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Surf’s up? US Tech 100 riding market rally after US inflation gauge gives green light

14:35, 11 August 2022

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Photo illustration of a surfer
The US 100 is surfing a wave of relief over the latest US CPI data. – Photo illustration: Getty Images

The Nasdaq 100 (US100) is rallying after a US inflation update came in below the market’s heated expectations on Wednesday, spurring a rise in tech stocks and the major US benchmarks.

The outlook for the Nasdaq 100 and other stocks may now include a relief rally, but it faces two major tests in coming days. One is the US Federal Reserve’s annual gathering in Jackson Hole, Wyoming at the end of August. Furthermore, technical analysis shows the Nasdaq 100 pushing up against its 200-day moving average line.

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Nasdaq 100 (US100) price chart

US Tech 100 rises on ‘cooled’ CPI report

On Wednesday, the Nasdaq rose 2.5% over the midday session, before closing the day at 2.85% in the green. In early trading on Thursday, the index was up roughly 0.64%.

The US benchmark rallied following the latest US CPI print in July, with inflation hitting 8.5% year-over-year, but falling short of the 8.7% mark expected by the market, prompting traders to reconsider the US Federal Reserve’s rate hike pace over the next few months.

Expectations for interest rate increases remain a major factor influencing the performance of technology stocks while the probability of a 50-basis-point hike at September’s Federal Open Market Committee meeting is now priced-in at 62.5%, up from 32% on Tuesday, providing relief for risky assets.

AMZN leads tech charge as US 100 powers to session win

Also on Wednesday, shares of Microsoft (MSFT) rose 2.43%, Apple (AAPL) went up 2.62%, while Alphabet (GOOGL) jumped 2.63% and Amazon (AMZN) leapt 3.53% higher.

Amazon (AMZN) stock price

Is the nightmare of spiralling inflation and interest rates finally ending?

There are reasons to doubt that, considering the inflationary pressures in non-energy items of the CPI basket remain strong. Also, core inflation is holding at 5.9% year-over-year, with the shelter component continuing to rise monthly.

AMC

7.31 Price
-6.830% 1D Chg, %
Long position overnight fee -0.0308%
Short position overnight fee -0.0137%
Overnight fee time 21:00 (UTC)
Spread 0.22

TSLA

269.43 Price
-6.230% 1D Chg, %
Long position overnight fee -0.0308%
Short position overnight fee -0.0137%
Overnight fee time 21:00 (UTC)
Spread 0.33

AMZN

115.21 Price
-2.460% 1D Chg, %
Long position overnight fee -0.0064%
Short position overnight fee -0.0059%
Overnight fee time 21:00 (UTC)
Spread 0.31

AAPL

142.43 Price
-4.750% 1D Chg, %
Long position overnight fee -0.0064%
Short position overnight fee -0.0059%
Overnight fee time 21:00 (UTC)
Spread 0.05

As a result, the inflation trend isn’t consistent with a rapid return to the 2% Fed target, so calling for a policy shift may be premature.

In the interim, markets and riskier assets may experience a relief rally until the end of August and the US Federal Reserve’s Symposium in Wyoming, where some volatility may return.

US100 technical analysis: Warning signs

Technical chart of US100

The index is approaching a key resistance of the 2022 descending trendline at 13,400 points. Daily RSI is moving towards overbought territory after hovering around the mark last week.

The Nasdaq 100 (US100) has traded below the 200-day moving average since 20 January 2020 and will remain below the line unless there is confirmation of slowing inflation and the Fed’s dovish repricing.

 

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