Where we are: The Nasdaq 100 futures are trading down 0.82% at 29479.75, with the cash index at 29249.38, reflecting a negative start to the New York session. This follows a broadly weaker tone across Asian and European markets overnight, with major indices like the Nikkei and DAX seeing significant declines. The Nasdaq 100 is currently trading below its prior New York close, indicating immediate selling pressure.
What’s driving it: The primary driver remains the ongoing reassessment of the AI trade, with a palpable shift in sentiment evident in the wire news. This is directly impacting tech valuations, particularly chipmakers, as highlighted by the slump in Korean stocks and broader EM weakness. While US yields have seen a notable decline, with the 2Y down 5bp and 10Y down 9bp, this hasn’t provided a floor for the Nasdaq 100, suggesting that sector-specific concerns are overriding broader rate relief. The USD TWI’s strength, up 0.84% yesterday, also adds a headwind for US equities.
- The persistent narrative around AI cost realities and Apple’s price hikes is creating a clear bifurcation in tech, pressuring names perceived as less directly benefiting or facing higher input costs.
- US 2Y yields are trading at 4.11% and 10Y at 4.41%, down significantly from yesterday’s close, but the Nasdaq 100’s inability to rally on this move points to a dominant risk-off sentiment within the tech sector.
- Net non-commercial positioning in Nasdaq 100 futures remains crowded short at -9,144 contracts, indicating potential for a short-covering rally on any positive catalyst, but the current trend suggests this is not yet materializing.
NY session focus: The 10:00 ET release of Revised UoM Consumer Sentiment and Inflation Expectations will be key for gauging the domestic consumer’s outlook, though the market’s immediate focus is on the tech sector’s internal dynamics. Any further weakness in chip stocks or broader tech sentiment could see the Nasdaq 100 test the 29000 level. President Trump’s speech at 13:30 ET introduces a political wildcard that could inject volatility, potentially shifting risk sentiment. The trade that’s working is shorting tech weakness, while the trade at risk is being long the Nasdaq 100 without hedging. The pain trade for this asset is a sustained breakdown below 29000, triggering further algorithmic selling.