STOCK MARKET FORECAST: NASDAQ COMPOSITE MIRRORING TREASURY YIELDS, INFLATION FEARS
Nasdaq cost action pressured during Friday morning trade as Treasury bond yields jump
Flash US PMI data just released by IHS Markit shows company action quickening in May
Treasury yield volatility enclosing inflation and Fed taper worries to dominate risk tendencies
The Nasdaq Composite looks likely to begin receding from session highs in the wake of robust US PMI data crossing marketplace wires shortly after the opening bell on Wall Street. Stocks might struggle to keep profits notched earlier in the week as investors shift focus back to the threat of Fed tapering. The flash US PMI survey for May blew past consensus prediction with company activity revealing an"unprecedented expansion."
As detailed on the DailyFX Economic Calendar, the headline PMI figure jumped to 68.1 from 63.5 reported in April. The composite PMI, producing PMI, and providers PMI all struck their respective highest readings on document. It was also highlighted, once more, how price pressures continue to mount. The rate of input price inflation jumped to a new survey record high and led to the sharpest increase in output costs since data collection began in 2009.
While strong economic growth is widely welcomed, the speed of the restoration could give Fed officials a headache. Major stock indices like the Nasdaq, S&P 500, and Dow may face renewed headwinds as well. That is considering recent FOMC minutes, which noted that"a number of participants indicated that if the economy continued to make rapid progress toward the Committee's aims, it might be appropriate at some point in forthcoming meetings to start discussing a plan for adjusting the speed of asset purchases"
Nevertheless, Nasdaq price action appears to be facing some pushback around its 20-day easy moving average. This technical barrier across the 13,500-price level might cap potential advances by the Nasdaq. If stock market bears begin to wrestle back control here and notch a near below the 50-day moving average, that may open up the door to further selling pressure. The Nasdaq does enjoy formidable support round the psychologically-significant 13,000-price level, however.
Nasdaq bulls can seem to shield this area of buoyancy underpinned by month-to-date lows, the long-term ascending trendline, and bottom Bollinger Band. On the other hand, reclaiming the 20-day easy moving average could inspire a bigger rally toward the 14,050-price degree where all time highs live. I'll ultimately be seeing yields on ten-year Treasury bonds to help gauge investor risk appetite and at which Nasdaq price action might head next. Sharp rises in Treasury yields probably reflect intensifying Fed taper fears. Correspondingly, that would stand to weigh on the wider stock market and tech-heavy Nasdaq in particular.
