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PPI On Watch

Following on from yesterday’s CPI reading, traders will today turn their focus to the latest US PPI reading. Rate hike expectations for June have fallen sharply on the back of yesterday’s softer-than-forecast US CPI data. Pricing for a further .25% hike now sits below 10%, down from around 20% ahead of the data. In light of the weakness in CPI, traders are looking for a similarly soft reading today which should keep stocks well supported on the view that the Fed is likely to keep rates on hold at the next meeting.
 

Nasdaq Rallies on US CPI

Tech stocks in particular have been well supported amidst the shift in outlook for the Fed. The Nasdaq was seen rallying over 1% yesterday, hitting fresh highs for the year as traders digested the latest US inflation data. If today’s data confirms a further fall in PPI, particularly if readings are weaker-than-forecast, this should create ample room for a fresh rally in tech stocks today. Looking at the numbers then, the market is projecting core PPI at 0.2%, up from the prior month’s -0.1% reading along with headline PPI at 0.3%, up from the prior month’s -0.5% reading. If these increases are confirmed, the impact will likely be fairly muted on stocks though an undershooting of these forecasts should see stocks rallying firmly into the end of the week.
 

Technical Views

Nasdaq

The rally in the Nasdaq has seen the market breaking out further above the 12927.3 level. While within the bull channel from the 2022 lows the focus is on a further push higher towards the 13752.6 level next. To the downside, any break back below the 12927.3 level will turn focus to the deeper support level at 12269.1. 

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