📉US100 loses 1.5%

📌Wall Street erases gains driven by CPI 📉 BigTech and semiconductors stocks decline

Wall Street indices erased early euphoric gains today, driven by a lower-than-forecast US CPI inflation reading. As we can see, falling yields and rising expectations around monetary easing in the US did not translate into a continuation of the rally in Nasdaq 100 (US100) futures today, which are now losing nearly 1.5%. The correction is led by technology stocks, where we're seeing a nearly 3.8% drop in Nvidia and a nearly 3% correction among most BigTech stocks. At the same time, contracts on the Russell 2000 index are gaining more than 3%; the higher chances of Fed policy easing even in September 2024 are supporting valuations of smaller, US businesses.

Looking at sentiment around U.S. stocks, we can clearly see that the biggest sell-off today is in technology companies. Nvidia is losing 3.7%; BigTech stocks are also seeing a strong pullback, with Apple, Alphabet, Microsoft and Meta losing almost 3%. Source: xStation5

US macro readings today

US CPI for June came in 3% YoY vs 3.1% exp. and 3.3% previously (-0.1% MoM vs 0.1% exp. and 0% previously)

US Core CPI for June came in 3.3% YoY vs 3.4% exp. and 3.4% previously (0.1% MoM vs 0.2% exp. and 0.2% previously)

• US June CPI food inflation came in 0.2%, also housing inflation was 0.2% higher, while rent was up 0.3% MoM 

US jobless claims came in 222k vs 235k exp. and 238k previously (1.852M continued jobless claims vs 1,86M exp. and 1.858M previously)

Since the CPI, there has been no news that directly justifies such high volatility in technology company stocks. The similar magnitude of the sell-off in the largest US tech stocks leads to the conclusion that profit-taking pressure may have caused dealers, who recently had record positive exposure to the options market, to add to the sell-off. As a result, the corrective move may have triggered hedging among gamma dealers to secure profits ahead of Friday options expiration.

Nvidia, at the forefront of the semiconductor sector's discounts, is trading today at its highest daily price (almost -4%) drop since April of this year.  The drop in the 10-year U.S. Treasury bond by more than 10 basis points, to just under 4.18%, failed to extend the upward momentum on Wall Street ahead of the earnings season. At the same time, we are also seeing more than 2% gains in gold and silver contracts. The U.S. dollar is losing almost 0.6% and EURUSD has broken through resistance at 1.087.

US100 (D1 interval)

Today's daily price drop on the Nasdaq 100 Index (US100) contract is the highest the contract has seen since April of this year. The narrow upward channel in which the contract has been moving since early May has been propped up for longer by gains in the largest technology companies. Weakness in this sector is leading to a reversal from the ATH at 20981 points to values in the psychological vicinity of 20500 points. Breaking through this boundary could lead to repricing towards the first support level set by local peaks at 20382 points.

Source: xStation5