The Tel Aviv Stock Exchange (TASE) concluded a volatile but generally positive week, with the flagship TA-125 Index closing at 4,414.81. While the week ended on a red note with a daily decline of 38.28 points (-0.86%), the broader five-day trend indicates resilience as investors continue to price in a more favorable macroeconomic environment following the recent ceasefire agreements and monetary easing. The index remains near its all-time highs, reflecting a cautious optimism that has characterized the Israeli market in early 2026.

Monetary Easing Fuels Optimism

The primary driver of the week’s bullish undercurrent remains the Bank of Israel’s recent policy shift. Following the reduction of the interest rate to 4% in January—the second consecutive cut—market participants are adjusting valuations to reflect lower borrowing costs. This monetary easing is particularly pivotal for the real estate and financial sectors, which have been arguably the biggest beneficiaries of the pivot. The chart reveals a steady climb throughout the mid-week sessions, suggesting that domestic institutional investors are increasing exposure to equities as bond yields moderate and the shekel demonstrates stability against major currencies.

Sector Divergence: Banks vs. Tech

Under the surface of the index, a tug-of-war is evident between traditional economy stocks and the growth-oriented technology sector. Israeli banks and real estate companies have shown strength, supported by the dual tailwinds of economic reopening and cheaper capital. In contrast, the technology sector—heavyweights like Nova, Camtek, and Tower Semiconductor—remains tethered to global sentiment, specifically the performance of the Nasdaq and the AI sector. The late-week dip of 0.86% correlates with profit-taking in these high-beta technology names, which likely mirrored global consolidation trends in semiconductor stocks after a strong run-up earlier in the quarter. Defense stocks, such as Elbit Systems, also saw mixed trading as geopolitical premiums began to unwind slightly due to the de-escalation of conflict.

Profit Taking or Correction?

The red close on Friday raises the question of whether the market is entering a consolidation phase. Technical indicators on the 5-day chart show the index peaking mid-week before giving back gains, a classic sign of profit-taking after a sustained rally. Volume data suggests that while buyers are active on dips, there is resistance around the 4,450 level. This “breather” is viewed by many analysts as healthy, preventing the market from becoming overextended. The pullback also reflects a “sell the news” reaction to corporate earnings reports, where guidance from major listed companies has been solid but arguably already priced into the elevated valuations.

Outlook
Looking ahead to next week, investors will be closely monitoring the Bank of Israel’s inflation expectations data and any geopolitical developments that could challenge the current ceasefire stability. If the 4,400 support level holds, the index may attempt another breakout toward fresh highs. However, renewed volatility in global tech markets or local security incidents could trigger a deeper correction. Traders should watch for the performance of the banking index on Sunday, as it often sets the tone for the local trading week.