NASDAQ 100 OUTLOOK:
- Nasdaq 100 gains as Tesla jumps more than 13% following strong car deliveries for 2021
- Investors shrug off the rise in COVID-19 infections and bet cases will start to subside soon, following the same pattern seen in other countries
- ISM data, the FOMC minutes, and the NFP report will take center stage this week
After a blockbuster 2021, U.S. stocks started the new year on the front foot, despite a steep rise in COVID-19 cases in most of the 50 states. At the market close, the S&P 500 gained 0.64%, ending the session at 4,796, a whisker away from its all-time high of 4,808. Meanwhile, the Nasdaq 100 jumped1.11% to 16,502, boosted by strong gains in Tesla shares, which soared 13.55% after fourth-quarter vehicle production and delivery results easily topped Wall Street‘s expectations. Apple, which climbed more than 2% and briefly became the first company to hit a $3 trillion capitalization, also boosted sentiment, increasing appetite for positions in big tech names.
Although the seven-day rolling average of coronavirus cases reached a pandemic record of 403,385 on Sunday, the increase in infection counts did not appear to unnerve investors, as models suggest that the current wave driven by the omicron variant may peak in mid-January and recede aggressively shortly thereafter, as has occurred in other countries such as South Africa.
For this reason, reopening stocks kicked off 2022 on a high note, with airlines and cruise operators surging across the board. When it was all said and done, American Airlines (AAL) closed4.3% higher while Carnival Corporation (CCL) added roughly 6.4%. If the health crisis were to resolve quickly in 2022, depressed stocks with attractive valuations in the reopening basketcouldcontinue to rally inthe first quarter.
Cyclicals also performed well on Monday, with energy, consumer discretionary, and financials leading the way. Banks such as JPMorgan (JPM), Wells Fargo (WFC), and Citigroup (C) appeared to benefit from the large upside move in Treasury rates, which pushed the 10-year yield up to 1.64%, its highest level since November 25. In general, when yields rise, loans offered by lending institutions become more lucrative, a good omen for margins and earnings.
As more traders return to their desks from vacation in the coming days, the attention will turn to economic data and, of course, the Federal Reserve’s monetary policy. That said, the calendar is packed with high impact releases this week, with ISM Manufacturing (Dec), the FOMC Minutes, ISM Services (Dec), and Non-farm payrolls (Dec) being the highlights. Traders should watch these reports carefully, as they may offer clues about the health of the economy and the strength of the recovery.
Focusing on technical analysis, the Nasdaq 100 has bounced off support and appears headed for its December high at 16,607. If the index manages to break through this barrier, it could be on track to retest its record high near 16,765, before targeting 17,200, the upper boundary of an ascending channel in play for the past 11 months. In any case, caution is warranted at this point, as the rising yield environment is a headwind for tech-oriented stocks.
On the other hand, if selling pressure begins to build and the Nasdaq 100 pivots lower, support is seen at 16,285. If the bears push the price below this floor, we could see a move towards 15,925 in early January.
NASDAQ 100 TECHNICAL CHART
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—Written by Diego Colman, Contributor