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Nasdaq 100, S&P 500, Dow Crumble as US Inflation Comes Hotter Than Anticipated


US STOCKS OUTLOOK:

  • S&P 500, Nasdaq 100 and Dow Jones sink after U.S. inflation knowledge tops estimates
  • Elevated worth pressures within the financial system might immediate the Fed to proceed front-loading rate of interest hikes in its coming financial coverage conferences
  • With market sentiment deteriorating day by day, threat belongings will wrestle to stage a significant rebound within the close to time period

Most Learn: US Dollar Price Action Setups – Prepping for Pullback? EUR/USD & USD/JPY

U.S. shares suffered steep losses on Wednesday amid rising headwinds for the U.S. financial system and more and more decrease risk-appetite on Wall Road. On the closing bell, the S&P 500 plunged 1.65% to three,935, its weakest degree since March 2021. The Dow Jones, for its half, fell 1.02% to 31,834, a brand new low for the yr. Elsewhere, the Nasdaq 100 bore the brunt of the sell-off and plummeted 3.06% to 11,967 amid a serious rout within the tech universe, with Apple, Microsoft and Amazon all plunging into free fall.

Though fairness futures have been buying and selling sharply greater within the pre-market session, the upbeat sentiment shifted and did a 180-degree flip after the U.S. consumer price index for April delivered one other adverse shock. For context, annual CPI cooled down to eight.3% from 8.5% in March, however the outcome got here in two-tenths of a % above expectations, an indication that broader worth pressures are not but easing considerably.The core indicator additionally topped consensus forecasts, printing at 6.3% year-over-year, solely a modest decline from the 6.5% advance recorded on the finish of the primary quarter.

Whereas the directional enchancment within the headline and core gauge are welcome, Wednesday’s knowledge served as a agency reminder that the U.S. central financial institution has a lengthy highway forward and a troublesome path to revive worth stability.Wanting forward, favorable base results ought to assist push year-over-year inflation numbers down, however with the underlying development working properly above fascinating ranges, the Fed is prone to retain a hawkish bias and proceed to front-load rate of interest hikes over the following couple of conferences to carry financial coverage to a impartial stance expeditiously.

Total, with inflation hovering at four-decade highs, it’s potential we now have not but reached peak hawkishness in central financial institution coverage outlook. In opposition to this backdrop, US Treasury yields might push greater within the close to time period, fueling recession fears and weighing on buyers’ temper. On this surroundings, threat urge for food will stay weak, stopping a significant fairness market restoration. Actually, we might proceed to witness the latest “promote the rip phenomenon,” the place merchants fade any rally for concern that shares will wrestle to keep up good points.

NASDAQ 100 TECHNICAL ANALYSIS

After a big drop on Wednesday, the Nasdaq 100 broke under a key assist within the 12,210 and fell to a brand new 2022 low close to 11,967. With the tech index in bear market and firmly biased to the draw back, sellers might goal the 11,600 degree within the coming classes. On additional weak point, the following ground to contemplate seems across the 11,000-mark. On the flip aspect, if dip patrons return and handle to push the benchmark greater, preliminary resistance is available in at 12,210, adopted by 12,645. If these hurdles are cleared, the main target shifts as much as the 13,000 space.

Nasdaq 100 technical chart

Nasdaq 100 Chart Prepared Using TradingView

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—Written by Diego Colman, Market Strategist for DailyFX





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