NAS100 Makes Cautious Start to a Week Dominated by Big Tech Earnings & the Fed

  • FAANG
    (${instrument.percentChange}%)
  • NAS100
    (${instrument.percentChange}%)

The Fed Decides

The US Federal Reserve embarked upon an aggressive monetary tightening path at the beginning of the second quarter, having already delivered 150 basis points worth of rate hikes, in order to combat surging inflation.

In the last decision in June, it had increased rates by a historic 0.75%, reacting to an unexpected jump in Inflation just a few days before that. Chair Powell had also pointed to 50-75 basis points move for this week's meeting. [1]

The latest inflation data from two weeks ago, showed that headline CPI accelerated 9.1% in June year-over-year to the highest level since 1981, causing markets to price in an outsized full percentage points hike.

However, Fed officials kept their cool this time around, with hawks Mr Bullard and Mr Waller sticking to the 0.75% plan [2], [3] that reined markets in. At the time of writing, CME's FedWatch Tool projects an 0.75% move with 75.1% probability. [4]

Big Tech in Focus

The tech sector and growth stocks are more vulnerable to the current high interest rate environment, with NAS100 trading firmly in bear territory, since it loses more than 20% from its November record highs.

FXCM's FAANG stock basket, which includes Meta Platforms (Facebook-parent), Apple, Amazon, Netflix and Alphabet (Google), erased nearly 30% in the second quarter, as the Fed had been tightening its policy.

Against this backdrop, Netflix reported better than feared results last week and during the current one, attention turns to the rest of the FAANGs, which announce their quarterly results, along with more tech heavyweights such as Microsoft.

NAS100 Analysis

The second quarter slump of NAS100 culminated in June's nearly two-year lows, but the index is off to strong start to July, as expectations around the Fed's next move cooled down. However, it is too early to talk about a credible bottom, especially as the Fed's decision looms, which can define the trajectory of the stock market.

NAS100 rejected the 38.2% Fibonacci of the March High/July Low slump on Friday and started the current week on the back foot. This creates risk for a return below the 12,070-00 region (EMA200) that would put the ascending trendline from the aforementioned lows into question (12690-50). It could also open the door to new lows (11,035-10,958), but it is early to talk about such an outcome.

On the other hand, as long the index holds above EMA200, immediate bias is on the upside. As such, it has the ability to push for higher highs towards 12,891-12,943, but will likely need fresh impetus for that and 13,560 is distant at this stage.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 26 Jul 2022 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20220615.htm

2

Retrieved 26 Jul 2022 https://asia.nikkei.com/Editor-s-Picks/Interview/St.-Louis-Fed-president-favors-75-basis-point-rate-hike

3

Retrieved 26 Jul 2022 https://www.federalreserve.gov/newsevents/speech/waller20220714a.htm

4

Retrieved 07 Oct 2022 https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html#

Disclosure

Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.

Past Performance: Past Performance is not an indicator of future results.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.

Risk Warning: Trading Margin FX/CFDs carries a high level of risk, and may not be suitable for all investors. Leverage can work against you. By trading, you could sustain a total loss of your deposited funds but wholesale clients could sustain losses in excess of deposits.

${getInstrumentData.name} / ${getInstrumentData.ticker} /

Exchange: ${getInstrumentData.exchange}

${getInstrumentData.bid} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)

${getInstrumentData.oneYearLow} 52/wk Range ${getInstrumentData.oneYearHigh}