Technology bulls were rattled on Thursday as comments from the Federal Reserve renewed fears about slower growth in 2024. The Nasdaq 100 closed at 15,188, a decline of 0.8%, states Jon Markman, editor of Strategic Advantage.
The modest weakness for the benchmark ends a nine-day winning streak. It also gives bears hope that they can win back ground lost since late October. That rally was built on better-than-expected earnings reports from a number of large technology firms like Microsoft (MSFT) and Amazon.com (AMZN).
Executives at these companies, and other large tech firms, have repeatedly made the case that corporate customers continue to spend heavily on digital transformation infrastructure. This narrative contradicts the talking points from bears about retrenchment in corporate capital expenditures and an earnings recession in 2024.
Federal Reserve Chairman Jerome Powell gave bears new hope on Thursday when he told members of the International Monetary Fund that the Fed is encouraged by the decline in inflation. Yet, he and his colleagues are not ready to concede they have done enough to rein in higher prices. This was a throwaway comment. Powell can’t declare victory over inflation. This would be malpractice with inflation still well above 3%.
However, bears are desperate for any chance to get back into the fight with bulls. And bulls were looking for an excuse to consolidate recent gains. A predictable sell-off ensued. The rally from the late October lows occurred because professional money managers became worried about falling further behind their benchmark.
Even with the decline Thursday, the Nasdaq 100 is still ahead by a stunning 39% in 2023. That number is going to continue to cause extreme performance anxiety as I would bet no more than about 20% of professionals are meeting that level of success.
Pros are likely to buy any near-term weakness. There is support for the benchmark at 14,892, the 20-day moving average. Expect buyers at that level. Resistance remains at 15,333, the October high.
