Nasdaq 100 Forecast: NDX falls as Treasury yields rebound, oil prices rise further

US futures        

Dow futures -0.85%, S&P futures -0.43%  & Nasdaq futures  -0.6%

European futures

FTSE -0.35%,  DAX -0.65%

• US stocks fall as Treasury intervention proves short-lived
• Yields rebound as oil prices climb further
• FOMC minutes highlight inflation concerns  
• Oil rises for a fifth day

U.S. Stocks Fall as Treasury Intervention Proves Short-Lived

U.S. stocks are falling on Thursday after modest gains in the previous session, as the relief from the Treasury's intervention in the long-end of the bond market starts to fade.

While 10-year and 30-year Treasury yields fell sharply yesterday after the Treasury announced it would increase its bond buyback operations, yields are moving higher again today.

The 30-year Treasury yield is back above 5.25%, around 5.7 basis points higher on the day, putting it close to the levels seen before Wednesday's announcement.

That highlights the difficulty of trying to contain borrowing costs through market intervention when the underlying pressures remain.

Oil prices are up another 2% as disruptions to Middle Eastern supply continue, keeping inflation concerns elevated. At the same time, investors remain concerned about the U.S. fiscal position, with government debt now above $40 trillion for the first time.

The Treasury's move can ease pressure on the bond market, but it doesn't address these underlying problems.

In other words, it may be more of a short-term fix than a change in the underlying trend.

The FOMC minutes also highlighted concerns over sticky inflation. However, weaker economic data last week, together with the disappointing non-farm payroll report, means markets still don't see an imminent Fed rate hike.

The market is currently pricing in around a 65% probability that the Fed will leave rates unchanged at its September meeting.

For equities, the combination of higher oil prices and rising Treasury yields is therefore becoming increasingly important. If both continue to move higher, the pressure on stocks — particularly higher-growth and technology names — could increase.

Corporate Movers

Walmart is falling 6% despite reporting a revenue beat for Q2. U.S. comparable sales grew 2.6%, below the 3.5% expected by analysts, while its Q3 and full-year EPS guidance also came in below expectations.

Crypto stocks are moving higher following Bitcoin's jump above $70,000, as the market continues to respond to the Treasury's intervention and President Trump's push for Congress to pass the Clarity Act. Coinbase is up 7%, while Strategy has jumped 10%.

Alibaba is down more than 3% after reporting a 75% decline in June-quarter profit as spending on AI increased sharply. Capital expenditure rose 75% during the quarter.

Moderna is falling 7% after gaining 177% following promising late-stage trial results for its cancer vaccine. The experimental vaccine developed with Merck met key goals in patients.

Nasdaq 100 Forecast – Technical Analysis

The Nasdaq 100 recovered from the 27,000 August low before running into resistance around 30,250 and turning lower.

The index remains above its 50 and 200 EMAs, keeping the broader trend constructive. However, the sequence of lower highs suggests momentum is starting to fade.

Immediate support is around 29,000, where the 50 EMA and horizontal support converge.

A break below here would expose 28,250, around the July 17 and June lows.

On the upside, buyers need to break above 30,250 to create a higher high and bring 30,750 and fresh record highs into focus.

FX Markets – Dollar Firms, EUR/USD Falls

The U.S. dollar is recovering after falling sharply yesterday following the Treasury's announcement that it would increase its long-dated bond buybacks from $2 billion to $4 billion.

With Treasury yields moving higher again today, some of the pressure on the dollar has eased.

EUR/USD is holding near a three-month high, supported by expectations of around 45 basis points of additional ECB tightening this year, with the next hike expected in September as elevated energy prices keep inflation above the 2% target.

GBP/USD is rising towards 1.3650, extending yesterday's gains amid continued dollar weakness. UK inflation accelerated to 2.9% in July, which has increased expectations of higher borrowing costs from the Bank of England.

Attention now turns to tomorrow's PMI data for clues over the health of the UK economy.

Oil Rises for a Fifth Straight Day

Oil prices are rising for a fifth consecutive session, reaching a three-week high as tensions in the Middle East continue to threaten supplies.

Prices have been grinding higher as sporadic attacks continue and traffic through the Strait of Hormuz remains severely restricted.

The lack of progress towards a diplomatic solution is keeping a risk premium in the oil price.

President Trump confirmed earlier this week that no talks were taking place with Iran, further reducing hopes of a quick resolution.