Where we are: Nasdaq futures currently trade at 28443.25, up 0.66% on the day, consolidating the overnight gains. The intraday range spans from 28248.25 to 28632.75, hinting at potential for further upside. The cash Nasdaq 100 closed yesterday at 25326.13 and has yet to fully catch up with the future’s optimism.
What’s driving it: The rally in Nasdaq 100 futures is being fueled by a confluence of factors, primarily centered around optimism concerning potential breakthroughs in the Iran conflict and surging AI-related earnings. While real yields are up 4bp, that has been overshadowed by the prospect of cheaper oil and renewed earnings optimism. We need to keep an eye on how the 10Y responds as it has been more sensitive to the latest geopolitical news.
- The surge in AMD (+20%) and Super Micro Computer (+15%) following strong earnings and forward guidance is boosting the entire AI infrastructure space, with Nvidia, Sandisk, Micron, and Intel also seeing gains.
- Geopolitical developments surrounding a potential agreement with Iran are easing concerns about energy prices, contributing to a broader risk-on sentiment.
- Speculator positioning in the Nasdaq 100 is crowded short (-2,322 contracts), making the index vulnerable to a squeeze if positive momentum continues.
NY session focus: The key event for today will be the 08:15 ET release of the ADP Non-Farm Employment Change. A print significantly above the 118K forecast could put pressure on the rally, prompting a reassessment of Fed policy expectations. Watch for the Nasdaq futures to test the intraday high of 28632.75; a break above could open the way to fresh record highs. Support lies around 28250. The long Nasdaq/short Russell trade continues to work, but be wary of a reversal if broader market participation returns. The pain trade is a hawkish surprise from today’s ADP print, catching the short-covering rally off guard.