Nasdaq 100, Dow Jones, S&P 500 News: Wall Street Takes a Breather from Record Highs

Wall Street Pauses After Record Rally

Stocks experienced a minor retreat on Monday, beginning a shorter trading week with modest losses. This pause follows a remarkable rally that propelled Wall Street to historic highs. The technology sector, particularly semiconductor companies, felt the impact with Intel’s shares declining by 3% due to new Chinese guidelines restricting the use of its chips in government servers. Additionally, United Airlines saw a 6% drop in its stock value, influenced by increased scrutiny from the Federal Aviation Administration after several safety incidents.

At 15:10 GMT, the Dow Jones is trading 39345.74, down 130.16 or -0.33%. The S&P 500 Index is at 5226.58, down 7.60 or -0.15% and the Nasdaq-100 Index is trading 16411.70, down 17.12 or -0.10%.

Recent Market Gains

Despite the day’s downturn, the market has been on an upward trajectory, marking its fifth consecutive month of gains. Last week, major U.S. stock indexes hit new all-time closing highs. The S&P 500 grew by approximately 2.3%, the Dow Jones Industrial Average edged closer to the 40,000 mark with a near 2% increase, and the Nasdaq Composite rose by about 2.9%. This growth was fueled by the Federal Reserve’s commitment to a rate-cutting timeline and a surge in tech stocks driven by AI innovations. The American Association of Individual Investors Sentiment Survey indicates that investor sentiment remains positive, reflecting a sustained market optimism.

Concerns Amid Growth

However, concerns are mounting over the possibility of an overextended rally and prolonged high interest rates. Sam Stovall of CFRA Research points out the high valuation of equities, with the S&P 500 trading at a significant premium compared to its 20-year average price-to-earnings ratio. This situation suggests increasing market vulnerability to a decline. Investors are now looking towards the upcoming February personal consumption expenditures price index for further direction, although Stovall anticipates a muted response.

Boeing’s Management Shakeup

In corporate news, Boeing announced major leadership changes, including CEO Dave Calhoun stepping down at the end of 2024. This follows increased calls for change due to quality and manufacturing issues with Boeing planes, highlighted by recent safety incidents.

EU Probes Big Tech

The European Union initiated its first investigation under the new Digital Markets Act, targeting tech giants Apple, Alphabet, and Meta for potential non-compliance. These probes will examine issues like anti-steering rules and whether companies are unfairly favoring their own services. These investigations could result in significant fines and are part of a broader scrutiny of tech firms’ market practices.

Market Outlook

In the short term, the market appears cautiously optimistic, balancing growth momentum with emerging challenges. The tech sector, especially with ongoing regulatory probes, and industries like aviation will be key areas to watch. Given current indicators and market sentiment, a slightly bullish outlook seems appropriate, albeit with a close eye on upcoming economic data and corporate developments.

Technical Analysis

The E-mini Dow Jones futures contract is in an uptrend, but trading lower for a second session on Monday.

If the downside momentum continues, we could see a test of the 50-day moving average at 39115. Since the trend is up, buyers are likely to up on a test of this indicator. A failure to hold as support could trigger an acceleration to the downside.

On the upside, a sustained move through the record high at 40316 will reaffirm the uptrend.