The trading week on the Tel Aviv Stock Exchange (TASE) ended on a sour note for mid-cap investors, as the TA-90 index failed to sustain its early-week momentum. While the flagship TA-35 index showed relative resilience, the TA-90—often considered a better barometer of the domestic economy—succumbed to profit-taking and sector-specific headwinds. By the close of trading on Friday, February 6, the index had shed 33.13 points to finish at 3,978.21, erasing gains from earlier in the week. This divergence highlights a growing caution regarding the domestic growth outlook, even as global markets continue to flash green signals.

Real Estate Heavyweights Drag the Index

The primary culprit for the TA-90’s decline was the real estate sector, which accounts for nearly 68% of the index’s weighting. As fiscal uncertainty looms and interest rate expectations recalibrate, investors rotated out of capital-intensive construction and property stocks. Notable decliners included Amram Avraham Construction, which fell 3.16%, and Isras, which dropped 2.95%. Prashkovsky also saw significant pressure, shedding 2.87%. The broad-based weakness in this sector suggests that the market is pricing in a “higher for longer” interest rate environment, which disproportionately impacts financing costs for mid-tier developers compared to the cash-rich blue chips in the TA-35.

Tech Sector: A Tale of Two Markets

A striking disconnect emerged this week between the local technology sector and its US counterparts. While Wall Street celebrated a massive 7.87% surge in Nvidia and continued optimism in AI-driven hardware, local IT services companies faced steep corrections. One Software was the index’s worst performer, plunging 5.62% on Friday. This sharp drop likely reflects concerns over local enterprise spending slowdowns rather than global tech trends. However, not all tech news was bleak; dual-listed Priortech managed to buck the trend, gaining 1.69%, indicating that companies with stronger export exposure are still finding favor with investors.

Bright Spots in Travel and Communications

Despite the red ink across most of the board, selective buying was evident in the travel and communications sectors, offering a glimpse of defensive positioning. El Al continued its ascent, adding 1.41% as travel demand remains robust despite geopolitical tensions. Similarly, the telecom sector showed strength, with Partner Communications rising 1.56%. These gains suggest that investors are not exiting the Israeli market entirely but are aggressively reallocating capital toward companies with strong cash flows and consumer resilience, hedging against the volatility seen in the property and software sectors.

Outlook: The TA-90’s inability to hold the 4,000 support level is a technical development that traders will watch closely next week. If the index fails to reclaim this threshold early in the coming sessions, it could trigger further technical selling. Investors should pay close attention to forthcoming earnings reports from the mid-cap real estate sector to see if the stock price weakness is justified by operational data. Furthermore, with the US markets showing mixed signals—Amazon dropped 5.55% while chips rallied—local volatility is likely to persist as Israeli traders attempt to decipher the global direction while managing domestic fiscal risks.