NASDAQ Waits Eagerly For Big Tech Earnings – Is It Time To Buy The Dip?

Key Points

• UBS downgraded 6 of the “Magnificent 7” from overweight to neutral amid a huge earnings week.
• NVIDIA stock has fallen over 20% since its peak in March and lost $200 billion in market cap in one single day. 
• NASDAQ100 finds support at Fair Value Gap; can it push back up to 17500? 
• Higher inflation remains a concern for Wall Street.

Market Overview

This year started very much like the last for Wall Street, with the bulls firmly in control. However, doubt has been cast over the recent rise amid geopolitical tension escalating in the Middle East, along with stubborn inflation prints. Since the all-time high printed in March, the NASDAQ100 is not far away from giving up all its yearly gains.

However, this week has started on a positive note, with the situation over in the Middle East seemingly easing, or at least not getting any worse. This has brought an unusual level of calm to the markets if the last few weeks are anything to go by, and volatility is suppressed. Today, NASDAQ100 futures edge higher, rising 0.28%.

Big Tech Earnings Ahead

In a broad sell-off in the semiconductor chip sector, NVIDIA stock has been leading the way for big tech losses. NVIDIA Stock has fallen over 20% since the peak in March and lost $200bn in market cap in one single day last week. Last week was the worst-ever weekly loss for the so-called “Magnificent Seven” – NVIDIA, Amazon, Meta, Microsoft, Alphabet, Apple, and Tesla.

Attentions have turned to what has often been the savior, earnings season. After the bell today, Tesla will be stepping up and delivering its latest earnings report. This stock is down 42% this year and could do with a much-needed boost. On Wednesday, Meta Platforms will release its earnings report, and it looks like it will continue a fantastic year for the stock price so far. Thursday is arguably the day for the most volatility as tech giants Microsoft and Alphabet deliver their reports simultaneously. This could send the NASDAQ100 into a frenzy!

Higher Inflation Remains A Concern 

There is no doubt that market sentiment has been hanging on the hopes the Federal Reserve will cut rates as early as the summer. However, market expectations have kept getting pushed back after the recent economic data and the hawkish talk from the Federal Reserve.

This week, there are two important economic events to be mindful of. On Thursday, the markets will get an idea of how well the US economy has performed in the quarter in the form of a Gross Domestic Product figure. The forecast is for a 2.5% growth, a fall from the previous figure of 3.4%. A figure closer to 3.4% would suggest the US economy is heating up again and could cause more pain in the NASDAQ100. There is also Friday’s Core PCE Price Index data to watch out for, as this is the Federal Reserve’s primary gauge of inflation, and traders will be looking for a softer reading to provide some welcome relief to the stock market.

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NASDAQ Finds Fair Value Gap Support

Over the weekend, a Fair Value Gap was formed between 17030 and 17080, and it has acted as support on two occasions over yesterday’s trading session.

If this week is to be a “buy the dip” week, then this could be the springboard for a push higher up the key highs at 17400 and 17594, respectively. It is important to note, too, that this all currently sits within a daily imbalance area, providing extra evidence of support at the current price. Strong tech earnings coupled with lower PCE inflation would be the perfect recipe, but should the opposite happen, expect a break below 17000 and a new wave of bearish price action. 

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