S&P 500, Nasdaq 100 Sag Ahead of Key US Inflation Data. Is the Rally Over?

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US STOCKS OUTLOOK:

  • S&P 500 and Nasdaq 100 decline for the second day in a row on fragile market sentiment
  • Traders seem to keep away from taking massive directional positions forward of a key financial report that would affect the Fed’s financial coverage outlook
  • July’s U.S. inflation information due for launch Wednesday will set the tone on Wall Street in the coming days

Most Read: S&P 500, Nasdaq 100, Dow Technical Outlook for the Days Ahead

U.S. shares had been subdued on Tuesday on jittery sentiment amid heightened uncertainty about the financial system in the face of slowing exercise and sky-high inflation. At the closing bell, the S&P 500 slipped 0.42% to 4,122, shedding floor for the second day in a row, with shopper discretionary and knowledge know-how main the retreat amongst the main sectors. Elsewhere, the Nasdaq 100 slumped 1.15% to 13,008 as Tesla and Nvidia, two firms with massive weightings in the tech index, suffered heavy losses on fears that their earnings may worsen going ahead.

Aside from Wall Street’s cautious tone, many merchants opted to stay on the sidelines forward of key financial information that would both bolster the temper or kill the current equity market rebound in its tracks: the newest inflation report.

The U.S. Bureau of Labor Statistics will launch the July Consumer Price Index on Wednesday morning. Headline CPI is anticipated to advance at 0.2% month-over-month after having risen 1.3% in June. With this consequence, annual inflation is seen easing to eight.7% from 9.1% beforehand, a sluggish however welcome directional enchancment.

For shares to renew the vigorous restoration seen late final month, inflationary forces should present convincing indicators of moderation, as that is the solely method for the Fed to undertake a much less hawkish stance later this yr or in 2023. This means the decrease the CPI print tomorrow, the higher for dangerous property. On the different hand, if information surprises to the upside, as has occurred quite a few instances in 2022, equities may sell-off violently as merchants start to cost in a steeper path of rate of interest hikes.

NASDAQ 100 TECHNICAL ANALYSIS

The Nasdaq 100 rallied strongly in current weeks, but it surely has now begun to drag again after failing to clear channel resistance in the 13,350 space. While the restoration bias has not been nullified but, the state of affairs may change if sellers handle to push the index beneath the psychological 13,000 mark in the coming days. If this bearish state of affairs performs out, we may doubtlessly see a transfer in direction of 12,600, adopted by a retest of the 12,250 ground close to the 50-day easy shifting common.

On the flip facet, if consumers resurface and push the index larger, preliminary resistance seems at 13,350. If costs breach this ceiling decisively, bullish momentum may speed up, paving the method for an advance in direction of 13,550.

NASDAQ 100 TECHNICAL CHART

NASDAQ 100 Chart Prepared Using TradingView

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—Written by Diego Colman, Market Strategist for DailyFX

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