Where we are: Nasdaq futures are trading up 0.49% at 29811.00, showing a modest recovery from yesterday’s sharp 3.29% decline in the cash index. This bounce attempts to claw back some of the $1.3 trillion rout seen in tech, particularly within the semiconductor space, driven by AI spending jitters. We are still some distance from yesterday’s New York close, and the VIX has spiked to 18.74, indicating elevated market nervousness.
What’s driving it: The primary driver remains the persistent upward pressure on US yields, with the 2-year and 10-year yields both up 5bp yesterday, and real yields climbing 7bp. This is a direct headwind for growth-oriented tech names like the Nasdaq 100. While WTI crude has fallen sharply, suggesting some easing of inflation fears, the market is clearly pricing in the risk of more than one Fed rate hike this year, keeping a lid on risk appetite. The broad USD index is also firming, adding another layer of pressure.
- US 10Y Real Yields are at 2.28%, up 7bp yesterday, directly pressuring long-duration assets.
- The VIX has jumped to 17.28, reflecting heightened volatility and a cautious risk sentiment.
- Net non-commercial positioning in Nasdaq 100 futures shows a crowded short at -8,908 contracts, suggesting significant squeeze potential on positive surprises.
NY session focus: The key event risk today is the 08:30 ET release of US Durable Goods Orders and Pending Home Sales. Given the current yield environment and the recent tech sell-off, any data points suggesting continued economic resilience or inflation persistence will likely exacerbate downward pressure on the Nasdaq. Conversely, weaker data could offer a reprieve, especially for the heavily shorted tech sector. The trade that’s working is shorting rallies in tech, while the trade at risk is a short squeeze driven by the extreme positioning. The pain trade for this asset today is a sharp reversal higher on a data miss, catching shorts offside.