Producer Inflation Indicates A Longer Term Decline In Inflation!

The NASDAQ experienced a milder retracement compared to the S&P 500 and Dow Jones during yesterday’s bullish trend, indicating strong investor confidence in the technology market. Analysts and institutions have raised their target prices and intrinsic values of stocks in response to recent inflation data.

Consumer inflation has dropped to 3.4%, while producer inflation has hit a record low. Producer inflation is now at 2.2% and core producer inflation at 2.3%. With these lower inflation readings, over 60% of traders now believe the Federal Reserve will cut rates in September 2024, up from less than 37% previously. This combination of lower inflation and a higher likelihood of rate cuts is seen as positive for the NASDAQ.

However, some investors are reacting negatively to higher-than-expected unemployment claims, which have risen to a 10-month high, surpassing the first quarter’s average.

The Federal Reserve’s decision to reduce the maximum volume of government bonds for reinvestment to $25 billion per month, down from $60 billion, and to maintain the limit for mortgage-backed securities at $35 billion, suggests a slight tightening in monetary policy aimed at further controlling inflation.

The 10-Year US Bond Yield has decreased by 0.026 points, which also supports the stock market. Investors will closely watch the performance of key stocks like Apple, Microsoft, NVIDIA, Alphabet, and Amazon when the US market opens.

Technical analysis indicates that buyers are in control of the price. Additionally, the price has formed a bullish crossover and remains above sentiment indicators. The VIX is trading 0.84% lower, and the High-Low Index is rising, both pointing to a “risk-on” sentiment. According to Fibonacci analysis, buy signals will strengthen if the price crosses above the $19,661.76 level.

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Michalis Efthymiou
HFM’s Market Analyst
Michalis Efthymiou brings over 9 years of extensive experience in the financial services industry across the United Kingdom and Europe. Initially serving as a financial advisor in London for 5 years, he has transitioned into the field of market analysis over the past 4 years.
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