Where we are: Nasdaq futures are trading at 29919.50, down 0.18% on the day, and within the 29745.50-29972.25 range. The cash Nasdaq 100 is also lower, at 26343.97, marking a 0.14% decline. This puts us below yesterday’s New York close, with some pressure building as we approach the US open.
What’s driving it: The continued strength in US real yields is weighing on tech valuations, evidenced by the 5bp rise to 2.18%. This is happening against a backdrop of a relatively flat 10-year yield, with the 2s10s spread at 0.43%, indicating a mild steepening. Rising real yields typically diminish the appeal of growth stocks, particularly in the tech sector, as they increase the discount rate applied to future earnings. The DXY is modestly stronger at 99.05, adding a further headwind. A possible agreement between the US and Iran, which drove markets higher overnight, remains fragile after fresh strikes.
- CB Consumer Confidence, printing at 10:00 ET, will be key for gauging economic strength. Consensus sits slightly below the previous print at 91.9.
- Net non-commercial positioning is crowded short at -1,420 contracts, representing the 4th percentile on a 52-week lookback. This suggests potential for a squeeze if the market catches a bid.
- Hedge funds have been reportedly rotating out of software and into semiconductors, which could create sector-specific pressure within the Nasdaq 100.
NY session focus: Watch the 10:00 ET Consumer Confidence print; a significant deviation from the forecast could amplify today’s move. Key levels to monitor include the intraday low of 29745.50 on the futures and the cash-session low of 26309.80. The long dollar/short Nasdaq trade is working, fueled by rising real yields. The trade at risk is the dip-buying strategy, which has been a staple of this market. The pain trade would be a surprise dovish turn from the Fed rhetoric, causing a violent short squeeze in tech.