USA100 – The Magnificent Seven Pushes the NASDAQ Lower!
The USA100 ended the year on a high rising by 52%, but 2024 has started with the strongest decline since October. As markets opened for the first time in 2024 the USA100 declined by 1.68% and trades lower after market close. The decline was largely triggered by the poor performance of the stocks holding the highest weight, notably Apple stocks.
Apple stocks, which are the most influential asset for the USA100, fell 3.58% in yesterday’s session and are already 0.38% lower this morning. The decline is due to reports that the latest Apple iPhone has underperformed, and revenue is lower than the previous model. Previously the company has relied on customer loyalty and customers wishing to have the latest model even if the current model is not faulty. However, this seems to be a dying trend which is worrying for shareholders. Barclays has also slightly lowered their target price for the stock to $160. This means the asset is trading above the bank’s predicted true value. Barclays also confirmed they are seeing a weakness in the recovery in Mac and iPad sales.
Of the USA100’s top 20 most influential stocks, 18 declined (90%) and AMD saw the strongest pullback, falling almost 6%. The performance during this morning’s Asian session is also similar. According to Bloomberg, analysts believe the stock market will continue to perform well in 2024, but may decline in the short term as we approach earnings season.
If the asset is to decline and form a retracement, wave analysis points towards a further 2% decline. On a medium-term basis, most indicators are also pointing towards a decline, including the RSI and moving averages forming trend lines. Potential targets can be found at $16,424.93, $16,380.60 and $16,191.15. However, if the price rises above $16,577.68 and $16737 respectively, technical analysis is likely to change.
The price throughout the day will largely be influenced by three economic releases; ISM Manufacturing PMI and JOLTS Job Openings at 15:00 GMT, and the Fed’s Meeting Minutes at 19:00 GMT. The Fed’s Meeting Minutes will be particularly vital as it is likely to contain more information on discussions regarding rate cuts.
USDJPY – Dollar Rises but Can Its Momentum Hold Against the Yen?
The US Dollar is again increasing in value against all competitors including against the Japanese Yen. However, the best performing currency after the Dollar is the Japanese Yen which is increasing in value against all currencies bar the Dollar and mixed price action against the Swiss Franc. Therefore, the USDJPY potentially may be ideal for individuals looking for possible swings in both directions.
The US ISM Purchasing Managers’ Index and Job Opening data are expected to be slightly better than the previous month. However, for the Dollar to see significant volatility and momentum, the two will need to read higher than expectations. Dollar buyers will also be hoping that the Fed’s Meeting Minutes confirm the unlikelihood of interest rate cuts in the first quarter of the year.
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Michalis Efthymiou
Market Analyst
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Technology stocks have been on a wild ride in recent months, with major fluctuations in value as investors grapple with uncertainty in the market. As the Federal Reserve prepares to release their meeting minutes, there is a sense of unease amongst tech investors, wondering what impact it may have on their portfolios.
With the Nasdaq reaching record highs and tech giants like Amazon, Apple, and Google dominating the market, it’s no surprise that investors are keeping a close eye on the tech sector. However, with the Fed meeting looming, many are wondering what impact it could have on the tech industry as a whole.
In this article, we will delve into the reasons why tech stocks are on edge as the Federal Reserve meeting minutes approach, what potential changes investors should be aware of, and some practical tips for navigating this uncertain time.
Why the Fed Meeting Matters to Tech Stocks
The Federal Reserve, also known as the “Fed”, is the central banking system of the United States. They are responsible for setting and implementing monetary policy, such as interest rates and money supply, in order to maintain economic stability and promote growth.
Every six weeks, the Federal Reserve holds a meeting to discuss the state of the economy and make decisions about monetary policy. These meetings are closely watched by investors as any changes can have a ripple effect on the stock market.
So why should tech investors pay attention to the Fed meeting? While the tech industry may seem immune to the ups and downs of the economy, it is not immune to changes in interest rates and inflation rates set by the Fed. Here’s how these factors can impact the tech sector.
1. Influence on Consumer Spending
Tech companies rely heavily on consumer spending for their profits. When interest rates are low, consumers are more likely to borrow money and spend it on tech gadgets and devices. On the other hand, when interest rates are high, consumer spending is likely to slow down, impacting the sales and revenue of tech companies.
2. Impact on Borrowing and Investments
Tech companies often rely on borrowing money for research and development, mergers and acquisitions, and other growth strategies. With the Fed having control over interest rates, changes in these rates can directly affect the cost of borrowing for these companies. Similarly, changes in interest rates can also impact investment opportunities for tech companies.
3. Influence on Inflation
Inflation, or the general increase in prices of goods and services, can also have an impact on the tech industry. With rising inflation, the cost of raw materials and other production expenses can increase, cutting into the profits of tech companies. The Fed’s decisions about interest rates can have an impact on inflation rates, causing a ripple effect on the tech industry.
Potential Changes on the Horizon
While we won’t know the outcome of the Fed meeting until the minutes are released, there are a few potential changes that tech investors should keep an eye out for.
1. Interest Rates
Interest rates have been at historic lows in recent years, and the general consensus is that they will remain low for the foreseeable future. However, any changes to interest rates, even small ones, can have a significant impact on the tech industry.
2. Inflation Rates
As mentioned earlier, inflation rates can also affect the tech sector. With the current economic climate and rising costs of production, any changes in inflation rates could spell trouble for tech stocks.
3. Economic Outlook
The Fed meeting minutes will also provide insight into the economic outlook for the coming months. With ongoing discussions about the potential for a recession, any indications of this in the minutes could cause a significant shift in the stock market, including the tech sector.
Practical Tips for Tech Investors
While it may be tempting to panic or make rash decisions in response to the looming Fed meeting, it’s important to stay calm and keep a long-term perspective. Here are some practical tips for tech investors to weather any potential changes in the market.
1. Diversify Your Portfolio
One of the most important principles of investing is diversification. This means spreading your investments across different industries and asset classes, rather than putting all your eggs in one basket. By diversifying your portfolio, you can mitigate the impact of any changes in a particular sector, such as tech.
2. Stay Informed and Do Your Research
Instead of relying on speculation and rumors, do your own research and stay informed about the latest market trends and economic indicators. While the Fed meeting may cause some volatility in the market, it’s important to keep a long-term perspective and make informed decisions.
3. Consider Seeking Professional Advice
If you’re feeling overwhelmed or unsure about how the Fed meeting may affect your investments, consider seeking the advice of a financial advisor or professional who can provide personalized advice based on your specific financial situation and goals.
In Conclusion
With the upcoming Federal Reserve meeting minutes looming, it’s no surprise that tech stocks are on edge. The potential changes in interest rates, inflation rates, and economic outlook could have a significant impact on the tech industry as a whole. As an investor, it’s important to stay informed, diversify your portfolio, and seek professional advice if needed, in order to navigate this uncertain time in the market.
