STOCK MARKET WEEK AHEAD OUTLOOK: BEARISH TO NEUTRAL
- S&P 500 and Nasdaq 100 shut the week larger regardless of rising Treasury yields
- The Fed’s hawkish financial coverage outlook stays a key danger for shares
- Powell’s testimony earlier than Congress and the February U.S. employment report will take the highlight subsequent week
Really useful by Diego Colman
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U.S. bond yields prolonged their current rally this previous week regardless of a average pullback on Friday, rising throughout most maturities amid a hawkish repricing of the Fed’s financial coverage outlook within the wake of hotter-than-expected financial information. At one level on Thursday, the whole Treasury curve topped 4.0% as expectations for the FOMC’s terminal charge drifted upwards and merchants began to brace for a “higher-for-longer” rate of interest regime in response to sticky inflation.
Counterintuitively, each the S&P 500 and Nasdaq 100 managed to shut the week with strong beneficial properties, up about 1.9% and a couple of.6%, respectively, shrugging off volatility within the mounted revenue area and shocking traders who had anticipated extra subdued efficiency as a result of Fed jitters.
Nevertheless, the energy in fairness markets might reverse early subsequent week, forward of the discharge of a key U.S. macro report on Friday, March 10: the February U.S. employment report. Fed chairman Powell’s semi-annual testimony earlier than Congress might additionally rattle optimistic sentiment if he embraces a forceful tone following the most recent string of robust macro numbers.
2023 FED FUNDS FUTURES & US TREASURY YIELDS CHART
Supply: TradingView
Merchants could also be tempted to begin trimming publicity to danger property and keep on the sidelines within the coming days to keep away from entering into “hawkish rhetoric” or, extra importantly, a “hawkish datapoint” that might present affirmation that the U.S. financial system is holding up remarkably nicely and can doubtless require further financial tightening. This situation might result in some promoting on Wall Avenue, biasing each the S&P 500 and Nasdaq 100 to the draw back within the very close to time period.
Specializing in the incoming nonfarm payrolls survey (NFP), U.S. employers are forecast to have added 200,000 employees final month, after hiring a whopping 517,000 folks in January. Nonetheless, persistently low jobless claims in current weeks, coupled with a sturdy rebound within the ISM companies’ employment index, counsel labor market information might handily exceed consensus estimates.
US EMPLOYMENT REPORT EXPECTATIONS
Supply: DailyFX Financial Calendar
One other sizzling NFP report will elevate the dangers that the Fed will finally do extra to gradual the financial system to stop elevated wage progress and demand pressures from exacerbating inflationary forces, that are exhibiting tentative indicators of regaining momentum. This implies policymakers might begin frontloading hikes once more, whereas concurrently signaling the next peak charge of round 6.0%. Clearly, this may be a unfavorable final result for the inventory market able to undermining equities within the close to time period.
| Change in | Longs | Shorts | OI |
| Each day | -14% | 7% | -5% |
| Weekly | -11% | 12% | -1% |
NASDAQ 100 TECHNICAL ANALYSIS
After discovering technical help and rebounding off its 200-day easy shifting common, the Nasdaq 100 has charged larger, with bulls now eyeing short-term trendline resistance close to 12,400. If merchants handle to push the tech index above this barrier within the coming periods, shopping for curiosity might decide momentum, paving the best way for a transfer in the direction of 12,675, adopted by 12,870, the 38.2% Fibonacci retracement of the November 2021/October 2022 droop. On the flip aspect, if sellers regain decisive management of the market and set off a bearish reversal, preliminary help seems at 11,900/11,820. If this space is taken out, bears might launch an assault on 11,655, the 50% Fib retracement of the October 2022/February 2023 rally.
NASDAQ 100 TECHNICAL CHART
Nasdaq 100 Chart Ready Utilizing TradingView
Written by Diego Colman, Contributing Strategist for DailyFX
