Where we are: Nasdaq 100 futures are currently trading around 18,350, down about 0.4% on the session. This pullback comes after a solid week where the index notched fresh records. The overnight range has been relatively contained, but the bias is clearly lower as risk sentiment sours. We’re sitting below Friday’s New York close, suggesting further downside pressure at the open.
What’s driving it: The primary driver is rising geopolitical tension. Increased tensions around the Strait of Hormuz are spiking oil prices and injecting broad risk-off sentiment, particularly hitting tech given their sensitivity to speculative bets and AI narratives. The domestic rates picture remains sticky, with the 10-year breakeven rising and real yields falling, providing a mixed backdrop — lower real rates should support risk but higher breakevens reflect upside inflation risks that keep the Fed hawkish. There is no significant domestic catalyst before the NY open.
- CFTC data shows the Nasdaq 100 crowded short at the 0th percentile, raising squeeze potential if tensions ease.
- The 10Y Breakeven Inflation rate rose 2bp yesterday to 2.48%, indicating growing inflation concerns despite falling nominal yields.
- WTI Crude spiked 1.49% to $99.89, exacerbating fears of sustained inflationary pressure.
NY session focus: Watch the headlines around the Hormuz Strait situation; any de-escalation could trigger a sharp relief rally given the crowded short positioning. Key levels to watch are 18,300 as initial support and 18,450 as resistance. Keep an eye on Palantir earnings after the bell; a positive surprise could provide a tailwind to the AI sector. The trade that’s working is shorting rallies, while the trade at risk is holding onto longs established last week. The pain trade for Nasdaq 100 would be a rapid de-escalation of Middle East tensions coupled with strong earnings from AI names, triggering a significant short squeeze.