Can the Nasdaq 100 Sustain Its AI-Driven Rebound Amid Hawkish Fed Expectations?

Renewed appetite for the AI trade is lifting U.S. futures after Tuesday's lower close, with Anthropic's IPO details and strong CoreWeave results reviving sentiment. Gains could nevertheless be capped by above-forecast U.S. inflation, increasingly hawkish expectations for the Fed and continued selling in Nvidia.

Nasdaq futures are trading over 1.3% higher on Wednesday, reversing direction after the index fell 0.7% on Tuesday. Today, Veterans Day, U.S. stock markets remain open, while the bond market is closed.

Can CoreWeave and Anthropic Revive Enthusiasm for AI?

Stronger-than-expected quarterly earnings and an upgrade to its annual forecast sent CoreWeave shares 17% higher overnight. In recent weeks, CoreWeave has been among the neo-cloud companies caught up in the AI sector fallout.

Reports of strong expected investor demand for Anthropic's IPO are providing a separate boost to AI sentiment. The expected November 18 or 19 debut of the Claude maker would price shares at $70 to $78, valuing the company at $1.4 trillion.

Financial markets face a fragile backdrop for the listing. Just days earlier, the U.S. midterm elections sparked a tech sell-off in a $3.2 trillion rout that rattled Wall Street. Early roadshow signals nevertheless point to robust demand, with the leading banks handling the deal set to proceed with a higher share price.

Will Hotter CPI and Hawkish Fed Comments Keep Treasury Yields Rising?

Persistent selling in Nvidia (-11% in 2 days) and a rise in Treasury yields could restrain the recovery in the tech-heavy Nasdaq, even as AI optimism supports it. Yields have climbed in response to hotter U.S. inflation figures and hawkish comments from the Fed.

October's U.S. headline CPI increased 0.4% month-on-month. Although slower than September's 0.6% rise, the reading exceeded the 0.3% forecast. Excluding volatile components such as food and fuel, core CPI came in at 0.3%, matching September but surpassing expectations of 0.2%.

Only days separate this above-forecast CPI release from a nonfarm payroll report that far exceeded expectations. With labour market strength accompanied by stubborn inflation, the conditions are in place for additional monetary policy tightening. How far the Fed will go is now the key question.

Markets have broadly priced in a 25-basis-point rate hike for December. Hawkish remarks from Federal Reserve Governor Christopher Waller have also prompted pricing of a 10% probability of a larger 50-basis-point increase next month. Even if October inflation improves, Waller said he would back a 25-basis-point rise in December. He added that persistently elevated price pressures could warrant consideration of a larger 50-basis-point move.

Waller is not alone in taking a hawkish stance. Comments from Fed Vice Chair for Supervision Michelle Bowman also had a hawkish tone, though her focus on the pace and timing suggests a preference for tightening more gradually.

Attention will stay on Fed communications in the days ahead. Fed officials Barr, Hammack and Daly are scheduled to speak on Thursday, before Friday's PPI inflation release.

Treasury yields could extend their rise if inflation remains hot and Fed commentary stays hawkish. Already at 5%, the 10-year yield has climbed from 4.88% before yesterday's CPI release. Higher yields weaken demand for riskier assets, and a further increase may leave the Nasdaq struggling to clear key resistance at the 200 EMA.

Can the Nasdaq Clear Key Technical Resistance?

Having recovered from its 26,260 low, the Nasdaq is now challenging the 200 EMA resistance at 28,100 alongside the 38.2% Fibonacci retracement of the advance from the 22,840 low to the 31,365 high.

Reclaiming this crucial resistance would be necessary for buyers to establish a firmer price footing. It would shift the focus to the 29,200 resistance zone, the 50 EMA and the 23.6% Fibonacci level. Above 30,000, the outlook would become more constructive.

If the index cannot close above the 200 EMA and resistance at 28,100, the bearish trend could persist. That would bring 27,100, the 50% Fibonacci retracement and July low, into focus before support at 26,000.