Stock Market Update
On Friday, major stock indexes dropped as investors reacted to ongoing energy supply worries, particularly due to increased tensions in the Strait of Hormuz. Some stocks experienced significant declines during the week. This downturn has led certain stocks in consumer discretionary, industrial, and technology sectors to become oversold, which might set the stage for a short-term recovery.
Meta was one of the most oversold stocks, facing two unfavorable court rulings last week along with layoffs. Typically, a stock is categorized as oversold if its relative strength index (RSI) drops below 30. On the other hand, stocks with an RSI above 70 are considered overbought, suggesting they may face declines soon.
In the S&P 500, Meta has an RSI of 22.1, indicating it’s heavily oversold, having dropped over 11% just this week. Last Wednesday, a California jury found that Meta and YouTube had implemented addictive features on their platforms, negatively impacting minors’ mental health. As a result, the court ordered Meta to pay $2.1 million in damages. A New Mexico jury also held Meta responsible for similar issues, awarding $375 million against the company. Additionally, last week, Meta laid off employees across several divisions like Facebook, global operations, and Reality Labs, which has heighted investor concerns regarding the frequent and expensive shifts in the company’s corporate strategy.
Other companies classified as oversold include Estée Lauder Companies, Cintas, and Lennox International.
Meanwhile, the overbought list was dominated by energy stocks. APA, an independent energy company, topped this list with an impressive RSI of 87.8, having seen a nearly 14% increase last week. With the ongoing conflict in Iran entering its fifth week, investors are increasingly adding energy stocks to their holdings, leading to significant disruptions in supply chains and a spike in oil prices. West Texas Intermediate crude oil futures closed at their highest since mid-2022 on Friday, while Brent crude also finished at levels not seen since July 4, 2022. Other companies on the overbought list include Diamondback Energy, Devon Energy, and Occidental Petroleum.
