Nasdaq Stalls
US Stocks are looking a little softer as we cross through into the back end of the week. The Nasdaq is now down around 2% from last week’s highs as traders deal with soaring US yields. A stronger US Dollar has become the standout theme for markets across October, with a less-dovish Fed outlook and rising US elections uncertainty driving safe-haven flows into the greenback. For stocks, this means the rally we saw over the first half of the month has stalled for now. Sentiment has also been muddied by some key earnings misses along the way.
USTs Rallying
US treasury yields have risen to three-month highs this week, boosted by a shift in the market’s Fed outlook. Traders have scaled back easing expectations for the remainder of the year, now looking for a .25% cut next month and only a 70% chance of a follow up cut in December. This pricing is down sharply from the end of September where traders were looking for a .5% cut next month and a further .25% reduction in December.
US Jobs Data
Looking ahead, there is room for USD to rally further, pulling stocks down lower, if this pricing turns less dovish. Next week we’ll get the latest set of US labour market data for October. If further strength is (last month we saw a strong upside surprise), this should lead to a more neutral message from the Fed, lowering December rate-cut expectations which should see stocks coming off firmly near-term.
Technical Views
Nasdaq
For now, the rally in the Nasdaq has stalled ahead of a fresh test of YTD highs at 20,668 with the market now retesting 19,955 as support from above, with the bull trend line just below. While this level holds, focus is on a fresh push higher. If we break below here, however, focus turns to 18,912 as the next support zone to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.