Where we are: The Nasdaq 100 is trading near unchanged at 18,050 in pre-market trading. The overnight range has been tight, confined between 18,000 and 18,100. This level is just below yesterday’s New York close, suggesting a slightly cautious tone ahead of key data releases.
What’s driving it: The primary driver is the continued rise in US real yields, with the 10-year TIPS yield climbing another 4bp to 1.96%. This exerts downward pressure on growth stocks, particularly in the tech sector. While breakeven inflation remains stable at 2.46%, the persistent rise in real rates suggests the market is pricing in a hawkish Fed stance or concerns about sustained economic growth. The fact that AI investment carried US GDP in Q1 offsetting slowing private consumption is also a consideration. The broad dollar index remains firm at 118.7294, further weighing on risk assets.
- The 10Y Real Yield at 1.96% is a major headwind for tech valuations, especially given elevated multiples.
- CFTC data shows net non-commercial positioning in Nasdaq 100 futures is modestly long but at the 4th percentile, suggesting limited further upside and potential for a squeeze to the downside.
- Alphabet nearing a $5 trillion valuation and the possibility of overtaking Nvidia underscores the concentration risk within the Mag 7.
NY session focus: The key event for today will be the release of ISM Manufacturing PMI and ISM Manufacturing Prices at 10:00 ET. A strong reading in either could exacerbate the real yield pressure and trigger a sell-off in the Nasdaq 100. Key levels to watch are 18,000 as immediate support and 17,800 as the next major level. Resistance sits at 18,150. The working trade has been shorting rallies into resistance. The trade at risk is chasing upside breakouts given the macro headwinds. The pain trade would be a dovish surprise triggering a risk-on rally that squeezes shorts.