Tech Stocks Are Back in Play

The US dollar had rebounded after the Fed’s meeting in August, where Jerome Powell had stated the achieved balance in the economy, which is neither overheated nor contracting at this stage. The labor market remained relatively strong, while the dynamics of inflation was pointing to a further decline.

At the same time, the Fed’s chief had stressed that the inflation was no longer in focus that much, while employment was the new parameter in focus.

The labor market had cooled down, which brings some risks of it’s decline, so probably, the Fed will look forward to the interest rate decline in September, as expected, if “totality of the data” would confirm a positive trend. As stated by Jerome Powell, “If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September.”

According to the CME’s Fedwatchtool, probabilities of a dovish scenario haven’t changed much around the most recent gathering of the Fed in August.

How Did Markets React to Jerome Powell’s Speech and Other Fundaments?

Gold and Nasdaq retreated higher getting a “dovish”, but not recessional signal. Bitcoin had pulled back to the support area of $64000, and the US dollar rebounded higher, indicating a possible technical price action amid absense of real fundamental triggers.

The potentially interesting situation might unfold in tech sector of the stock market, as Nasdaq bounced off the key support level, and it’s possible to observe the rotation from financial stocks (which have been particularly strong so far) back to techs.

Nasdaq

The Nasdaq index had bounced off the technical support, displaying a strong bullish candlestick “engulfing pattern”, right from the long-term trendline.

Given the improvement of the overall market breadth in the stock market after the earnings season, it would be logical for Nasdaq to rebound and resume the upswing.

The week is packed with earnings releases from big cap tech companies, such as AAPL, MSFT, AMZN, INTC and others, most of them will be published after the market close, so volatility might be increased.

The non-farm payrolls indicator is about to be published on Friday, so that’s another possible driver for Nasdaq and other assets.