Nasdaq Declines Sharply Following US Inflation Data

Nasdaq Declines Sharply Following US Inflation Data
Another day, another sell-off in US stock markets. At the time of writing, the Nasdaq 100 index was down 1.5% on the day, having completely erased a gain of nearly 2% from earlier today.

Inflation above expectations

Consumer prices in the United States grew slower in April than in March, but persistent supply-side disruptions kept inflation around its 40-year peak. And while decelerating from March, core consumer prices grew higher than expected, indicating that underlying inflationary dynamics across the economy stayed robust.

According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) climbed 8.3% in April over the previous year, down from 8.5% in March. That was the quickest pace of increase since 1981. According to Bloomberg, consensus experts predicted a rise of 8.1% in April. In addition, the monthly CPI climbed by 0.3%, compared to 1.2% in March.

The market's initial reaction was risk-off as the slowdown was not enough. Therefore, the 75 basis point rate hike might still be in the cards. The Nasdaq index dropped nearly 400 points after the data.

“The pace of price increases moderated, but not as much as expected. Excluding a decline in energy prices – which appears outdated by this point – the increases remain widespread," Greg McBride, chief financial analyst at Bankrate, said in an email Wednesday morning.

Short-term volatile

The short-term chart seems somewhat volatile as the Nasdaq 100 index is trying to bottom out near significant weekly support at 12,100 USD. However, if today's sell pressure sends the index below that support, we might see another leg lower, targeting 11,500 USD.

On the other hand, the index must jump above today's highs at 12,550 USD to cancel the immediate bearish threat. For the moment, that scenario seems rather unlikely. 

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