Nasdaq 100: Tech Stocks Poised for Rebound Amid Rising Futures Today

Nasdaq Futures Rise as Tech Stocks Seek Rebound

Nasdaq 100 futures advanced on Thursday morning, signaling a potential recovery for technology shares after the Nasdaq Composite’s steepest decline since December 2022.

At 11:31 GMT, Dow Futures are trading 41433.00, down 64.00 or -0.15%. S&P 500 Index Futures are at 5645.50, up 6.50 or +0.12% and Nasdaq 100 Index Futures are trading 20069.00, up 71.50 or +0.36%.

Market Performance

The Nasdaq Composite plummeted 2.8% on Wednesday, closing below 18,000 for the first time since July 1. The S&P 500 also fell 1.4%, primarily due to losses in tech stocks. In contrast, the Dow Jones Industrial Average climbed 0.6%, surpassing 41,000 for the first time ever.

Sector Rotation

Investors have been selling shares of artificial intelligence companies and pivoting towards small-cap and cyclical stocks. This shift is driven by growing expectations of a September rate cut, which could benefit sectors more sensitive to borrowing costs. The Russell 2000, a small-cap index, has surged over 9% in the past five trading sessions.

Individual Stock Movements

Discover Financial saw a 3% increase following better-than-expected second-quarter results. Conversely, Beyond Meat’s stock plummeted about 16% amid reports of potential balance sheet restructuring discussions with bondholders.

TSMC Earnings Beat

Taiwan Semiconductor Manufacturing Company reported strong second-quarter results, with revenue reaching NT$673.51 billion ($20.82 billion) and net income of NT$247.85 billion, both exceeding analyst expectations. CEO C.C. Wei highlighted surging demand for AI chips, with supply expected to remain tight through 2025.

Treasury Yields and Fed Outlook

U.S. Treasury yields rose as investors processed comments from Federal Reserve officials. The 10-year yield increased to 4.184%, while the 2-year yield reached 4.461%. Traders now see a 90% chance of a rate cut in September, with a July reduction deemed unlikely.

Market Outlook

The semiconductor sector, particularly TSMC, appears bullish in the short term due to strong AI chip demand. However, the broader market faces potential headwinds. Lauren Goodwin of New York Life Investments noted that while current market behavior aligns with expectations preceding a Fed pivot, the economy may still face challenges in the coming months, potentially impacting overall market performance.

Technical Analysis

The question investors are asking today about yesterday’s debacle is, are we done? Was it a knee-jerk reaction to political rhetoric, or the start of a prolonged move down in terms of price and time?

Although the Nasdaq-100 is edging higher on Thursday, there is no support base so this rally may not likely to last. Furthermore, it didn’t begin at a value price like the 50% level at 19742.25 or the uptrending 50-day moving average at 19584.54. So I think we’re going to revisit that area to really get a good idea of what investors perceive as value.

Meanwhile, resistance has dropped down to 20354.75. With the short-term trend down, look for a sellers on a rebound back to this level.