NASDAQ 100, S&P 500, US CPI, INFLATION, JP MORGAN – TALKING POINTS
- Core CPI comes in soft, 0.3% MoM and 6.5% YoY
- Nasdaq gains more than 1%, trades back through 14200
- S&P 500 trades back to 4440 area ahead of bank earnings
Equities received a boost Tuesday morning as core inflation came in slightly softer than estimates. Core CPI, which excludes food and energy, rose 0.3% MoM and 6.5% YoY. The soft core print saw traders bid for risk assets, with the Dollar sinking initially and major equity benchmarks catching a strong bid. Treasury yields also came in, as market participants priced in the possibility of inflation having peaked. Recent inflation prints have forced traders to price in an extremely aggressive Fed, with a 50 basis point rate hike effectively baked in for the May policy meeting.
Market participants have been quick to shed growth stocks as rates have soared over the last few weeks. The Nasdaq 100 is down roughly 5% in April, as equity investors focus on cyclical and value oriented names. In the post CPI pop, Tesla gained nearly 4% while Microsoft rallied more than 1.6%. Chipmakers also bounced, bringing some much needed relief to the sector.
NASDAQ 100 FUTURES 1 HOUR CHART
Chart created with TradingView
With Nasdaq 100 futures having carved out what looks like a near-term bottom around 13900, price has continued to stall around the 14260 area. Should Treasuries continue to catch a bid, US tech stocks may continue to rally as yield-related pressures ease. Despite supply chain risks from China and growth fears from the impact of Russia’s invasion of Ukraine, sentiment may improve as we enter corporate earnings season.
S&P 500 FUTURES 1 HOUR CHART
Chart created with TradingView
S&P 500 futures (ES) found support overnight below 4400 around the 4390 level. This area provided the base for a 30 point rally prior to Tuesday morning’s CPI print, with gains accelerating around the NY open. Price has since rebounded to the 4440-4444 area, which held price up for much of last week. If ES can quickly reclaim these levels, 4470 and 4500 could trade shortly thereafter as shorts may get caught offside on any clear break. Should 4406 not hold during any downside swings, a swift revisit of overnight support around 4390 may materialize.
JP Morgan kicks off earnings season on Wednesday, which may offer a short term boost to equities. If XLF constituents can kick off Q1 earnings on a strong note, that may bode well for the rest of the stock market. XLE and energy stocks have done much of the heavy lifting this year as oil prices have skyrocketed, with that continuing during Tuesday’s session. Chevron jumped nearly 2.5% while Marathon Oil briefly traded 4% higher. Overall, earnings may provide a short respite for a beaten down US equity market. However, growth concerns and supply chain issues remain significant impediments to any sustained move(s) higher.
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— Written by Brendan Fagan, Intern