Nasdaq tests essential support; sentiment remains fragile
07 January 2022
US equities tried to stage a little comeback yesterday, but it looks like bears quickly sold the rally, with the indices starting Friday in a bearish mode.
The tech-heavy Nasdaq 100 index fell the most recently as rising yields prompted selling in the overleveraged and volatile sector. In addition, this week's hawkish FOMC minutes confirmed that the Fed would tighten monetary policy faster than previously anticipated.
However, the US dollar ignored this week's developments, and the EURUSD pair remains glued to the 1.13 level, failing to maintain any bearish momentum. The GBPUSD pair is well above its December lows, but the USDJPY pair has recently advanced to five-year highs.
The bond market continues to price in a highly hawkish Fed, with the first rate hike now expected in March, much sooner than July anticipated just a few weeks ago. As a result, the 2-year yield has jumped toward 0.9% today, pushing the real yields higher as well.
Later today, the US labor market data are due, with the non-farm payrolls change expected to double to 400,000 for December. In addition, the unemployment rate will likely fall a notch to 4.1%. Solid job numbers could reinforce the hawkish thesis and increase US yields.
From other news, German industrial output dropped 0.2% in November, a sharp decrease from October's 2.4% gain.
This weakness was also seen in France, where industrial production fell 0.4% monthly in November, after climbing 0.9% in October.