Nasdaq 100 Forecast :Stocks fall on rate and government shutdown worries

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Fiona Cincotta
By :  ,  Senior Market Analyst

US futures

Dow futures -0.56% at 33818

S&P futures -0.63% at 4309

Nasdaq futures -0.63% at 14674

In Europe

FTSE +0.2% at 7629

Dax -0.72% at 15285

  • Worries of higher rates for longer hit sentiment
  • US government shutdown fears continue
  • USD pauses for breath after hitting a 10 month high
  • Oil falls on economic woes

Higher rates for longer hurt sentiment

US stocks are heading for a weaker open as investors continue to fret over the prospect of higher interest rates for longer and the subsequent impact on the economy, as well as worries over the likelihood of a partial Federal Government shutdown.

All three major stock indices on Wall Street are expected to log quarterly declines for the first time this year after a particularly grueling September. Pressurising equities benchmark 2 and 10-year treasury yields have risen to multi-year highs after the Federal Reserve’s hawkish outlook and amid a growing sense that interest rates will not be coming down anytime soon.

According to the CME Fedwatch tool, the market is betting that interest rates will remain unchanged in November and December at 5.25%-5.5% a 22 year high.

Attention is now turning to the U.S. Consumer Confidence Index for September and the new home sales report for August, which are both due after the opening bell.

Consumer confidence is expected to ease slightly in September to 105.5, down from 106.1 in August. The data came after Jerome Powell last week said that a soft landing is no longer the Fed’s base case scenario.

Elsewhere ratings agency Moody's warned that a government shutdown would highlight the weakness of US institutions and governments compared to other countries with a similar top rating.

Corporate news

Tesla is falling premarket on news that the EV maker’s export vehicles from China to the EU will be included in the European Union’s investigation into whether Chinese EV subsidies are giving an unfair advantage.

Coty has fallen 3% premarket after launching a global offering of 33 million shares and saying it's admitted an application for a duel listing on the Paris Stock Exchange.

Alibaba ADRs are down modestly after the Chinese e-commerce giant announced plans to list its logistics arm Cainiao in Hong Kong, marking the first unit to be separated after announcing its breakup six months ago.

Nasdaq 100 forecast – technical analysis.

The Nasdaq has fallen below the multi-month rising trendline and the 100 sma, before finding support around 14600. The Nasdaq hasn’t yet fallen below its August low of 14550.  A break below this level is needed to extend the bearish trend. Should 14600, the weekly low hold, buyers will be looking for a rise above 14790, the weekly high, to extend gains towards 14930, the 100 sma, and 15000 round number.

Nasdaq 100 forecast chart

FX markets –USD slips, GBP falls

The USD is edging lower, giving up earlier gains as dollar bulls pause for breath after a strong rally following the Fed's update. Yesterday, Minneapolis Fed president Neel Kashkari supported the idea of another rate hike this year, saying that the US economy was much stronger than expected.

EUR/USD is edging higher, boosted by a weaker U.S. dollar and by the prospect of interest rates staying higher for longer. While more ECB members are suggesting that the central bank may not be raising interest rates again, ECB president Christine Lagarde reiterated the central bank's determination to keep interest rates elevated in order to bring inflation back to 2%.

GBP/USD is falling again, dropping to a fresh six-month low thanks to a dovish shift in the composition of the Monetary Policy Committee. There were already doubts over the Bank of England's ability to hike interest rates again in November, given the gloomy economic outlook. Now, with Sarah Breeden joining the MPC rate vote on November the 2nd, two days after replacing hawk John Cunliffe, she is unlikely to vote for a rate hike. The prospect that the Bank of England could be at the end of its hiking cycle has seen the pound fall sharply in recent weeks.

EUR/USD -0.16% at 1.0630

GBP/USD -0.20% at 1.2186


Oil falls on economic woes

Oil prices are falling on Tuesday amid fears that major central banks keeping interest rates higher for longer could negatively impact the oil demand outlook. Concerns of an economic recession are once again overshadowing the tight supply fears that had been supporting oil prices in recent sessions.

Policymakers from both the ECB and the Federal Reserve have reiterated their commitment to fighting inflation, suggesting that interest rates could remain elevated for longer.

The US dollar rose to a 10-month high yesterday, tracking bond yields northwards, which is also adding pressure to oil prices as a stronger dollar makes oil more expensive for buyers with foreign currencies.

WTI crude trades -0.65% at $88.78

Brent trades -0.4% at $91.30

Looking ahead

15:00 US Consumer confidence

15:00 US New home sales

18:30 Fed Bowman speaks




Related tags: US Open Indices USD Oil

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