Where we are: The Nasdaq 100 futures are holding steady this morning, trading around the 19,800 level, within the overnight range. While the index saw some softness yesterday, it is still tracking to open near the highs of the week. The overnight range has been relatively tight, and we’re seeing some consolidation ahead of the US open, roughly flat versus yesterday’s NY close.
What’s driving it: The dominant theme remains the relentless bid in tech stocks, fueled by the ongoing enthusiasm for the AI sector. Despite some profit-taking in Nvidia yesterday after earnings, the underlying narrative of strong growth potential is keeping dip buyers active. Lower US yields across the curve are also supportive. The 2-year yield is down 9bp and the 10-year down 10bp yesterday, helping to alleviate some pressure on growth stocks.
- Net non-commercial positioning in the Nasdaq 100 is crowded short at the 0th percentile, increasing the risk of a squeeze on any positive surprise.
- The US 10-year real yield has fallen 5bp to 2.13%, potentially providing a tailwind for gold and other risk assets.
- The Bloomberg wire notes that EM stocks are also seeing a weekly gain, adding to the overall positive risk sentiment.
NY session focus: Focus will be on the 10:00 ET release of the Revised UoM Consumer Sentiment data; markets are already pricing in the forecast of 48.2. We’ll be watching for any move above 19,850, which could trigger a squeeze given the current positioning. Failure to hold 19,750 could lead to a test of overnight lows. The trade that’s working is still long tech on dips. The risk is a broader risk-off move driven by geopolitical concerns, given elevated crude oil prices which sit at $112.25. The pain trade is a sharp rally in yields if the consumer sentiment data surprises to the upside, reigniting inflation fears.