Image source: Pixabay

During the first week of the inauguration of President Joe Biden, the US stock market closed higher for the week, with major indices making record closing figures. The Nasdaq Composite Index outperformed and the Dow Jones Industrial Average index underperformed for the week.

With earnings season underway, the stock market will weigh on the fundamentals and the valuation of equities. At least, it should. Irrational stock moves, such as the GameStop Corp. (GME) surging on no apparent news, shows that speculation is apparently related to specific stocks. Therefore, a lot of prudence is suggested for investors.

The answer as to whether the stock market can continue to move higher at these record highs is hard to answer. Earnings can be a catalyst for a move higher, if they beat estimates. But valuation is too stretched, especially for tech stocks.

Economic News

The economic data reported for the week was positive for the US economy. The housing market showed strength. Both Building Permits and Housing Starts came in better-than-expected. The figures for the Building Permits and Housing Starts were 1.709 million and 1.669 million, respectively. The consensus for the Building Permits and Housing Starts were 1.604 million and 1.56 million, respectively.

The weekly initial jobless claims and continuing jobless claims reported were both better-than-expected. The Initial Jobless Claims reported were 900 thousand, lower than the consensus of 910 thousand. The Continuing Jobless Claims reported were 5.054 million, lower than the consensus of  5.4 million.

The Markit Manufacturing PMI beat the estimate of 56.5 with a figure of 59.1. The Services Purchasing Managers Index (PMI) was also better-than-expected with a figure of 57.5, compared to the consensus of 53.6. Improved business conditions in the manufacturing and services sector serves as positive news for economic growth.

For the week of Jan. 18-Jan. 22, 2021, the major US stock market indexes closed as follows on Friday, Jan. 22, 2021:

• Dow Jones Industrial Average: Closed at 30996.98, +0.59% for the week, and +1.28% Year-to-date.
• S&P 500 Index: Closed at 3841.47, +1.94% for the week, and +2.27% Year-to-date.
• Nasdaq Composite: Closed at 13543.06, +4.19% for the week, and +5.08%, Year-to-date.
• Russell 2000: Closed at 2168.76, +2.15% for the week, and +9.82% Year-to-date.

Economic Events for the Upcoming Week

Important economic data for the next week include the weekly Initial and Continuing Jobless Claims, the Chicago Fed National Activity Index (CFNAI), the Housing Price Index, the Consumer Confidence, the Durable Goods Orders, the Fed Interest Rate Decision, the Gross Domestic Product Annualized, the Personal Income and Personal Spending, the Michigan Consumer Sentiment Index, and Pending Home Sales.