Nasdaq 100 Forecast: NDX falls as Treasury yields hit a 19-year high

US futures        

Dow futures -0.52% S&P 500 futures -0.12%  & Nasdaq futures  -0.02%

European futures

FTSE -0.43%,  DAX  0.12%

• US stocks under pressure as yields rise
• 10-year Treasury yields rise above 5%, the highest level since 2007
• September Fed rate hike expectations rise above 90%
• Oil rises further, escalating Middle East tensions

U.S. struggle as Treasury yields keep rising

U.S. Stocks have opened lower on Tuesday as rising oil prices and elevated Treasury yields dampen the move.

Oil prices are once again on the rise as the conflict in the Middle East shows few signs of easing, deepening supply shock worries. Rising energy prices are lifting inflation concerns.

The yield on the U.S. 10-year Treasury has hit its highest level since 2007 as investors turn their attention to the Federal Reserve rate decision tomorrow. The central bank is expected to hike rates by 25 basis points and could hike rates for a second time before the end of the year. However, any sense of a hawkish hike from Federal Reserve Chair Kevin Warsh may see yields push higher.

High yields on risk-free Treasuries dampen the appeal of stocks and other risk assets. The market is currently pricing in over a 90% probability of a rate hike.

Corporate Movers

Tech stocks are under pressure, with Alphabet and Microsoft down around 1% each, while chip makers, which bore the brunt of Monday's sell-off on AI nerves, are trading only modestly higher.

Concerns surrounding the sector remain after calls from top AI executives to slow development of the technology over safety concerns. Any sort of slowdown would be a problem for future revenue and growth.

The fact that we're seeing the sell-off abate suggests the market doesn't believe there will be much of a slowdown.

Nasdaq Forecast – Technical Analysis

The Nasdaq has been trading in a holding pattern over the past month, capped on the upside by 29,700 and on the downside by 28,900. The price trades below its 50 EMA and towards the lower end of the range.

A break below 28,900, together with the 100 EMA at 27,000, opens the door to 28,000, the June low.

Below here, attention turns to the 200 EMA at 27,400.

Any recovery would need to retake the 50 EMA at 28,250 and the recent upper bound of the range at 29,700. Above here, 30,000 comes into focus as the psychological level and falling trendline resistance, before attention turns to 30,250, the July high, and 30,750, the record high.

FX Markets – Dollar Rises, EUR/USD Falls

The USD is rising as the U.S. Treasury yield climbs to its highest level since 2007 and reinforces expectations that the Federal Reserve will hike interest rates this week.

EUR/USD is falling amid a stronger U.S. dollar and after mixed eurozone economic sentiment and trade balance figures failed to boost the euro, which trades just above a monthly low after four days of losses.

GBP/USD is falling after data showed that the UK jobs market is weaker than expected. Employers shed workers at the fastest pace in nine months, with the number of employees on company payrolls dropping 26,000 in August, after a downwardly revised 19,000 fall in July. This was worse than the 5,000 drop expected.

Vacancies fell by 8,000 to a five-year low of 702,000, while the unemployment rate held steady at 4.9%. This data comes ahead of the Bank of England rate decision and supports a view that the central bank could keep interest rates unchanged.

Oil Rises After Meaningful Escalation of Tensions in the Middle East

Oil prices are rising on Tuesday after attacks on Saudi Arabian energy infrastructure kept the East-West pipeline offline, while raising fears that supply from the region will remain disrupted.

Houthi forces in Yemen launched fresh attacks on Saudi Arabia and Gulf Arab states, postponing planned discussions with Iran, meaning any diplomatic breakthrough is still some way off.

The East-West pipeline allows oil exports to bypass the blockade of the Strait of Hormuz, and it being offline is threatening around 4% of global oil supply.

This marks a meaningful escalation in the conflict and could see Brent rising towards $120 a barrel.

Meanwhile, commodity vessel traffic through the Strait of Hormuz remains low, with just four ships transiting the key strait on Monday.