The Nasdaq 100 traded higher early on Wednesday as the tech-heavy index continues to hold key support around 13,100. US equity benchmarks are looking to retrace recent losses, with Monday’s session representing the worst losses for the major indices in months. The focus of market participants has shifted away from Fed policy to the Russian invasion of Ukraine, which has weighed heavily on risk assets of late. US CPI data on Thursday will be crucial ahead of next week’s Fed policy meeting, where markets are currently forecasting a 25 basis point rate hike.

US ECONOMIC CALENDAR

Courtesy of the DailyFX Economic Calendar

With the Fed set to begin the move away from pandemic-era emergency policy, rates may come back into focus for growth investors. Despite the consensus view of a rate hike next week, yields have come in significantly as the Ukraine conflict weighs on global growth forecasts. While the broader Nasdaq 100 Index may be dragged down by growth names that are not free cash flow generative, there may be tactical opportunities in more mature companies. Given the volatility at hand, it appears that we may now be in a pickers market.

NASDAQ 100 2 HOUR CHART

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Chart created with TradingView

As mentioned, the Nasdaq 100 Index (NQ) has so far held support around 13,100 throughout late February and early March. The index now approaches the 13,700 level, which has acted as a solid pivot point over the last few weeks. Fresh bids through 13,700 may bring 14,000 back into play, with the October lows at 14,367 sitting just beyond that. NQ has remained rangebound between 13,100 and those October lows for multiple weeks now, despite war headlines and surging inflation. Either one of these bounds could soon break, given the slate of risk events just on the horizon.

With NQ sitting comfortably off recent lows, gains may consolidate as traders shift focus to Thursday’s US CPI report. With the consensus estimate currently at 7.9%, a print above 8% could shock markets. With inflation already at 40 year highs, the ball is firmly in the Fed’s court. Do they remain dovish, citing the threats to the global outlook from the Russian invasion of Ukraine? Or do they maintain credibility and use their tools to reign in rampant inflation? Only time will tell, but the Fed’s credibility may be on the line next week.