, said:

Despite Jerome Powell’s declaration during the press conference that the Fed is not trying to induce a recession, this accelerated pathway will almost assuredly result in negative growth, best case scenario, or worse, stagflation.

S&P 500 remains under pressure

S&P 500 (SPX ) weakened by -5.79% last week and entered bear market territory fueled by fears that accelerating rate increases by the Federal Reserve will end economic expansion.

Data source: tradingview.com

S&P 500 remains under pressure, and if the price falls below 3,500 points, the next target could be 3,000 points which represents a strong support level.

DJIA is trading below 30,000 points

The Dow Jones Industrial Average (DJIA) weakened by -3.36% last trading week and closed the week below 30,000 points for the first time since January 2021.

Data source: tradingview.com

The current support level stands at 29,500 points, and if the price falls below this level, the next target could be 29,000 points. If the price jumps above 30,500 points, the next target could be resistance at 31,000 points.

Nasdaq Composite fell -4.78% last week

Nasdaq Composite (COMP) lost -4.78% last trading week and closed at 10,646 points. The prospect of a more aggressive monetary policy keeps investors in a negative mood, and the upside potential for Nasdaq Composite remains limited.

Data source: tradingview.com

The current support level for Nasdaq Composite stands at 10,500 points, and if the price falls below this level, the next target could be 10,000 points.

Summary

The U.S. Federal Reserve raised the interest rate by 75 bps last week, and investors are worried that an aggressive monetary policy could tip the economy into recession. The aggressive move came despite signs that the economy is beginning to cool while Federal Reserve Chair Jerome Powell said that the next meeting could well be a decision between 50 bps and 75 bps.

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