Technology sector

US inflation has dealt another blow to the tech sector

NAS100 Analysis

The technology sector and growth stocks are sensitive to the current high interest rate environment, which led to a very poor year as the US Fed aggressively tightened policy.

After the second consecutive historic rate hike of 0.75% in July, the central bank abandoned its forward guidance and turned to a data-dependent approach, while Chairman Powell had hinted at a potentially slower pace in the future, while keeping the door open to more outrageous rates. hikes.

Markets got it into their heads that the Fed would soon change tack and become less aggressive, which allowed the NAS100 to organize a notable recovery in July. This proved to be short-lived, however, as policymakers refocused public discourse on their determination to bring down inflation and maintain their hawkish stance.

Yesterday’s surge in core CPI shattered recent optimism of an inflation spike and markets are now seeing the possibility of an even bigger rate move by the central bank at the next meeting next week. next week.

This led to a massive sell-off in the stock market, with NAS100 posting its worst day since March 2020 and the peak of the COVID-19 outbreak, while FXCM FANG The basket of stocks lost almost 7%.

NAS100 closed the day below the daily Ichimoku Cloud, which is still trading firmly in bearish territory, as it sheds more than 20% from the November 2021 high – which is generally considered the threshold for such a designation. However, it managed to defend recent lows in the 12,000-11,915 region and finds some reprieve today.

This could give it the chance for a bounce towards the 200 EMA and the descending trendline from last month’s high (12,600-12,790), but a catalyst would likely be needed for such a move and we are cautious about with upward perspectives.

The bears are under control and we see a risk of renewed pressure at 11,693, although it is likely early for weakness below 11,035.