NAS100 Analysis

Today's data from China showed that the world's second largest economy stays on the recovery path, after ditching strict Covid-19 containment measures, helping sentiment. GDP grew by 4.5% y/y in the first quarter, while retail sales jumped more than 10% in March.

The optimism though around China is offset by prospects renewed higher-for-longer prospects by the Fed. According to known-hawk Governor Waller, recent data show that policymakers "haven't made much progress" on the inflation goal, who stressed that "there is still work to do" on the rates front ^[1]. Also on Friday, one-year inflation expectation rose to 4.6% (from 3.6%), based on the University of Michigan survey.

These news reinforced markets expectations for another 25 bps hike by the Fed to a peak of 5.25% and moderated the dovish view around cuts. At the time of writing, CME's FedWatch Tool assigns the highest probability to rates dropping to 4.75% by end of the year, from 4.5% previously. ^[2]

Markets also have to grapple with concerns for an economic slowdown, as the accounts of the Fed's last policy meeting revealed that staff expects a recession this year ^[3]. Friday's data showed that retail sales declined by 1% in March, playing into those fears.

Wall Street cheered an encouraging start to the latest earnings season, as big banks posted strong result for the first quarter, which ended in an explosive manner due to the failure of the Silicon Valley Bank and the turmoil that ensued. JP Morgan Chase for example reported record revenues of $39.34 billion and a 52% jump in its Net Income. ^[4]

Investors now turn to the streaming giant Netflix that releases its quarterly results today after market close. Some of the focal points will be The subscriber figures, any insight on the recently launched ad-supported tier and progress on paid-sharing. A day later, Tesla takes up the baton. The leader of the electric vehicle (EV) market has already announced record - albeit underwhelming - delivery and production figures. The gap between the two has created fears over demand and has led tesla to price cuts, putting the spotlight on the profit margins, among other things.

NAS100 comes from a somewhat mixed week and stays in consolidation mode, after the 2023 highs earlier in the month, as investors digest the aforementioned news and gear up of this week's earnings reports. The lack of progress creates risk of a correction towards the EMA200 (at around 12,730), although a strong catalyst would be required for a breach that would bring the 12,300 region in the spotlight.

However, NAS100 surged in March, overlooking the banking turmoil and fears of recession, which has put bulls firmly in control. It has also brought 13,724 in their crosshair, but taking out may prove elusive, at least in the near-term.