Nasdaq Breaking Out As Fed Rate Bets Shift

Stocks Rally on CPI DropThe Nasdaq is trading at its highest level since early 2022 this week as the index continues to rally against the backdrop of a weaker US Dollar. The index is now up almost 5% off the July lows and looks set for further gains near-term as traders continue to scale back their Fed rate hike expectations.Fed Expectations ShiftThis week, a further fall in US CPI saw traders adjusting their outlook on the Fed beyond this month’s meeting. Following a further expected hike this month, traders are now looking for the Fed to move back into neutral mode on rates through the end of the year, with expectations for a rate cut growing higher into March 2024. There are still those in favour of further hiking, however. Fed’s Waller yesterday voiced his support for at least two more hikes this year.PPI Drops AlsoPPI data yesterday also came in lower than expected, adding to bearish sentiment in USD. This is good news for stocks, particularly the tech sector, with traders moving capital out of USD and back into higher yielding positions. Looking ahead today, we have the latest UoM consumer sentiment data which is expected to tick up a little against the prior month.Technical ViewsNasdaqThe Nasdaq is currently trading above the 15177.5 level and above the bull channel highs. While above here, the focus is on a continuation higher and a challenge of the 16010.4 level next. To the downside, 14288.2 remains the key support to note.