Nasdaq's post-CPI slide may be more about growth than rates

US core CPI came in above forecasts yesterday, and the Nasdaq then fell sharply. After that first hawkish move, though, the interesting part is that longer-dated rate expectations turned dovish and Treasury yields declined.

Copper, frequently viewed as a gauge of global growth, dropped sharply as well after the CPI release. That could be an early indication that worries about the economic picture ahead are building among investors.

Those concerns are being compounded by the drawn-out Middle East crisis, and ongoing inflation risks may push the Fed into more rate increases than anticipated, or into holding rates higher for a longer stretch. If the economy begins to weaken, that could put the Fed behind the curve.

For several weeks, credit spreads have been sending warning signals, and equities may finally be beginning to reflect that. Upcoming catalysts include the Flash PMIs, the FOMC gathering, developments in US-Iran talks, and the US midterm elections.

Should economic releases begin to signal worsening conditions, growth fears could deepen, adding more strain to risk sentiment and the Nasdaq. A resolution of the US-Iran war, by contrast, could alter the landscape substantially, reducing geopolitical uncertainty and brightening the growth outlook.

Nasdaq technical analysis – daily timeframe

The Nasdaq (US100 CFD contract) has moved below the main upward trendline. Sellers are likely to step in near these levels, with risk defined above the trendline, and keep targeting 28,742. Should price reach that area, buyers could appear with risk defined below it, positioning for a move to fresh record highs. On the downside, a break lower would encourage additional bearish positioning toward 26,971.

Nasdaq technical analysis – four-hour timeframe

Nasdaq technical analysis – one-hour timeframe

A retest of the broken trendline could see it serve as resistance. Sellers would probably enter there, with risk defined above the line, to continue the move toward new lows. Buyers, meanwhile, would wait for a break higher before positioning for a pullback to the downward trendline.

Catalysts to watch

On today's calendar are US PPI, US Retail Sales and the latest US Jobless Claims numbers. Fed Chair Warsh is also scheduled to speak late in the day, appearing in a fireside chat with IMF Managing Director Georgieva. He opposes forward guidance, making a policy signal unlikely, though the appearance is still worth monitoring.