Where we are: The Nasdaq 100 futures are trading up 0.40% at 30841.75, building on a strong prior session that saw the cash index climb 2.48% to 30406.19. This leaves the index firmly above its prior New York close, pushing towards new highs as we head into the US session. The overnight range has been tight, reflecting a cautious sentiment ahead of key US data.
What’s driving it: The primary driver remains the recalibration of US interest rate expectations. While the Fed’s hawkish lean from last week persists, the market is now grappling with the implications of falling oil prices and potential Middle East peace talks, which could ease inflation pressures. This is reflected in the US 2Y yield’s 15bp jump and the 10Y real yield’s 9bp rise, creating a headwind for gold but providing a mixed signal for tech valuations.
- US 2Y Yield: 4.2% (+15.0bp d/d) – The sharp rise in short-end yields suggests a sticky inflation narrative is still priced in, limiting upside for growth assets.
- WTI Crude: 84.65 (-4.48% d/d) – The significant drop in oil prices, driven by peace talk optimism, offers a potential disinflationary signal that the market is starting to price.
- Net non-commercial positioning: -1,349 contracts (+13,600 w/w) – The crowded short positioning in Nasdaq futures presents a clear squeeze risk should positive US data or dovish Fed commentary emerge.
NY session focus: All eyes are on the 08:30 ET US data releases, particularly any prints that could sway Fed policy expectations. The Nasdaq 100 cash index is trading near its all-time highs, with immediate resistance likely around 30500. The trade that’s working is a long bias on tech, betting on continued AI-driven momentum. However, the trade at risk is any sustained move higher in US yields, which could quickly unwind these gains. The pain trade for this asset would be a sharp reversal in short-term yields coupled with a miss on US data, triggering a rapid unwinding of crowded long tech positions.