Key Points
- Risk assets shrugging off hawkish Fed.
- July cuts aren’t fully priced out.
- NVIDIA smashes earnings.
- NASDAQ to breach 19,000?
Market Overview
The NASDAQ is on for its fifth straight week of gains, with only one of those weeks seeing less than 1% growth. In fact, since the bottom was created in the middle of April, the NASDAQ has gained 11.3% or 2000 points! This is a remarkable return for just 35 days of trading.
A lot of this has been attributed to the trajectory of inflation in the last month, with data seemingly softer than usual, especially the jobs data. Also, the Core Consumer Price Index has been trending lower for a while. Despite this, the FOMC Meeting Minutes last night clearly showed that the Federal Reserve is still uncomfortable with where inflation is at, and there is a disconnect between the Fed language and the current market pricing.
July Cuts On The Table For Markets?
Astonishingly, despite the Federal Reserve’s hawkish tone, the public still sees a 17.4% chance of a rate cut in July. This suggests that this isn’t fully priced out, and should it be, then the markets are likely to correct itself with dollar strength, and this could weigh on stocks slightly.
According to the CME Fed Watch tool, the September probabilities are where the biggest corrections could come because, at the moment, traders see a 50% chance of a rate cut, a 9% chance of two rate cuts by then, and a 41% chance of rats remaining where they are. There is a lot of movement to come with these percentages, and they will cause market volatility, so this puts added emphasis on the data coming out in the next couple of months.
NVIDIA Smashes Earnings
Last night, all eyes were on NVIDIA’s earnings report, with the barrier set extremely high, thanks to its amazing outperformance in recent years. Once again, NVIDIA defied all expectations by delivering revenue for the quarter of a cool $26bn vs $24.7bn forecasted. Earnings per share also came in higher, and the impressive report was attributed to the data center revenues.
As a result, NVDA stock trades 6.5% higher after the release. More importantly, the stock traded up to the milestone figure of $1000 per share, which has acted naturally as resistance since. It is safe to say NVIDIA is powering the AI revolution.
NASDAQ To Breach 19,000?
Due to NVIDIA’s weighting in the NASDAQ, the tech index also surged after the earnings release. As a result, the price is approaching the milestone 19,000 level, and there may not be much stopping it from reaching there.
On the chart, you can see how the previous all-time high acted as a fantastic support level for this current move. The next support area could come from the Fair Value Gap (FVG) at 18,750, created from the NVIDIA earnings report. This could then be the moment 19,000 is breached.
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