Nasdaq 100: Tech Stocks Rally Today as Oil Drops, Inflation Fears Ease

Stocks Rally at Mid-Session as Oil Eases and Jobs Data Beats

The major U.S. stock indexes are higher at the mid-session on Wednesday as they attempt to recover this week’s losses. The catalysts behind today’s gains are an easing of oil prices and better-than-expected private sector labor data.

Bessent’s Persian Gulf Pledge Puts a Lid on Crude

After yesterday’s spike to a multi-month high, crude oil prices are flat-lining today as traders react to comments that Treasury Secretary Scott Bessent made to CNBC that he is going to make “a series of announcements” to keep oil flowing from the Persian Gulf.

This news is important to stock market investors because, if accomplished, it could keep a lid on crude prices and stop them from being an inflationary burden on the economy. One scenario being floated by investors is that oil prices rise so high for a prolonged period of time that it drives inflation to a level that forces the Fed to keep rates unchanged or even makes them raise rates. This is only speculation at this time, but there is evidence in the form of the CME’s Fed Funds tool that shows a March rate cut is off the table, and only about 33.4% of traders believe the central bank will trim rates in June.

From a historical perspective, low rates are the key to any bull market so while a rate hike will not necessarily derail the bull market, it could slow down the pace of gains because it can lead to higher costs and lower profits, especially in the capital intensive technology sector.

ADP Jobs Beat and Services Growth Add to the Good News

Besides the good news from the oil market, there was actually better news from the economic front. Firstly, ADP released a report that showed the private sector added more jobs than forecast in February. Secondly, the U.S. services sector recorded better-than-expected growth in February. However, the main takeaway from the report, easing inflation pressures, is likely irrelevant because the survey was probably taken before the war started and oil jumped 10% in two days.

Nasdaq-100 Breaks Downtrend Angle but Needs Thursday Confirmation

Technically, the E-mini Nasdaq-100 Index futures contract is in a downtrend, but momentum has shifted to the upside, following the breakout over a long-term downtrend angle at 25035.75. Last week, the index made a similar move, but it was never confirmed by a follow-through rally.

The current rally is no exception. A close over the trendline will confirm the shift in momentum. However, we’re going to need to see a confirmation of this rally on Thursday. Even better, in order to give yesterday’s low at 24352.00 more meaning and to lead to even greater upside momentum, I’d like to see a further breakout over the 50-day moving average at 25439.55.

Only a Clean Break Over the 50-Day MA Ends Sell the Rally Mode

The futures contract is now trading higher for the week, erasing all of this week’s earlier volatile losses. But only with a clean breakout over the 50-day moving average can we say that we’re no longer in “sell the rally” mode.

More Information in our Economic Calendar.