NASDAQ Rebounds: Inflation and Rate Hikes on Horizon?

The stock market rebounded close to a weekly new high after witnessing a decline measuring over 1%. However, investors are still concerned about the resilient employment sector, rising oil prices, and a new conflict within the Middle East. This week's key factor is likely the Consumer Price Index, Producer Price Index and the FOMC Meeting Minutes. The CPI and PPI will confirm the current US inflation rate and how inflation is likely to develop over the next two months. In addition, investors will monitor the Meeting Minutes to determine how likely the committee will quickly opt for another interest rate hike. 

Economists say the higher Non-farm Payroll figure is a small step towards another 0.25% hike. However, if inflation reads more elevated than the 0.3% expectations, the possibility of a hike in November will significantly increase. As a result, the Dollar will rise, and the stock market will likely decline to lower lows. Nonetheless, the current outlook for the US economy remains table. The IMF this morning has cut the global economic outlook, particularly the global GDP forecast, but has kept US predictions unchanged. 

On Friday, the US Non-Farm Payroll read significantly higher than Wall Street’s expectations. The NFP read 336,000, more than the 170,000 expectations and the 227,000 seen the month before. The JOLTS Job Openings and the NFP data show resilience and an uneven jobs market. However, the Unemployment rate remained at 3.8% and the Average Hourly earnings at 0.2%. Both were slightly worse than expected, but none were poor enough to signal a less restrictive monetary policy. 

NASDAQ Rebounds but Inflation Still a Concern

The NASDAQ saw a significant decline after the September US employment data publication. However, the index rebounded to a new high after that. The price is now trading slightly higher than the previous price range, regardless of the higher employment data. Economists are advising the positive employment data is positive for the stock market as we approach earnings season, despite it meaning a possible further hike. However, buyers will struggle to hold onto gains if inflation also rises. The NASDAQ was the best-performing index, rising a considerable percentage, 1.70%, and rose to a 14-day high. 

On the other hand, technical analysts point to the fact that the longer-term price action and waves still indicate a downward trend. This will change if the price continues to rise, but influential factors are also indicating upcoming pressure. For example, the price of Oil has again surged due to supply interruption fears, and all indices open on a negative price gap due to risk sentiment souring. Traders will monitor the European Cash Open and the performance of EU stocks to see if the “risk-off” sentiment persists in Europe. Investors will deem this as an indication for the upcoming US Open.

The US 10-Year Treasury is also on the rise this morning adding a further 0.079%, which is harmful for the stock market. If the price rises above 4.88%, the stock market is likely to experience significant pressure as stocks become less attractive. The US Dollar index is also increasing this morning, harming the NASDAQ and the general US stock market. 

The best-performing stocks within the NASDAQ were PDD Holdings (+7.40%), CrowdStrike Holdings (+6.90) and Zscaler (+6.71). None of the top ten influential stocks within the NASDAQ are among the best-performing ten from Friday. However, Meta, which holds a weight of 3.904%, rose by 3.49%, and Microsoft rose by 2.47%. Of the stocks holding the highest weight, only Costco Wholesale Corp experienced a significant decline, falling 2.11%. Nonetheless, from the 100 components, only 12 ended the day lower, indicating a clear “risk on” sentiment and buyers controlling the exchange. This can also be seen by analysing the top 30 influential stocks, of which only one declined. This is something investors will continue to analyse this morning. 

NASDAQ 30-Minute Chart on October 9th 

The NASDAQ opened on a negative price gap, which has not yet been corrected. In addition to this, the Dollar is increasing in value considerably. As a result, investors are contemplating a potential correction back to the previous high, which is 0.45% lower. This morning, another indication of a correction is the decline in the European equities as the European Open approaches, such as the DAX and CAC. If the price declines below $14,833.20, a crossover is likely to be formed, indicating a decline. However, the price is above the 100-bar EMA on the 2-hour chart, indicating that buyers are strong. 

EUR/USD - Dollar Rises on Lower Risk Sentiment

The EUR/USD shows an apparent decline with a bearish price gap and downward momentum favouring the Dollar.  The US Dollar Index is up 0.40% as the market shows a “risk-off” sentiment as inflation data approaches and due to the Israel-Palastine conflict. The US Dollar is increasing in value against all currencies bar the Japanese Yen. The Euro on the other hand is declining against the Yen, Pound, Franc and the Dollar. 

The rise in US bond yields supports the US Dollar, the lower risk sentiment and the positive data from the US employment sector. However, the medium to longer-term performance of the US Dollar will depend on the upcoming inflation data. The Dollar will rise further if the US Consumer Price Index reads more than 0.3%. However, market participants will monitor the FOMC Meeting Minutes and producer inflation before the CPI. If producer inflation reads higher than 0.3%, the Dollar can rise again. If data reads lower than expected, the Dollar will likely decline, and the stock market can rise.

EUR/USD 15-Minute Chart on October 9th 

Summary:

• The US Dollar Index is up 0.40% as the market shows a “risk-off” sentiment as inflation data approaches and due to the Israel-Palastine conflict. The US Dollar is increasing in value against all currencies bar the Japanese Yen.
• The Euro is declining against most major currencies, including the Dollar. European indices also traded lower during this morning’s Asian and European session. 
• The NFP read 336,000, more than the 170,000 expectations and the 227,000 seen the month before. The Unemployment rate remained at 3.8% and the Average Hourly earnings at 0.2%.
• The best-performing stocks within the NASDAQ were PDD Holdings (+7.40%), CrowdStrike Holdings (+6.90) and Zscaler (+6.71). But, none of the top ten influential stocks within the NASDAQ are among the best-performing ten from Friday.