NAS100 to New Records as Markets Cheered Lower Inflation

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NAS100 Analysis

Price pressures in the US moderated in April, following months of persistence, according to Wednesday's CPI report. Headline inflation eased to 3.4% y/y and core to 3.6% y/y, which was in-line with forecast and good enough for markets. Investors also liked the retail sales miss that provided another warning sign around the economy, in a classic "bad news is good news" reaction. Markets reinforced their pricing around two rate cuts by the Fed this year, starting in September. Wall Street rallied as result, with NAS100 reaching new record highs and looking towards the 19K mark.

However, inflation remains far from the 2% target and along with robust labor market and strong economy (despite early signs of moderation), raise the bar for a Fed pivot. Policymakers have adopted a cautious approach towards removing monetary restraint and push the higher-for-longer narrative. Speaking a day before the CPI report, Chair Powell acknowledged the lack of further progress on inflation and thinks it is about "keeping policy at the current rate for longer than had been thought". [1]

Markets seem convinced that inflation will come down and the central bank will cut more than once, but they have been overly optimistic before. On the technical side, the Relative Strenght Index points to heavily overbought conditions, creating scope for a pullback towards the EMA200 (at around 17,950). Correction past that levels is not easy under current conditions though.

Wall Street has generally looked past the Fed's hawkish shift, largely helped by the generative artificial intelligence revolution, which continues to drive gains this year. Its enabler and main beneficiary, NVIDIA, reports its latest quarterly results next week (May 22). Thanks to its leading AI work, the firm has seen mind-boggling growth in its top and bottom lines and investors will be looking to see if that can continue.

Nikos Tzabouras

Senior Financial Editorial Writer

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

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Retrieved 01 Jun 2024 https://www.youtube.com/watch

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