NASDAQ 100 Forecast: QQQ rises after solid data and on AI optimism

US futures

Dow futures -0.11% at 37216

S&P futures +0.43% at 4756

Nasdaq futures -0.55% at 16867

In Europe

FTSE +0.3% at 7454

Dax +0.74% at 16526

Jobless claims fall to 187k vs 207k forecast
Housing data is stronger than expected
TSM boosts AI optimism
Oil holds steady after the IEA oil outlook report

US data beats forecasts

US Stocks are broadly positive open on optimism of a soft landing after two days of declines. AI stocks are in favour after TSM’s earnings report. However, the upside for stocks could be limited amid ongoing concerns that the Federal Reserve may not raise interest rates till later this year.

Today’s data came in ahead of forecasts, with jobless claims falling to 187k, down from 202k, highlighting the strength in the US labor market. Meanwhile, housing starts and building permits were also ahead of forecasts, highlighting the resilient housing sector despite interest rates at a 22-year high.

The data supports the view that the US is on track for a soft landing, supporting the market mood. However, this also supports recent Fed commentary that rates should stay high for longer.

Federal Reserve officials have been attempting to dial back market expectations of early rate cuts after the markets got ahead of itself on rate cut optimism in Q4 last year.

According to the FedWatch tool, the market is pricing in a 56% probability of a March rate cut, down from 70% just a week ago,

Looking ahead, Atlanta Fed president Raphael Bostic is due to speak twice across the US session. Investors will be watching closely for further comments regarding the outlook for inflation or interest rates.

Corporate news

Apple is pointing to a 2.4% rise on the open after Bank of America upgraded its stance on the tech giant to buy from neutral, citing the upcoming launch of the Vision Pro next month and an AI-powered phone.

Alphabet is expected to rise on the open reports that its Google business will announce more job losses.

Taiwan Semiconductor Manufacturing is on track to open around 7% higher after the world's largest chipmaker posted a smaller-than-expected decline in Q4 profits and sounded upbeat about the outlook with AI expected to best demand for its chips.

Nasdaq 100 forecast – technical analysis

Despite a brief spike below the 20 SMA, the price closed above this support at 16700 and is again aiming for 17000 and a fresh high. However, sellers could be encouraged by the RSI's bearish divergence. A break below the 20 SMA could open the door to 16175, the January low.

FX markets – USD rises EUR/USD falls

The USD is rising and trades close to a monthly high versus its major peers. The resilience of the US economy combined with Federal Reserve officials pushing back against rate cut expectations has helped support the USD.

EUR/USD is falling after the latest ECB minutes showed that all members supported leaving interest rates on hold. There were no clues regarding the timing of the first potential interest rate cut. ECB president Christine Lagarde will speak again later today and will likely reiterate comments that the fight against inflation has not been won.

GBP/USD is flat after gains in the previous session after UK inflation was hotter than expected, causing the market to push back on BoE rate cut bets. The first rate cut is fully priced in for June this year, while March rate cut bets have been downwardly revised to 50% from around 85% a few weeks ago.

Oil holds steady after the IEA report.

Oil prices are holding steady as investors digest the latest International Energy Agency’s global oil outlook report while weighing up Middle East tensions, the prospect of high rates for longer, and a slightly weaker USD.

The IEA has raised its 2024 global oil demand growth forecast but remains lower than OPEC’s projections. The IEA also said ample supply will remain in 2024, with world supply growth expected to exceed demand growth year, which could keep prices in check.

The IEA forecast world oil supply will rise by 1.5 million barrels per day to a new high of 103.5 million bpd this year thanks to record non-OPEC output from the US, Brazil, and Canada. However, disruptions in the Middle East could also disrupt oil flow via key trade check choke points.

Looking ahead, EIA inventory data will be in focus.

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