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NQ100_m rebounds after Powell/Yellen confusion

The tech-heavy index is now paring Wednesday’s losses and move past the conflicting messages out of US policymakers overnight.

NQ100_m rebounds after Powell/Yellen confusion

The NQ100_m was initially heartened by the FOMC policy statement, which was initially interpreted to be dovish, as it suggested that peak US rates are close at hand.

However, the immediate knee-jerk gains were unwound as Fed Chair Jerome Powell, during his press conference, repeated the Fed’s ambitions to quell US inflation.

Powell flat out said that rate cuts are not in the Fed’s “base case”.

And tech stocks generally do not like the through of US interest rates moving higher still.


Muddied messaging

Of course, Powell was then asked about the recent turmoil in the US banking sector, to which the Fed Chair responded with “all depositors’ savings are safe”.

Then came Treasury Secretary Janet Yellen’s comments at a Senate hearing, with the former Fed Chair saying that regulators are not considering “blanket” insurance on bank deposits as an option.

Yellen’s comments then sparked a selloff in US stocks, prompting major US stock indices (S&P 500, Dow Jones, Nasdaq Composite) to all end Wednesday’s session by at least 1.6% lower compared to Tuesday’s closing price.

Yet, markets are now attempting to unwind such fears, having had more time to digest the latest messaging out of policymakers.

Fed Funds Futures are now pricing in a 81% chance of a US rate cut at the July FOMC meeting, in a sign that markets are willing to challenge Powell’s hawkish signals.


Can Nasdaq 100 return to bull market?

A bull market is denoted when prices have climbed by 20% from its recent low.

The Nasdaq 100 index has twice come close to achieving such a feat in recent months:

  • 19.89% climb from 28 December 2022 to 2 February 2023
  • 19.31% climb from 28 December 2022 to 21 March 2023
(the % figures above are based on closing prices. Using intraday prices, the NQ100m has already surged by well over 20% since October 13th intraday low at 10,437.8)


Should markets increasingly expect an actual Fed rate cut in Q3 2023, or even an official pause on the Fed rate-hiking cycle at its next policy meeting in May (52% chance of such an occurrence), that should help the Nasdaq 100 officially lay claim to a bull market.

Such a feat may serve as a technical catalyst that bolsters investor confidence and pushes the Nasdaq 100 onto greater heights.

NQ100_m rebounds after Powell/Yellen confusion

However, the merits of achieving such a textbook definition may be fleeting.

The Nasdaq 100 may not be able to sustain a “bull market” over the near term if there are greater signs of possible contagion stemming from the US banking sector, or if a US recession grows likelier in the months ahead.

Such risk-off signs may deal a blow to the gut in the market’s collective risk-taking appetite, which may dampen demand for riskier assets such as tech stocks.



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