NAS100 Cautious on Bond Rout, Powell Remarks & Netflix-Tesla Divergence

NAS100 Analysis

It has been an ugly week for major stock markets around the world, as investors digest a slew of events, including escalating Middle East conflict and prospects for sustained tight monetary environment. Hang Seng falls despite encouraging data from China and UK100 drops after sticky inflation.

Wall Street does not fare better, weighed by the bond market rout, as the 10-year yields rose to the highest since 2007. Chair Powell did not try manage the situation during his speech at the Economic Club of New York, saying that "we have to let this play out and watch it". ^[1]

He retained a non-committal stance on policy outlook but did not double down on recent dovish remark by some Fed voters. Although he said the committee is "proceeding carefully", he warned inflation is "still too high" and kept the door open to more hikes, proclaiming policy is not too tight.

Netflix posted blowout results, with an acceleration in both revenue and subscriber growth, with its stock jumping more than 15% on Thursday as a result. It was unable to lead a broader tech rally though, as Tesla's results and the commentary of Mr Musk dampened sentiment. The EV giant's margins continued to shrink amidst weak demand and price cuts ^[2]. Mr Musk appeared worried about the economy and high interest rates during the earnings call, while tempering expectations around the Cybetruck, with a delivery event announced for the end of November. ^[3]

Big Tech will remain in the spotlight next week. AI-contenders Microsoft and Alphabet, Amazon who recently upped its AI game but faces regulatory hurdles and social media giant Meta, stand out.

The results of these mega caps can steer market sentiment and determine the trajectory of NAS100, during the Fed's communication blackout. The tech-heavy index heads towards a losing week,
continuing the sideways movement. The drop below the EMA200 (black line) creates risk for further losses towards the 200Days EMA (at around 14,200). However strong catalyst would be needed for a breach.

On the other hand, 10-year yields cool today and NAS100 finds some reprieve as the RSI points towards oversold conditions. As such, we can see a return above the EMA200, but the index does not inspire confidence at this stage for challenging 15,946.