Alaska Airlines stocks drop after Hawaiian Airlines acquisition.
Mixed market sentiment amidst Federal Reserve rate cut prospects.
US Stock Market Faces Pressure Amid Tech Sell-Off
The US stock market began the week with a decline, led by a sell-off in technology shares. The Dow Jones Industrial Average fell by 144 points or 0.4%, while the S&P 500 and Nasdaq Composite dropped 0.9% and 1.1%, respectively. This downturn contrasts the recent gains, with the S&P 500 achieving its highest close since March 2022 on Friday and the Dow marking its first five-week winning streak since 2021.
Tech Stocks Underperform
Technology stocks, particularly Big Tech, faced a challenging session. Heavyweights like Nvidia, Alphabet, and Meta all saw declines of around 2%. However, cryptocurrency-related stocks like Coinbase and MicroStrategy experienced significant gains, with Bitcoin surpassing $41,000 for the first time this year.
Mergers and Acquisitions
In the corporate sector, Alaska Airlines‘ stock plunged over 17% following its announcement to acquire Hawaiian Airlines for $1.9 billion. This move is a strategic effort to strengthen Alaska’s presence along the West Coast.
Investor Sentiment and Federal Reserve Outlook
Investors are reassessing the market’s momentum after its robust performance in recent months, including the best month for the Dow since October 2022. Despite Federal Reserve Chairman Jerome Powell’s caution against expectations of policy easing, investors remain hopeful about potential rate cuts in the upcoming year. Economist Jeremy Siegel suggests that the Fed should consider lowering rates in response to recent soft economic data.
Short-Term Market Forecast
The current market sentiment reflects a mix of optimism and caution. While the recent rebound in stocks indicates bullish tendencies, the tech sector’s underperformance and concerns over Federal Reserve policy decisions contribute to a cautious outlook. The market’s direction in the upcoming quarters will likely depend on further economic indicators and the Fed’s policy stance.
Daily E-mini S&P 500 Index
The E-mini S&P 500 Index, currently priced at 4566.50, is trading above both its 200-day moving average (4311.86) and 50-day moving average (4386.66). This positioning above key moving averages typically signals a bullish trend.
However, the index is hovering around its minor support level of 4562.50. The close proximity to this support level suggests a critical juncture; maintaining above this level could uphold the bullish sentiment, while a break below could shift the market sentiment towards bearish.
The market’s direction is contingent on the index’s interaction with the current support level.
Overall, the market sentiment leans towards bullish, given the index’s stance above key moving averages, but caution is warranted due to its proximity to the minor support level at 4562.50.
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.