Nasdaq Forecast: NDX inches higher despite rising oil prices and ahead of retail sales

US futures        

Dow futures 0.12%, S&P futures 0.07%  & Nasdaq futures  0.17%

European futures

FTSE 0.12%,  DAX 0.84%

• US stocks rise after S&P 500 reached a record high
• Cooler inflation data dampened Fed rate hike expectations
• Rising oil prices mean inflation worries could be rekindled
• Oil rises across the week

U.S. Stocks Set for Muted Open as Oil Prices Rise

U.S. stocks are set for a muted open on Friday after the S&P 500 closed at a record high in the previous session. Investors are weighing rising oil prices against this week's cooler inflation data.

Cooling inflation figures have dampened rate hike expectations and, together with resilient corporate earnings, helped the S&P 500 reach fresh record highs. The Nasdaq is also on track for a third straight week of gains.

Following cooler CPI and PPI data the market is now pricing in a 35% chance that the Fed will hike rates in September, down from 55% last week. Lower hawkish Fed expectations support risk assets such as stocks, and particularly tech stocks.

Attention will now turn to July retail sales, which could offer more insight into the health of the U.S. consumer. Expectations are for retail sales to rise 0.1% month-on-month, slightly down from 0.2% in June. Continued growth would point to a resilient consumer, which could give the Fed less reason to cut rates quickly.

At the same time, oil prices are rising again as the U.S. says it could maintain a naval blockade of Iran indefinitely and increase economic pressure on Tehran amid stalled ceasefire talks.

The market will continue to monitor developments in the Middle East, as any escalation in tensions could quickly bring inflation concerns back into focus and put some pressure on the recent equity rally.

Corporate Movers

Reddit — The social media platform has jumped 12% pre-market after S&P Dow Jones Indices said Reddit would join the S&P 500 from August 18, replacing AvalonBay Communities.

Applied Materials — Shares are down more than 5% pre-market after the semiconductor manufacturing equipment maker posted Q2 results that failed to impress investors. The company reported EPS of $3.50 on revenue of $9.12 billion.

Workday — Shares are up 2% after rallying 13% yesterday in their strongest session in ten years following reports that private equity firm Silver Lake was in talks to buy the company.

Sandisk — The memory chip company climbed 5% after a JPMorgan analyst upgraded the stock to overweight from neutral.

Nasdaq 100 Forecast – Technical Analysis

The Nasdaq 100 has extended its recovery from the 27,000 July low, rising above the 50 EMA to 30,150, a level last seen six weeks ago.

Buyers, supported by improving momentum, will look to extend the move towards the 30,300 resistance zone at the July high. A break above here would open the door to 30,750 and fresh record highs.

On the downside, support can be seen around 29,000, where the 50 EMA and horizontal support converge. A break below here would expose 28,250, the June low. From here, attention turns towards 27,000, the July low, and the 200 EMA.

FX Markets – Dollar Falls, EUR/USD Rises

The U.S. dollar is falling on Friday as investors pare back Federal Reserve rate hike expectations. However, Treasury yields remain elevated as oil prices rise amid ongoing U.S.-Iran tensions and concerns over fiscal borrowing. Despite today's weakness, the U.S. dollar is on track to gain 0.1% this week, following two straight weeks of declines.

EUR/USD is rising amid a weaker U.S. dollar after Eurozone data confirmed GDP growth of 0.4% in Q2, following flat growth in the first quarter. On an annual basis, economic growth rose to 1%, up from 0.5% in the previous period. The stronger growth data supports expectations that the ECB could hike interest rates at its September meeting.

GBP/USD is also rising amid a weaker U.S. dollar and following hawkish comments from Bank of England Chief Economist Huw Pill. Pill said the stronger-than-expected UK GDP figures for June reinforced the case for higher borrowing costs to bring inflation back towards target.

Oil Recovers as Supply Risks Remain

Oil prices are rising on Friday, recovering from yesterday's losses and remaining on track for a weekly gain as the U.S. threatens an indefinite naval blockade of Iran, fuelling concerns over supply disruption.

Both Brent and WTI are set to gain more than 4% across the week.

The move comes after Treasury Secretary Scott Bessant said that the U.S. could maintain its naval blockade of Iran indefinitely and increase economic pressure on Tehran as ceasefire talks have stalled.

While supply from the Middle East remains constrained, weaker demand forecasts are limiting the upside. OPEC has lowered its demand outlook, while U.S. crude inventories recorded their largest weekly increase in more than three and a half years.

For now, the market is caught between the risk of further Middle East supply disruption and signs of weaker oil demand. A further escalation in the conflict could push prices higher again, while a sustained increase in U.S. inventories and weaker demand could limit the upside.