Where we are: Nasdaq 100 futures are trading around 19,650, down roughly 1.6% premarket, after a fresh record close in the prior session. The overnight range has been relatively contained, but the bias is clearly lower as the exuberance around AI names cools somewhat. Resistance looms above at the all-time high near 19,900.
What’s driving it: The primary driver is a pullback in tech and AI-related stocks after their recent surge to new highs. This profit-taking is being exacerbated by concerns over persistent inflation and the potential for a more hawkish Fed, with solid economic data seemingly emboldening dissenters. While Fed speakers Barr and Bowman spoke last night, their remarks on central banking and the future of banking seem to have had little immediate market impact beyond a brief flattening of the curve. The US 2Y yield is currently at 3.98%, down 2bp yesterday, but the broader narrative of rates staying higher for longer is weighing on sentiment.
- Tech giants like Nvidia, Tesla, Amazon, Oracle, and Alphabet are all down around 2% premarket, leading the Nasdaq lower.
- Speculator positioning in the Nasdaq 100 is modestly long, with net non-commercial positions at +1,221 contracts. While the weekly change shows an increase of +3,543 contracts, this is still only at the 2nd percentile, meaning that despite the recent rally, there is little risk of a violent squeeze to the upside.
- Energy prices and Boeing’s disappointing China order figures are also contributing to the risk-off tone.
NY session focus: Keep an eye on the open and the initial reaction to the overnight moves. Watch for bargain hunters if we test down towards 19,500. The 08:30 ET data print will be key; a stronger-than-expected number will likely reinforce hawkish Fed bets and pressure the Nasdaq further. If the AI trade really falters, we could see a deeper correction towards 19,300. The trade that’s working is shorting over-extended tech names; the trade at risk is dip-buying without confirmation. The pain trade for the Nasdaq would be a sudden reversal driven by dovish surprises.