- Oil is set to witness its third consecutive week of higher prices due to escalations in the Middle East.
- The VIX falls more than 4.11% indicating higher risk appetite within the stock market. Investors get ready to turn their attention to employment data and earnings reports.
- Stocks quickly rise as the latest Core PCE Price Index reads the lowest in 6 months.
- The Nikkei225 and NASDAQ are this week’s best performing indices.
USA100 – The NASDAQ Struggles To Hold Onto Short-Term Gains!
The NASDAQ rises to its highest price in over a week as the latest inflation data continues to point towards lower interest rates. The Core PCE Price Index fell from 0.2% to 0.1%, which is the lowest in 6 months. The latest reading brings the annual rate down to 2.6% which is slightly higher than the Fed’s 2.00% target.
As a result, the possibility of an adjustment in interest rates next month increases to 10.3% and 64.00% for September. This factor is known to be positive for the stock market and continues to support a higher risk appetite. The improvement in investor sentiment can also be seen from the decline in the VIX Index. The VIX fell more than 4.11% and is moving closer to previous lows. In addition to this, the US 10 Year Bond Yield declined 15 points adding further support for the technology sector.
However, the main concerns for investors are threefold. The first is the rise in oil prices which if continued could spark panic and stickier inflation. The second is the escalations in the Middle East between Lebanon and Israel. Experts fear that an escalation could lead to direct involvement of Iran and Turkey in the conflict, causing problems with the supply. However, for now, this solely has investors on edge and not panicking.
Lastly, investors also need to be cautious about the strong decline after the price quickly rose after the PCE announcement. Due to the bearish volatility, the price is forming a lower low. However, the question is whether the price will break the resistance level at $19,871.80. Nonetheless, on the two-hour chart the price continues to point towards a longer-term bullish trend, but most investors would prefer to see the 3 US indices rise before speculating upward price movement.
Of the components which hold a weight of move than 1.00% (25 stocks), only 32% are trading lower. This factor does not point towards a significant decline, but investors will continue to monitor any change.
Michalis Efthymiou
Market Analyst
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