Where we are: Nasdaq 100 futures are currently trading around 19,850, retreating from overnight highs after the hotter-than-expected CPI print. The index is trading roughly 0.75% below yesterday’s New York close, with the overnight range spanning approximately 150 points. Initial support lies at 19,800, with further downside targeting 19,700.
What’s driving it: Today’s hotter-than-expected CPI data is the dominant driver, reigniting fears of persistent inflation and diminishing the likelihood of further Fed rate cuts this year. The market is now repricing the probability of easing, putting upward pressure on real yields and weighing on risk assets. While the 10-year Treasury yield dipped slightly to 4.38% yesterday, real yields remain elevated at 1.93%, creating a headwind for tech stocks and other growth sectors. The prospect of a passed Fed Chair nomination vote later today is unlikely to offset the inflationary concerns.
- Headline CPI y/y printed at 3.8% versus the 3.7% forecast, exceeding expectations and fueling inflation worries.
- The 10-year breakeven inflation rate sits at 2.47%, reflecting the market’s perception of rising inflation expectations.
- Speculator positioning in Nasdaq 100 futures is modestly long, but with only 0.4% of open interest, suggesting limited squeeze potential despite the recent pullback.
NY session focus: The immediate focus is on digesting the 08:30 ET CPI release and assessing the market’s reaction. Keep an eye on the 10-year Treasury yield and real yield moves as key indicators. Watch for support around 19,700; a break below that level could trigger further selling. The trade that’s working is short NDX on rallies. The trade at risk is dip-buying until the inflation picture becomes clearer. The pain trade would be a surprisingly dovish pivot from the Fed, sparking a rapid rally in tech and growth stocks.