Dow Jones
The Dow Jones index climbed 227 points to 34,017 on Friday, closing with a +0.67% gain as new home sales beat estimates.
After posting a record close earlier in the week, the Dow Jones was rocked by the news that President Biden has been exploring almost doubling the current rate of Capital gains tax paid by the wealthiest U.S citizens, from 20% to 39.6%.
These fears were soon downplayed by leading wall street analysts, including Investment bank Goldman Sachs. The consensus is that the proposed tax increase is unlikely to pass in its current form. Given the Democrat’s slim majority, the view is that the rate of increase will be subject to a revision lower to get the green light.
According to Compass Points strategist Isaac Boltansky “At this point, any tax proposals should be “viewed as negotiating markers rather than red lines,”
This renewed optimism saw the Dow futures well bid from the opening bell, with prices almost negating the previous days’ 1% risk-off.
Adding to the positive tone in the DJIA was the March data for new home sales. The street expected the number to come in better-than-expected, and it didn’t disappoint. New home sales increased a staggering 20.7% MoM, taking the increase to 66.8% YoY from the March 2020 pandemic lows.
Whilst new home sales data impressed, new home prices came in fairly muted with an 0.8% increase YoY.
Overall, the long-term bull trend remains intact. The Dow price remains firmly entrenched in the ascending channel in place from the March 2020 lows.
Initial support comes at the lower end of last week’s range, circa 33,700. A broader sell-off would target the 33,250 highs of March 18th and 29th.
Resistance can be found at 34,150 and at the top end of the ascending channel at 34,350.
