Where we are: Nasdaq futures are trading at 27435.00, up 1.64% on the day, printing a high of 27462.50. The cash Nasdaq 100 closed yesterday at 24836.60. This rally puts us well above yesterday’s cash close, suggesting a strong open for the New York session. Intraday, futures have held a relatively tight range of roughly 500 points.
What’s driving it: Risk sentiment is clearly the dominant force, fueled by optimism surrounding potential US-Iran peace talks and the ceasefire extension between Israel and Lebanon. This is translating directly into a weaker dollar, with the DXY currently at 98.36, down 0.31% and falling US Treasury yields – the 10-year is at 4.302%, down 2.6bp, with the 2-year seeing even more pronounced downside (-5.9bp) at 3.785% – all of which are supporting tech valuations. Speculator positioning in the Nasdaq 100 is modestly long, at the 4th percentile, which reduces the immediate risk of a significant long squeeze.
- The US 2Y yield declining nearly 6bp suggests some repricing of near-term Fed expectations.
- WTI crude is higher by nearly 6% (albeit on stale data), suggesting inflation expectations could be firming, though breakevens are little changed, for now.
- While European equities are mostly in the red, the Nasdaq is diverging massively, with the DAX off 0.37% while Nasdaq futures are up over 1.6%. This discrepancy hints at a potential catch-up trade in Europe later in the day, or a possible reversal in the US.
NY session focus: With no major economic data releases scheduled ahead of the New York open, attention will be squarely on President Trump’s speech at 17:00 London time. Watch for any remarks related to geopolitical developments or economic policy that could impact risk sentiment. Key levels to watch are 27500 as resistance and 27000 as initial support for the Nasdaq futures. The short dollar / long Nasdaq trade is currently working, but be wary of a hawkish surprise from Trump, which could trigger a sharp reversal. The pain trade would be a sudden escalation in Middle East tensions driving a flight to safety into the dollar and out of tech.