Markets Tumble After Relief Rally

During the overnight trading session, the S&P 500 futures traded above the key psychological level of 3,900. As previously mentioned in a Simpler News article, if the market fails to maintain its position above this level, it may potentially see a decline toward the lower target levels of 3,850 and 3,800.

However, just before the opening bell for the cash session, this critical level was broken, setting a bearish tone for the day.

The Initial and Continuing Jobless Claims Data was released at 8:30 a.m. Eastern time, revealing that the labor market remains tight, with a slight decrease in claims from the previous week. While this report may not have been strong enough to support the market, the indices began to fall in unison following its release.

Tech giants weigh down indices 

Tesla Motor Company (TSLA) led the market’s downward trend, experiencing a steep decline as concerns grow that Twitter Inc. (TWTR) may be causing a distraction for Elon Musk and his responsibilities at TSLA. TSLA’s stock saw a 10% decline today, reaching its lowest point.

When a large, influential company like Tesla experiences significant selling pressure, it can drag down the overall market due to its weight in the Nasdaq index (NASDAQ). This selling pressure can make it even more difficult for the market to move higher when major companies are weighing it down.

Throughout the day, the rest of the market continued to experience downward movement, with selling pressure strong enough to push the S&P 500 futures to their downside targets of 3,850 and 3,800.

While the psychological level of 3,800 was briefly breached, the market quickly regained its footing heading into the latter half of the trading session. 

This level had previously provided support earlier in the week, and it did so again. If this area of support were to give out, it could indicate strong selling, but for now, it has held steady.

Markets rebound, stay negative

The second half of the day saw a significant shift in market activity, with a recovery of the psychological level of 3,800 leading to a 50-point surge in the market as the day came to a close.

Earlier in the day, the market had been characterized by strong selling and limited buying. The recovery at the end of the day, also known as a “relief rally,” may have been an opportunity for traders to position themselves ahead of upcoming economic data.

Economic data to end the week

There is an important economic data set scheduled to be released tomorrow morning at 8:30 a.m. Eastern time. The Personal consumption expenditures (PCE) price index is closely watched by the Federal Reserve (Fed) and its Chairman, Jerome Powell, as it is used to make decisions about future rate hikes.

If the data and overall economic trends do not support the Fed’s goals, it is possible that we may see further rate hikes at the upcoming February meeting.

Markets see continued weakness.

The Nasdaq and the S&P 500 were negative to close the session. The S&P 500 futures closed down 1.36%, losing 54 points, while the Nasdaq futures closed down 2.35%, decreasing 268 points. The Dow Jones futures followed, closing down 1.02%, falling 350 points.