Where we are: Nasdaq 100 futures are currently trading lower, pressured by rising Treasury yields and mixed reactions to recent earnings reports. The NQ is down approximately 0.8% as of 13:00 London, sitting near the lower end of its overnight range. This contrasts with a slightly more positive tone in the S&P 500 and Dow futures, highlighting the tech sector’s relative underperformance. Failure to hold here opens up a test of yesterday’s lows.
What’s driving it: The primary driver is the uptick in US Treasury yields, with both the 2-year and 10-year yields up 6 basis points, to 4.13% and 4.67% respectively. The increase in yields puts pressure on growth stocks, as higher rates reduce the present value of future earnings. While Nvidia beat earnings expectations and raised its dividend, guidance that didn’t exceed the upper range of expectations tempered enthusiasm, underscoring the sensitivity of the market to growth forecasts in the current rate environment. Rising real rates are also weighing, providing a headwind for gold and other alternative assets.
- The 10-year real yield climbed 5bp to 2.18%, further tightening financial conditions.
- Net non-commercial positioning in the Nasdaq 100 is crowded short at the 0th percentile, suggesting squeeze risk if we see a positive surprise.
- SpaceX’s plans for a $1.75 trillion IPO, listing on Nasdaq under the ticker SPCX, introduce a potentially significant supply dynamic to the market in the coming month.
NY session focus: The market will be closely watching the 08:30 ET release of the Philly Fed Manufacturing Index and Unemployment Claims. Flash PMI data at 09:45 ET will also be key. A weaker-than-expected Philly Fed print could provide a temporary boost to the Nasdaq 100, but the overall trend of rising yields suggests limited upside. Key levels to watch are yesterday’s low and then 19,500 as key support. The pain trade would be a sustained break above 19,700, triggering a short squeeze given the crowded short positioning.