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Nasdaq 100, S&P 500 gain as FOMC minutes bring no new hawkish surprises, US PCE eyed

S&P 500, Nasdaq 10 rebound after the Fed minutes fail to deliver new hawkish surprises; while the market rebound is welcome, sentiment remains fragile on Wall Street and U.S. April PCE data will be in focus on Friday.

U.S. stocks rebounded on Wednesday after suffering big losses on Tuesday when social media companies tanked and dragged down the entire tech sector with them. For most of the day, equities struggled to find clear direction, but managed to rally in late trading after the FOMC minutes from the May gathering brought no new hawkish surprises. Although the readout from the latest conclave showed that the central bank continues to favor raising rates in 50 basis point increments at upcoming meetings, there were no suggestions that policymakers were gravitating toward more aggressive actions to restore price stability.

When it was all said and done, the S&P 500 climbed 0.95% to 3,978, notching its best close in a week. The Nasdaq 100, for its part, jumped 1.48% to 11,943, buoyed in part by retracing U.S. Treasury rates, with the ten-year yield briefly touching a daily low of 2.7%, its lowest level since April 14th. Although bulls probably welcomed the positive move on Wall Street, the technology index remains mired in a deep bear market, down almost 29% from its peak in November last year.

Looking ahead, first-quarter GDP will be the highlight of the U.S. economic calendar on Thursday. The report, however, will be the second estimate from the U.S. Bureau of Economic Analysis, so it is unlikely to have a material impact on risk assets, barring a major revision to the preliminary reading that showed a 1.4% contraction in output.

On Friday, the core personal consumption expenditures price index, the Fed's favorite inflation gauge, will take center stage. In terms of forecasts, April Core PCE is seen slowing to 4.9% y-o-y from 5.2% y-o-y in March, a sign that inflationary pressures may have topped out during the first quarter of the year. Considering that this is a high-impact report, we could see strong price volatility before the weekend, amplified by thinner liquidity ahead of the Memorial Day holiday, especially if results surprise relative to expectations.

Nasdaq 100 technical analysis

The Nasdaq 100 bounced on Wednesday, but the buying momentum wasn’t particularly strong, indicating that traders aren’t yet rushing back in to pick up beaten down tech shares. In any case, if the bulls manage to push the price higher in the coming days, initial resistance appears at 12,250, followed by 12,600. On further strength, the focus shifts upwards to 13,000.

On the other hand, if sellers return and fade the recent rally, as has happened several times during this bear market, the first technical support to watch appears around the 2022 lows at 11,492. If we see a move below this floor, downside pressure could accelerate, exposing the November 2020 low near the psychological 11,000 level.

Nasdaq 100 technical chart


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This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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