US Tech 100 retreats as markets digest the latest projections from the Fed
US equities are pulling away from recent highs on Monday morning after a week packed with impactful events. The key takeaway from the Federal Reserve meeting on Wednesday was the fact that the majority of the FOMC members still expected three rate cuts in 2024, which drove equities higher after the event. A closer look at the economic projections and updated dot-plot graph gave a different picture – one that sees the Fed as more hawkish than in December – but that didn’t seem to interrupt the bullishness in equities, even if the US dollar broke higher with vengeance.
The reality is that even if the Fed does in fact expect less than three cuts in 2024, there is still this widespread belief that rate cuts will come eventually this year. This alone is supportive of equities, especially as the bullishness has been intact even with higher rates. The stronger economic data is also playing in favour of equities, as a soft landing is the best-case scenario for growth and higher expectations of future returns. Right now, it seems that only a shift towards the need for another rate cut could dampen the appetite for equities to move higher.
That said, the momentum remains overbought, and sellers are likely to be attracted as prices move higher. This week is much lighter on the economic calendar, and it is also shortened by the Easter holiday weekend, so momentum seems to be following the path of least resistance. For US equity indices, the bias seems to continue to point higher, but the current pullback may deepen further as appetite realigns with the latest fundamentals.
The US Tech 100 has been a key driver of the five-month-long bullish rally in equities as appetite for tech stocks has been very high. However, the index continues to find resistance in its attempts to break above the 18,400 mark, causing some sideways consolidation in the past few weeks. These big companies are less rate-sensitive than smaller-cap stocks and therefore they are less susceptible to news headlines, meaning greater moves have been seen in the S&P 500 and Russell 2000 over the past few weeks as traders adapted their expectations about monetary policy. So far, short-term support remains around 17,750 but even if the price drops below this level there is a fair amount of interest from buyers to keep the index from slipping. That said, there has been talk about indices being overbought for a while now, so a deeper pullback could quickly spiral into a selloff as many traders are likely waiting for the opportunity to take advantage of volatility. For now, there doesn’t seem to be much motive for this to happen, but with many central bank speakers expected to offer comments in the coming days, a perception of further hawkishness from the Federal Reserve could cause traders to pare back their bullish positions.
US Tech 100 daily chart
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