US Stock Market Weekly Review Jan. 25 – 29, 2021
The US stock market closed lower this week, with all major stock indices falling more than 3%. Dow Jones and S&P 500 turned their performance negative for 2021. There were two selloffs during the week, one during the FED interest rate announcement and one on Friday, January 29, 2021.
What caused this selling pressure this week? Is it justified? Last week I wrote “Irrational stock moves such as the GameStop Corp. (GME) surging on no apparent news, shows that speculation is apparent related to specific stocks, therefore a lot of prudence is suggested for rational investors.The answer 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.”
News about speculative mania in stocks with no fundamental news and surging prices in their stock prices are strong signs of pump-and-dump schemes, which are illegal. I believe the SEC must make a thorough investigation and press charges to the forums and persons that present stock trading to be too easy and ignoring the risks of stock picking. Manipulation in any stock price is both illegal and should be dealt with utmost prudence, plus fines by the regulators. The stock market is not a casino.
The FOMO trading effect is also too dangerous. I believe that the valuation of many stocks is irrational, and investors have started realizing that profit-taking is too important not only at these high record levels for major stock indices but at any time.
News by the Fed that mentioned economic growth is moderated and that the economic recovery is not only dependent on the covid-19 but also the progress on vaccinations were more than enough for this selloff this week. Economic news showed that the GPD growth was less than expected. Overall, the economic growth is still fragile. And realizing that 2021 may be another bumpy road for stock investing despite vaccinations has a lot of odds.
Economic News
“The pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic,” the Federal Open Market Committee mentioned in its latest policy statement.
The S&P/Case-Shiller Home Price Indices reported were 9.1%, better than the consensus of 8.6%. The Durable Goods Orders were weak with a figure of 0.2%, much lower than the forecast of 0.9%. Personal Consumption Expenditures were less than expected. The job market was surprised positively both for the Continuing Jobless Claims and the Initial Jobless Claims. Both were less than expected.
The Michigan Consumer Sentiment Index was a marginal miss with a figure of 79 vs the consensus of 79.2
For the week of January 25- January 29, 2021, the major US stock market indexes closed as follows on Friday, January 29, 2021:
• Dow Jones Industrial Average: Close 29982.62, -3.27% for the week, -2.04% Year-to-date
• S&P 500 Index: Close 3714.24, -3.31% for the week, -1.11% Year-to-date
• Nasdaq Composite: Close 13070.69 , -3.49% for the week, +1.42%, Year-to-date
• Russell 2000: Close 2073.64 , -4.39% for the week, +5.00% Year-to-date
Economic events for the week February 1- February 5, 2021:
Important economic data for the next week will be the weekly Initial and Continuing Jobless Claims, the ISM Manufacturing PMI, the ISM Services PMI, the Nonfarm Payrolls, and the Unemployment Rate.
Sources:
https://www.wsj.com/market-data/stocks/us/indexes
https://www.fxstreet.com/economic-calendar
Disclosure: I have no position in any stock mentioned