Even the mighty Nasdaq 100 has taken a drop today, with risk sentiment turning sour across the board. Rising bond yields, oil and the dollar all played a part, not to mention profit-taking from over extended run for US indices. While markets are down, it is far too early to say whether the longer-term bullish Nasdaq 100 forecast has now turned. But rising yields certainly do challenge growth stocks, plenty of which found in the tech-heavy index.
What has knocked market sentiment?
Well, there are at least two major contributors here. There was so much hype on the Trump-Xi meeting, with many hoping that it might deliver a few constructive headlines — perhaps on Iran as well. But that didn’t materialise and US equity futures have turned lower along with European markets, while oil prices have pushed higher once more, giving the US dollar fresh support as traders continue to reprice Fed rate expectations higher following another round of hawkish US data this week. Consequently, bond yields have continued to march higher, and this has introduced more volatility to the wider financial markets as investors worry about the impact of increased government borrowings across the developed economies and what they mean for their economies.
Investors are meanwhile continuing to grapple with inflation and stagflation concerns. After the hotter-than-expected US CPI report earlier this week, markets were hit with another hotter-than-expected inflation print on Wednesday, this time through the producer price index. April’s PPI rose by the largest monthly increase since March 2022 and comfortably exceeded market expectations. That has inevitably revived concerns that inflationary pressures are proving far stickier than many had hoped. On top of this, we had US import prices surging too, suggesting company margins are going to be squeezed and the raised prices will be passed onto the consumer.
Underpinning inflation has been crude oil. High energy prices have weighed heavily on large parts of the market until now, but thanks to the semiconductor stocks remaining firmly in favour, we hadn’t seen much weakness in US tech indices until today as enthusiasm around artificial intelligence continued to underpin sentiment there.
Nasdaq 100 forecast: Only a small dent in bull run or something more significant?
The technical Nasdaq 100 forecast has been bullish because of the strong momentum amid the AI optimism. The strong momentum has at least paused here after the index hit the 200% extension of the prior downswing, thus achieving the objective from the breakout that took place in mid-April.
Today could mark the start of a potential downturn as the index futures have broken some short-term levels, including 29370 support. This level is now going to be the first important resistance to watch today. At the time of writing, the Nasdaq 100 was testing the bullish trend line established since that amazing run from the March lows. Break this and we could see the index take a dive below 29,000, leading to fresh technical selling.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
