Nasdaq100 Forecast: Nasdaq100 soars after cooler CPI

US futures

Dow futures +1.1% at 34717

S&P futures +1.45% at 4474

Nasdaq futures +1.75% at 15750

In Europe

FTSE +0.17% at 7441

Dax +0.32% at 15555

• US CPI cools to 3.2% YoY in Oct from 3.7%
• Core inflation cools to 4%
• Data fuels bets that the Fed is at peak rates
• Oil rises on an improved demand outlook 

CPI & Core CPI cool by more than expected

US stocks are soaring after a cooler-than-expected inflation report fuels bets that the Fed is done hiking rates.

US CPI cooled 3.2%, down significantly from 3.7% YoY in September, below the 3.3% economists had penciled in. On a monthly basis, inflation rose 0.2%, below the 0.3% forecast. Core inflation was also cooler than forecast at 4%.

Inflation is back on the right trajectory after several months of rising inflation, which has calmed market worries and cemented bets that the Fed won’t be hiking rates again.

The data comes after a more dovish than expected FOMC meeting in November, and Federal Reserve chair Powell said last week that he wasn't sure whether the Fed had tightened monetary policy sufficiently to bring inflation back to the 2% level. Given the surge in stocks, particularly growth stocks, and the drop in the USD, the market believes that the Fed’s job is done.

The Fed is unlikely to remove the option of further hikes if needed just yet. It is likely to continue its wait-and-see position towards rate hikes, especially as expectations are for the labour market to start cooling more rapidly. Meanwhile, the market will likely race ahead and focus on when the Fed could begin cutting rates.

Corporate news

Home Depot rises 1.7% after the home improvement retailer posted a smaller-than-expected decline in Q3 compatible sales. However, the home retailer also narrowed its full-year financial forecasts as shoppers rein in spending.

Snap is set to rise over 4% after Amazon confirmed that Snapchat users in the US will be able to buy some products listed on the e-commerce company directly through the social media app.

Teck Resources are set to rise over 5% on the open after Glencore agreed to buy a 77% stake in the Canadian miner's steelmaking coal business for $6.93 billion.

Nasdaq100 forecast – technical analysis

The Nasdaq100 has broken above key resistance at 15630, the September high and is looking towards 16000, the July peak. The RSI supports further gains while it remains out of overbought territory. On the downside, support can be seen at 15630 and 15300, the October high. A break below here exposes the falling trendline support at 15080, a level which negates the near-term up trend.

FX markets – USD falls, GBPrises

The USD has dropped sharply after US inflation data, which supports the view that the Fed could be at peak rates.  

EUR/USD is rising after upbeat German ZEW economic sentiment, which rose to an 8-month high, suggesting that the downturn in the eurozone’s largest economy may have bottomed out. Meanwhile, eurozone GDP confirmed the preliminary reading of -0.1% contraction QoQ in Q3 after rising in Q2.

GBP/USD Is rising on USD weakness and as investors digest the latest UK jobs data, which was a mixed bag. On the one hand, a falling number of vacancies points to the labour market cooling. However, total wage growth remained extremely high, cooling by less than expected to 7.9%, which is likely to raise a few eyebrows at the Bank of England as they decide whether to raise interest rates again. Attention will now turn to UK inflation data tomorrow for further clarity on the BoE’s next move.

EUR/USD +0.97% at 1.0795

GBP/USD +1% at 1.24

 

Oil rises amid an improved demand outlook.

Oil prices are rising for a fourth straight day, supported by data from the International Energy Agency, which raised its demand forecast.

The IEA raised its oil demand growth forecast for 2023 to 2.4 million barrels per day, up from 2.3 million barrels per day and for 2024, it raised the forecast to 930k bpd, up from 880k barrels per day.

The output revision to oil demand forecasts comes despite an expected slowdown in economic growth in most major economies next year.

The update comes after OPEC made a slight upward revision to its forecast for 2023 global oil demand growth and maintained its high projection for 2024.

The upward revision, in addition to a optimism that the Fed could be at peak rates and a weaker USD are helping oil prices recover from the low last week, which marked the lowest level since

WTI crude trades +0.02% at $78.14

Brent trades +0.07% at $82.26

 

Looking ahead

15:00 Fed Barr speaks

16:00 Fed Mester speaks

17:45 Fed Goolsbee speaks

21:30 API oil inventories