Where we are: Nasdaq 100 futures are currently trading at 27127.25, down 304.25 points or 1.11% on the session, and trading near the low end of today’s 27037.75-27511.75 range. This contrasts with yesterday’s cash close of 24887.10, a gain of 0.35%. The drop reflects growing unease with stretched valuations within the AI sector, pressuring tech stocks, while traditional sectors are comparatively robust.
What’s driving it: Concerns over the sustainability of AI-driven growth are the primary driver today. Reports that OpenAI has missed its financial targets are triggering a reassessment of the AI investment boom, pressuring stocks such as Nvidia and Oracle. This pullback is occurring despite a backdrop of a slightly steeper 2s10s curve at 0.57% and a rising 10Y breakeven inflation rate at 2.44%, suggesting some degree of inflation expectation anchoring. The rise in the 10Y yield to 4.364, up 1.6bp, and the 2Y yield to 3.848, up 3.5bp, reflects this shift in expectations, adding pressure on growth stocks.
- The 1.11% drop in Nasdaq futures is signalling a clear shift in risk sentiment.
- Weakness in AI leaders like Nvidia (down 2% pre-market) is exacerbating the sell-off.
- CFTC data shows that net non-commercial positioning is still modestly long at +9,439 contracts, representing the 4th percentile of its 52-week range, suggesting limited room for further long liquidation but ample opportunity for new shorts to pile on.
NY session focus: Watch for the 10:00 ET release of the CB Consumer Confidence data. A miss of the 89.0 forecast could further weigh on sentiment, potentially pushing Nasdaq futures lower towards the 27000 level. Key levels to watch are 27000 as initial support, and 26800 as the next major support zone. The short trade in AI-exposed names is working for now, but a sharp reversal on strong earnings from Meta, Microsoft, or Alphabet could trigger a significant squeeze. The pain trade would be a strong showing from consumer confidence, sparking a broader risk rally that catches the AI bears offside.