Nasdaq 100 Forecast :QQQ rises towards record highs after CPI cools

US futures

Dow future 0.37% at 39685

S&P futures 0.48% at 5268

Nasdaq futures 0.51% at 18406

In Europe

FTSE 0.16% at 8440

Dax 0.52% at 18825

• US CPI cooled to 0.3% MoM in April, below 0.4% expected
• Retail sales were 0% MoM in April, down from 0.6%
• Fed rate cut expectations have been brought forward
• Meme-stocks fall after a 2-day rally

Cooler inflation a relief for the Fed 

U.S. stocks are rising, heading back toward record highs after softer US inflation and retail sales data.

US CPI rose 0.3% MoM in April, down from 0.4% in March and below expectations of 0.4%. On an annual basis, CPI eased in line with forecasts to 3.4%. Meanwhile, core inflation cooled in line with forecasts to 0.3%.

CPI cooled for the first time in six months, which will be a relief for the Federal Reserve as it considers when to start cutting interest rates.

Retail sales came in flat at 0%MoM, below the 0.4% forecast and down from 0.6% in March. The weaker sales come as consumer confidence has also weakened recently.

Cool inflation and signs of weaker retail sales support the view that the Fed could start cutting interest rates as soon as September.

Following the data U.S. treasury yields tumbled, pulling the US dollar lower and lifting stocks.

Interest rate futures show that two rate cuts are fully pricing in for 2024, which wasn't the case prior to the data. The next Fed policy meeting will be on June 11th and 12^th. According to the CME fed watch tool, the market is now pricing in a 75% probability that the Fed will cut rates by at least 25 basis points in the September meeting. This was up from 65% yesterday.

Corporate news

GameStop and AMC entertainment are falling pre-open as momentum from the meme stock craze fizzles. AMC shares are down 7%, while GameStop is down 6% following a rise of over 130% in the past two day

Boeing is set to open lower after the Department of Justice said that Boeing violated a 2021 settlement related to its two fatal 737 crashes, leaving the company liable to potential US prosecution.

Nasdaq 100 forecast – technical analysis.

The Nasdaq100 has recovered from the 17300 May low, rising above the 100 SMA, support at 17800, and the 50 SMA as it grinds higher towards the 18466 all-time high. Buyers will look to extend gains towards the record level and fresh highs. Meanwhile, sellers need to break below 17936 to negate the near-term uptrend. A break below 17300 creates a lower low.

 

FX markets – USD falls, GBP/USD rises

The USD is falling after weaker-than-expected US inflation data, which supports the view that the Fed could cut rates. The USD is tracking treasury yields lower.

EUR/USD rose on U.S. dollar weakness and after encouraging data from the eurozone. Eurozone GDP confirmed 0.3% QoQ growth, recovering from a -0.1% contraction in Q4 2023. Meanwhile, industrial production rose by more than the expected 0.6%.

GBP/USD is rising amid a quiet UK economic calendar and as investors continue to digest yesterday's jobs data and comments from chief economist Huw Pill. The BoE chief economist suggested that the central bank was still on track to cut rates over the summer.

Oil rises ahead of stockpile data

Oil prices are falling for a second straight session despite the EIA downgrading its oil demand outlook by 140,000 barrels to 1.1 million, owing to weaker demand in developed OCED countries.

However, losses could be limited by the weaker USD and a larger-than-expected drawdown in crude oil stockpiles. Data from the API showed that crude oil inventories fell by 3.1 million barrels in the previous week. U.S. government official data will stockpiles is due later today and is expected to confirm the drawdown