NQ100_m finds support at 21-day SMA

The NQ100_m is now attempting to stabilise after falling yesterday (Wednesday, January 17th).

Yesterday’s better-than-expected US retail sales and industrial production data prompted markets to lower their expectations that the Fed can start lowering its benchmark rates starting in March 2024.

Such reduced bets in turn the NQ100_m to pare its recovery from recent weeks.

Having found support at its 21-day simple moving average (SMA), this stock index is now trading around the psychological 16,800 mark, and is just about 1% away from its all-time high of 16,995.3 posted on December 28th, 2023.

Why are US stock indices recovering today?

Today, the tech-heavy Nasdaq 100 index, which is tracked by the NQ100_m, was offered some relief after Taiwan Semiconductor Manufacturing (TSMC) posted better-than-expected results this morning.

The world’s most valuable chipmaker, with a market cap of US$534 billion, expected demand for smartphones and computers to recover in 2024.

Such an optimistic outlook is in turn helping to alleviate the slightly souring sentiment surrounding the Nasdaq 100 in these early days of 2024.

US stocks paring year-to-date losses

Recall in the first 3 trading days of the year, the Nasdaq 100 fell by over 3%.

Looking at the overall US stock markets, as measured by the S&P 500 index, posted its worst start to a calendar year since 2003!

However, since then, both benchmark indices have recovered:

• Despite yesterday’s drop, the Nasdaq 100 is just 1% away from its all-time high.
   
• The S&P 500 is also about 1.2% away from its highest-ever closing price posted on January 3rd, 2022.

Although both these indices are still bearing year-to-date declines of less than 1% each, they’re still within touching distance of their respective record highs.

What’s influencing the NQ100_m now?

The biggest driver of US stock indices currently are the uncertainties surrounding the highly-anticipated Fed rate cuts.

At the time of writing, markets are predicting a 64.5% chance that the Fed could lower its benchmark rates as soon as March 2024.

There’s also an 80% chance being given that the Fed will ultimately cut US rates by 150 basis points by year-end.

As long as the Fed can act in accordance to market expectations, that should enable fresh record highs for US stock indices, including the NQ100_m.

However, as we’ve seen in recent weeks, if markets doubt that the Fed can cut rates as soon (March?) and/or as much (150 basis points?) as expected, that may prompt to bouts of declines for US stock indices.

Also, look out for upcoming Big Tech earnings

Of the so-called “Magnificnet 7” stocks:

• Tesla is set to kick things off with its earnings announcement on January 25th
   
• Microsoft and Alphabet have already confirmed their respective earnings releases, both on January 31st.
   
• Apple, Amazon, and Meta should follow soon after in early-February.
   
• Nvidia then rounds up the reporting from the “magnificent 7” on February 21st.

If these Big Tech megacaps can sooth market fears concerning its earnings outlook, that should add to the tailwinds for NQ100_m.