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S&P 500, Nasdaq 100 Sink as US Inflation Expectations Indicate More Pain to Come

Inflation Expectations, Federal Reserve, Nasdaq 100, S&P 500 – Talking Points

  • 12-month inflation expectations rise to 6.6% from 6.0%
  • S&P 500 breaks through last week’s lows, 4400 fast approaching
  • Nasdaq 100 getting pulled toward 14,000, big tech under pressure

US consumers raised their outlook for inflation over the near-term, a study released by the NY Fed revealed on Monday. 12-month inflation expectations rose to 6.6% from 6.0%, with food and housing costs expected to soar. 3-year inflation expectations sit at 3.7%, well below the 4.2% print from six months ago.

Consumers are expecting rents to increase by 10.2% for the year ahead, while food expenses are expected to jump 9.6%. Home prices are also expected to rise by 6%, up from 5.7% in the previous survey. This suggests the notion that survey participants expect inflationary pressures to worsen before they improve, something that will certainly worry Federal Reserve officials. Last month, the Fed kicked off its tightening cycle by raising interest rates to combat rampant inflation. Eyes will now turn to Tuesday’s US CPI print.

S&P 500 Futures 1 Hour Chart

S&P 500, Nasdaq 100 Sink as US Inflation Expectations Indicate More Pain to Come

Chart created with TradingView

S&P 500 futures have largely been on the backfoot for the last few days, with each rally to the 4500-4510 area being faded. Monday’s session saw a key break of the 4444 level, which propped up price twice last week. With bears seemingly in control right now, it may be wise to continue to selling into any strength until the market puts in a bottom. Price needs to reclaim the 4455 area before any thoughts of 4470 and beyond can materialize. Until then, a slow procession towards 4406-4400 may continue.

Nasdaq 100 Futures 1 Hour Chart

S&P 500, Nasdaq 100 Sink as US Inflation Expectations Indicate More Pain to Come

Chart created with TradingView

The Nasdaq 100 Index continues to get crushed as US Treasury yields march higher. Since flirting with 15200 just last week, Nasdaq 100 futures now firmly stare sub-14k handles in the face. After balancing for the second half of last week, the march lower recommenced during the APAC session on Monday. NQ now sits vulnerably above the 14000 handle, with no sign of a turnaround in sight.

Earnings season may provide a buying opportunity, as companies will likely comment on the nature of inflation and global growth prospects during earnings calls. Should the 14000 level hold, traders could look for a bounce to the October lows around 14367. Should the global bond rout continue, NQ could be in for more pain in the form of sub-14000 prices.

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— Written by Brendan Fagan, Intern

To contact Brendan, use the comments section below or @BrendanFaganFX on Twitter