Nasdaq 100 Forecast: Stocks extend gains ahead of PMI data

US futures

Dow futures +0.59% at 37336

S&P futures +0.12% at 4729

Nasdaq futures +0.25% at 16580

In Europe

FTSE -0.6% at 7606

Dax +0.01% at 16768

• Stocks are set to rise for a seventh straight week
• PMI data is due to show services PMI to ease to 50.6
• Costco rises after upbeat earnings
• Oil is on track to rise after two months of losses 

Stocks set to post a seventh straight weekly gain

US stocks Point to further gains on Friday, extending the post-fed rally into another day on optimism that the central bank will cut rates and be able to engineer a soft landing next year.

The three main indices on Wall Street are on track for their seventh straight weekly gain, marking their best weekly winning streak since 2019. The Dow posted its second consecutive all-time closing high.

Gains in the market came after the Fed signaled that it would start cutting interest rates next year and planned to do so three times, more than the twice previously forecast.

Meanwhile stronger than expected US retail sales data yesterday also fueled expectations that the Federal Reserve will manage to engineer the soft landing it has been aiming for. Attention will now turn to US industrial production and PMI data due after the opening bell.

The services PMI is expected to cool to 50.6, down from 50.8. Meanwhile, the manufacturing PMI is expected to remain weak around 49.3 in December. Upbeat data could fuel bets that the Fed is on track to engineer the soft landing. However, this is still a balancing act. If data starts to come in continuously too strong it might raise doubts over the fed's ability to cut rate three times next year.

Corporate news

Costco is rising after earnings beat forecast. The membership-only retailer posted an EPS of $3.58 and a 6.1% rise in total revenues to $57.8 billion in fiscal Q1. Costco’s low prices have attracted price-conscious customers in a time of elevated inflation and interest rates.

Chinese ADRs such as Alibaba and JD.com, along with other Chinese tech stocks, are rising as investors cheer fresh stimulus from Chinese authorities and weigh the prospect of additional measures.

Nasdaq 100 forecast – technical analysis

The Nasdaq 100 rose to a high of 16667 in the previous session and has eased back slightly to 16600. The RSI is overbought so buyers should be cautious. A rise above 16667 brings 16770 the record high into play. Signs the bulls are tiring could see the price slip towards 16400 and 16000 round number.

FX markets – USD falls, GBP/USD rises

The USD is hovering around a four-month low after the Federal Reserve interest rate decision earlier in the week was more dovish than expected and as investors look ahead to PMI data.

EUR/USD is falling after the eurozone services PMI came in at 48.1, below forecasts of 49. Overall business activity declined further in December, reaffirming the region is in recession mode at the end of the year and raising concerns over prolonged economic contraction.

GBP/USD is rising after the UK services PMI expanded faster than expected at 52.7 in December, supporting the view the BoE could need to keep interest rates high for longer. Yesterday, the central bank left rates at 5.25% and warned that the fight against inflation isn't over.

EUR/USD -0.4% at 1.0950

GBP/USD -0.1% at 1.2750

Oil points to a weekly gain after 2-months of losses

Oil prices rise on Friday for a third straight day and are on track to increase across the week, marking the first weekly gain in two months.

Oil prices have benefited from an improved outlook report from the International Energy Agency for the coming year and a weaker USD.

According to the IEA, oil consumption globally will rise by 1.1 million barrels per day next year, an upward revision from the previously forecasted 130,000 BPD, thanks to an improved economic outlook in the US.

Stronger-than-expected Chinese industrial output figures also help support the oil price and fresh stimulus from Chinese authorities.

However, weak economic data from Germany, Europe's biggest economy, and Chinese refinery runs in November, also dropping to the lowest level since the start of 2023, which could limit the upside.

WTI crude trades +0.75% at $72.42

Brent trades +0.75% at $77.20