Nasdaq 100 Forecast: NDX falls after hotter inflation data

US futures       

Dow futures -0.08%, S&P 500 futures -0.2%  & Nasdaq futures  -0.49%

European futures

FTSE 0.24%,  DAX  0.4%

·       US stocks fall after CPI data

·       U.S. inflation rises by more than expected

·       Banks rise after mixed earnings, tech stocks fall

·       Oil rises as hostilities in the Middle East ramp up

U.S. Stocks Fall as Inflation Comes in Hotter Than Expected

U.S. stocks are falling after hotter-than-expected U.S. inflation data, which has lifted Fed rate hike expectations.

CPI rose to 3.7% year on year in September, up from 3.4% in August and ahead of expectations of 3.6%. Meanwhile, core CPI was also hotter than expected at 2.6% year on year, up from 2.4% in August and ahead of forecasts of 2.5%. On a monthly basis, core inflation was also hotter than expected at 0.3%, defying expectations of it cooling to 0.2%.

The rise in headline inflation comes as gasoline prices rose 9.1% in September, accounting for over half of the monthly increase in the all-items index.

Delving deeper into the figures, price pressures look reasonably broad-based, with prices for recreation, used cars and trucks, education, airline fares, medical care and apparel all increasing. This suggests that while some of the pressure could be linked to tariffs and energy costs, there are also signs of stickier inflation.

With both headline and core inflation rising, money markets are pricing in a 45% chance of a rate hike in October, up from 20% before the data. While the data increases the chances of an October hike this is still not a given.

A December rate hike also remains firmly on the table, with the market pricing in an 85% probability of an increase. Markets are also pricing in at least three 25-basis-point hikes over the next 12 months as oil prices remain elevated and the U.S. economy continues to show resilience.

New York Fed President John Williams said he sees only one rate hike this year and no further hikes in 2027, a stark difference from what markets are pricing in.

However, with oil prices rising and the U.S. economy seemingly remaining robust for now, upward pressure on prices remains.

Following the data, U.S. Treasury yields and the dollar are rising. The 10-year Treasury yield is up 4 basis points to 5.25%, having reportedly reached 5.8% earlier.

There are still several days of Fed speakers including chair Kevin Warsh to navigate.

Corporate Movers

Bank of America is falling 4% after posting a sharp decline in Q3 profits, following a $1.2 billion penalty from the U.S. Treasury Department over money laundering violations.

BlackRock, the asset manager, is up 3% after beating earnings and revenue expectations. Adjusted EPS came in at $15.93, compared with $14.13 expected. Assets under management rose to $15.49 trillion, up from $13.46 trillion a year ago.

ASML's U.S.-listed shares are down 1% after the Dutch semiconductor company posted a slight miss on Q3 net sales, even as earnings and revenue beat expectations. Net profit came in above forecasts, and the chipmaker also said orders are coming in for 2029–2030.

Dell Technologies and Hewlett Packard Enterprise are down 2.5% and 4%, respectively, after Barclays downgraded both stocks to Equal Weight from Overweight.

Nasdaq 100 Forecast – Technical Analysis

The Nasdaq trades above its rising trend line and its 50 and 200 EMAs, keeping the broader trend bullish. After running into resistance at 31,365, the record high, the price has eased lower and is currently testing the 20 EMA.

Should the 20 EMA hold, buyers will look towards 31,000 and 31,350, with a break higher opening the way to fresh record highs.

On the downside, a break below the 20 EMA exposes the 50 EMA at 30,000, which is also a psychological level. From here, attention will turn to 28,950, the horizontal support level.

FX Markets – Dollar rises after hotter CPI data

The U.S. dollar is rising after hotter than expected US inflation data lift Fed rate hike expectations.

EUR/USD is unchanged around 1.12, having recovered from a fresh 17-month low near 1.1150. The euro has come under serious pressure amid ongoing concerns over France's fiscal and political situation. A budget needs to be pushed through, but political opposition is making this challenging ahead of next year's elections. The ECB is expected to hike rates once more, while eurozone inflation data is due on Friday.

GBP/USD is unchanged as the market digests reports that UK Finance Minister John Healey is set to finance all new measures announced in the October 28 budget. This includes a cost-of-living support package, which would be funded through higher taxes or reduced public spending rather than additional borrowing.

This could go some way towards calming the gilt market, where yields had risen to their highest level since 1998 amid concerns about the UK's fiscal position ahead of the budget.

Oil rises as hostilities in the Middle East rise

Oil prices are rising on Wednesday for a fifth straight session as tensions and attacks in the Middle East escalate, raising concerns over supply.

Brent trades above $106 a barrel, while WTI is pushing towards $96 a barrel.

Attacks on ships crossing the Strait of Hormuz, combined with military strikes involving Saudi Arabia and the Houthis, are making the oil market more nervous about exports from the region.

These latest developments in the Middle East are overshadowing President Trump's announcement last Friday that Russia had agreed to supply diesel to global markets, a move that could ease market tightness, at least temporarily.

The IEA has said that a lack of operational Russian refinery capacity means the announcement is unlikely to bring any material change to the global gasoil market balance.