- Markets remain volatile, with tech megacaps rebounding but broader uncertainty persisting.
- Inflation data and tariffs continue to drive sentiment, with PPI in focus after a mixed CPI reading.
- Nasdaq 100 finds support near key technical levels, but sustained recovery needs stronger confirmation.
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Wall Street managed a decent bounce following a somewhat subdued CPI reading, but alas, it failed to inject much vigour into the futures during the Asian hours, leaving European investors with rather little to cheer about initially. At one point, the Nasdaq futures were down some 385 points from yesterday’s high – nearly 2%.
So, it was not exactly the most inspiring start to the day, I must say. But once Europe got underway, dip buyers returned and up went index futures.
Still, in recent days, we have seen the markets trying to establish a base and we had a big rally for tech mega caps yesterday with Nvidia (NASDAQ:NVDA) for example closing 6.4% higher and back above $115, while Tesla (NASDAQ:TSLA) rallied 7.6% and AMD (NASDAQ:AMD) closed back above the key $100 level with a 4.1% rally.
So, despite the volatility, there are some tentative signs that the market is potentially on a path to recovery, but more evidence is needed to confirm that a low has been reached.
More Inflation Data On The Way
Following the release of a weaker-than-expected CPI report, the focus will be on PPI (and jobless claims) today. The PPI data could be more significant factor for investors to consider, given its close correlation with the Fed’s preferred inflation gauge—the Core PCE Price Index.
A bigger deviation from the expected figure could alter expectations around the Fed’s next move, making this release particularly noteworthy. Both headline and core PPI are seen printing +03% m/m each.
Once the inflation data is absorbed, market focus will turn to Friday’s University of Michigan surveys. A sharp drop in last month’s consumer confidence reading raised concerns about the impact of Trump’s trade policies on economic sentiment. This widely followed survey, polling around 420 respondents on current and future economic conditions, will provide further insight into consumer confidence trends.
Additionally, the inflation expectations component, which saw a sharp rise last month to 4.3% from 3.3%, will be closely watched for signs of persistent inflationary pressures. The implications of these figures could be significant, as investors weigh the potential impact on monetary policy and broader market sentiment.
Now, going back to yesterday’s release of CPI, one of the sticking points here is that while the inflation data did offer a smidgen of respite, it’s not quite the silver bullet some might have hoped for. The cooling was largely concentrated in the services sector, which means it won’t directly translate into a lower PCE price index.
Adding to the unease is the fact that February’s data doesn’t fully account for the ripple effects of Trump’s flurry of tariffs. However, the Fed is unlikely to rush into rate cuts anyway. With continued uncertainty around trade policies and immigration, policymakers will need to see sustained favourable inflation data before making any decisive moves.
And that view was mirrored in the FX price action in the immediate aftermath of the CPI release, with the US Dollar bouncing back today. And let’s not forget, the real elephant in the room for markets isn’t so much inflation as it is growth—or the lack thereof.
Tariffs Remain Key Risk
We have seen markets move wildly on threats of tariffs and bounce equally strongly when Trump says anything positive regarding trade deals. This was evidenced in the markets yet again yesterday. After a mid-session drop following Canada’s announcement of new tariffs on $21 billion worth of US goods, US stock indices managed to stage a comeback.
Trump’s shifting stance on trade tariffs—backing away from an additional 25% levy on Canadian exports—reignited optimism that trade deals could still be on the table. Sentiment received an additional boost as February inflation came in cooler than anticipated, propelling stocks higher after two days of steep declines.
But now, Europe finds itself squarely in Trump’s crosshairs. The EU’s threat of counter-measures was met with a rather pointed warning of reciprocal duties from the United States. One can’t help but wonder whether Trump’s approach to Europe will mirror the ramp-up-and-reprieve strategy he employed with Canada and Mexico, or if he’ll opt for the model we’ve seen with China – tariffs on top of tariffs. Only time will tell, of course.
Anyway, Trump’s 25% tariffs on steel and aluminium imports took effect yesterday, prompting immediate retaliatory measures from the European Union and Canada.
Nasdaq 100 Technical Analysis: Will We See Sustainable Recovery?
The markets have tried – and failed – to create a turning point in the last few sessions. But with tech megacaps bouncing back strongly yesterday and markets being severely oversold in the short-term view, can the Nasdaq 100 stage a more significant recovery from here?
One consistent theme in this long-running bull market is that every notable sell-off has been met with aggressive dip-buying, pushing indices to new highs. Despite persistent macroeconomic concerns—whether it was the covid crash, the unwinding of yen carry trades in 2024, Russia’s invasion of Ukraine, or the inflation-driven bear market of 2022—investors have repeatedly stepped in. The key question now is whether we are on the cusp of another resurgence or if the market is set for a deeper pullback.
The Nasdaq 100 futures has been finding support in the last few days around the 19150-19400 region. This area also corresponds to the 61.8% Fibonacci retracement of the last major rally from August. With the daily RSI now firmly in oversold territory, the potential for a further rebound remains strong.
On the upside, initial resistance stands at 19765—the low from Friday, which was broken following Monday’s big rout. Beyond that, further hurdles emerge at the psychological barrier of 20,000, with the 200-day moving average looming around 20385. If dip buyers return with force, these levels could come into play in the coming sessions.
But should selling pressure resume, then we could see 18,800 and possibly the 78.6% Fibonacci level at 18437 next.
All told, I am now eyeing a potential recovery than a continuation of the selling, having previously been calling for a correction, which finally materialised this month.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.