Nasdaq 100 Forecast: QQQ extends slump as Dec. rate cut expectations drop

US futures                                         

Dow futures -0.6%, S&P futures -1%  & Nasdaq futures -1.5%

In Europe                                                                        

FTSE -1.55% & DAX -1.5%

• Stocks are slumping for a second day in risk-off mode
• Fed rate cut expectations have fallen to
• Tech stocks fall, while healthcare has outperformed
• Oil Rebounds after Ukraine's attack on a Russian Black Sea port

Fed rate cut expectations fall below 50%

US stocks are set to open sharply lower, extending yesterday's losses, after hawkish comments from Federal Reserve officials raised further doubts about a December interest rate cut.

Yesterday, the three major U.S. stock indices posted the sharpest one-day declines in over a month, with heavyweight tech stocks leading the charge lower.

Investors have continued to dump technology and AI stocks amid concerns about stretched valuations, leading to several sell-offs in recent weeks and putting the NASDAQ on course for a second straight weekly decline.

Interestingly, whilst tech stocks are being sold, underperforming sectors such as healthcare are starting to shine. Nvidia results will be released next week and could make or break the AI rally, which has been behind indexes hitting all-time highs this year.

The mood has soured after Fed speakers on Thursday added to expectations that the Fed may leave interest rates unchanged in the December meeting. Fed speakers, including Neil Kashkari and Beth Hammack, highlighted concerns over inflation. Inflation was 3.0% year on year in September, below forecasts, but suggesting that inflationary pressures remain.

Whilst the US government shutdown ended yesterday, it has led to an economic data drought, leaving the Fed and the markets flying blind. Despite the reopening, some data gaps may never be filled, with the White House casting doubt on the release of October nonfarm payroll and CPI data.

The market is now pricing in a less than 50% chance of a rate cut next month, down from 94% a month ago and 64% a week ago.

Corporate news       

Applied material has fallen over 5% after the semiconductor firm warned that spending on chipmaking gear in China is expected to fall next year due to more stringent US export controls.

Tesla is falling by more than 3.5% after the US Consumer Product Safety Commission announced a recall of around 10,000 units of its Powerwall 2, a backup battery, due to overheating risks.

Warner Bros. Discovery is up almost 3% after reports in the Wall Street Journal that Paramount, Netflix, and Comcast are preparing bids for the media firm.

Nasdaq forecast – technical analysis.

The Nasdaq’s rally from 24,600 stalled at 25,725 before dropping sharply. The shooting star candle, the aggressive break below the 50 SMA, and the lower band of the rising channel keep sellers hopeful of further downside. The price is testing 24,600 support. A break below here creates a lower low, opening the door to 24,000, the October low. Any recovery would need to rise above the 50 SMA and the rising trendline at 24,900. A rise above 24,600 creates a higher high.

FX markets – USD falls, EUR/USD rises

The U.S. dollar is falling as investors fret over a weakening US economy, even as more Federal Reserve officials signalled caution on Thursday about further easing. The USD is expected to fall 0.6% this week, marking the second straight weekly decline.

EUR/USD is rising against the weaker dollar after the eurozone GDP data showed resilience within the economy. Q2 GDP grew 0.2% QoQ in line with the preliminary reading. Strong growth in Spain and France offset stagnation in Germany and comes following an improvement in recent PMI figures.

GBP/USD is falling and gilt yields are rising amid jitters over the Chancellor's budget, as she abandons plans to raise income tax later this month. This has really undermined investor confidence in the government's ability to meet its fiscal targets, propelling gilt yields higher. Reports are circulating that an improved fiscal outlook means the Chancellor is not considering the move. However, the bond market is clearly unhappy with these reports.

Oil rebounds after Ukrainian attacks on Russian oil port

Oil prices are rising over 1.5% following a 4% drop earlier in the week, after a Ukrainian attack on a Black Sea port in Russia halted oil exports from the major energy hub.

The port has paused exports, and the oil pipeline monopoly, Transneft, has suspended crude supplies to that outlet, raising supply worries in the region.

The market is attempting to assess the impact of these attacks on Russian supply and what it means in the longer term—according to oil insiders, oil shipments via the port reached 761,000 barrels a day in October.

The jump in oil prices is helping to offset a sharp decline on Wednesday after OPEC’s monthly report showed the global oil supply would match demand in 2026 or shift away from its earlier projection of a supply deficit.

On Thursday, the IEA reported a larger-than-expected build in US crude stockpiles of 6.4 million barrels, pointing to weaker demand.

Overnight Chinese data was also weaker than expected, with Chinese industrial production falling to a 14-month low.