NAS100 Analysis

Wall Street rallied last week on hopes for a successful outcome in the debt ceiling negotiations, after a series of optimistic comments from politicians. Talks at the highest levels paused as US President Biden travelled to Japan for the G-7 meeting, but he had a call with House Speaker McCarthy and the two are expected to resume in-person discussions today. ^[1]

The rhetoric over the weekend appeared to turn a bit adversarial, with some of the original optimism fading. Speaker McCarthy accused the White House of "moving backward" in the negotiations ^[2], while President Biden called on Republicans to move and to accept that "there is no bipartisan deal to be made solely — solely on their partisan terms". ^[3]

In an interview on NBC's Meet the Press meanwhile, Treasury Secretary Yellen reaffirmed the early-June estimate for when the government will be unable to pay all of its bills, speaking of a "hard deadline". ^[4]

In a series of mostly hawkish commentary recently, Fed officials have dismissed market anticipation for rate cuts this year, while some have cast doubt over prospects of a pause next month. Chair Powell kept the door open to a hold on Friday, saying that "we can afford to look at the data and the evolving outlook and make careful assessments", given the amount of tightening policy makers have delivered. ^[5]

Markets have moderated their aggressive expectations, with CME's FedWatch Tool now pricing chances for one more hike, even if small. The highest probability for the first cut is assigned to November and for rates at 4.75% by the end of the year (from 5.25% currently). ^[6]

NAS100 dropped on Friday, but had a stellar week and shows resilience today despite mixed signal on the US debt ceiling and rising uncertainty around the Fed's next move. Bulls are clearly in control with 14,302 in their eyesight, but will likely need fresh impetus to tackle it, while 14.856 is distant at this stage.

On the other hand, as we move closer to the early-June estimated deadline with no deal on the debt-ceiling, fears may begin to mount and weigh on NAS100. A breach of the EMA200 (12,180-90) would need a significant deterioration in sentiment, while the downside appears well protected, with the daily Ichimokou Cloud following.

There are also a series of economic releases this week that could determine the trajectory of NAS100, including preliminary PMIs, the minutes of the Fed's last policy decision and of course Friday's PCE Inflation update.