- The Nasdaq 100 index remains within consolidation but with a bullish bias as the Core PCE Price Index cools amid an expanding US economy.
Current setup:
The Nasdaq 100 index’s immediate reaction to the double news release of the Core PCE Price Index and Gross Domestic Product (GDP) has been constructive. Today’s data set showed cooler inflation (Core PCE Price Index: 0.2% MoM vs 0.3% consensus) amid economic growth (GDP: 2.2% vs 1.5% consensus). As shown in the video previewing the data using the Nasdaq index, the US 10-year Treasury yield is currently choppy, with yields initially falling before picking up again.
The US10Y asset is currently trading at 5.247%, an intraday high currently contained by the near-term resistance pivot. This suggests bond yields still constrain valuations in AI and technology stocks at current levels. However, the expectation is that bond yields will ease as the session progresses. Traders will have to watch the US10Y as the key indicator for price direction ahead of Friday’s US Non-Farm Payrolls report.
Even though the Nasdaq 100 has responded positively to today’s US data, it has not seen a major upside move and still remains in the consolidation band between 30175 and 30682.
US Data Breakdown (Mildly Bullish for Nasdaq 100 Within the Consolidation)
Here is a breakdown of the US data releases.
1. Core PCE — bullish surprise for the Nasdaq 100
August Core PCE Price Index rose 0.2% month-on-month versus 0.3% expected. The annualized figure (i.e., year-on-year print) came in at 3.0% versus 3.3% consensus.
The headline PCE also printed softer, coming in at +0.3% vs +0.4% consensus (MoM), while the YoY number printed at 3.4% vs 3.7% expected.
The Core PCE Price Index is the Fed’s preferred inflation barometer and carries significant weight for bond yields and interest rate expectations. The data implies less pressure on the Fed to hike rates in October, which should push down US long-term bond yields. Nasdaq futures climbed 0.47% in the minutes after the news hit the wires.
2. GDP — additional bullish input for the Nasdaq
The final US Q2 GDP reading showed the US economy grew 2.2% YoY, substantially higher than the prior 1.5% and consensus numbers. An economy growing at this pace suggests softer inflation is not coming at the expense of economic activity. Lower inflation + a stronger-than-expected GDP is a favorable environment for growth stocks with long-term valuations.
3. US 10-year bond yield: current levels constrain the upside
The 10-year Treasury yield hit 5.293% intraday; it fell to 5.22% after the PCE print, then rebounded. At current levels, the US10Y yield still threatens equity valuations. The Nasdaq 100 is made up of tech, AI, and long-duration growth stocks. A higher 10-year yield translates to higher discount rates, which reduce the present value of these stocks’ future earnings. The resulting valuation pressure is negative for the Nasdaq 100.
The price action between now and Friday’s NFP data should produce an answer to this question: “will the softer PCE prints lead to a sustained decline in long-term bond yields?”
Nasdaq 100: Trading Scenarios
Bullish: US10Y yield drops below 5.20%: This would signal market satisfaction that the cooler PCE data proves inflation is cooling sufficiently, reducing the need for additional Fed rate hikes. This favors a break above 30682 towards new all-time highs.
Neutral: US10Y yield remains above 5.00% but below the June 2007 highs. Nasdaq will probably remain range-bound as AI demand proves supportive. No uptrend extension expected.
Bearish: US10Y yield shift above 5.30%, taking out the June 2007 highs. This is likely if Brent crude pushes towards $110 per barrel. In this scenario, the Nasdaq 100 could break down the 30175 support, favoring a return below 30,000.
Technical Outlook
Nasdaq 10 remains constrained into a range between 30175 and 30682. A sustained move above the 30682 upper boundary (27% Fibonacci extension of 27 July – 5 August upswing) exposes a potential new high at 31657 (61.8% Fibonacci extension). Look for an accompanying decline in the US10Y yield chart below 5.0%, which would strengthen this scenario.
Conversely, a breakdown of the 30175 support unlocks a retracement toward 29752 (28 August and 8 September highs). This case is strengthened if the US10Y yield shoots above 5.30%. The 25 August/2 September lows at 28856 (also the 38.2% Fibonacci retracement) become available if the bears degrade 29752.