Nasdaq 100: AI enthusiasm spurs rebound, with hawkish Fed expectations a potential brake on recovery

U.S. futures are moving higher. After Tuesday's weaker close, positive CoreWeave earnings and details of Anthropic's IPO have revived appetite for AI trades. Potential constraints on further gains include above-forecast U.S. inflation, growing expectations of a hawkish Fed and sustained selling pressure on Nvidia.

Nasdaq futures are up over 1.3% on Wednesday. This follows a 0.7% fall in the Nasdaq on Tuesday. Today is Veterans Day: U.S. equity markets are trading, but the bond market is closed.

CoreWeave earnings and Anthropic IPO fuel AI demand

An earnings beat and a higher full-year forecast helped CoreWeave shares jump 17% overnight. Recent weeks have placed the company among the neo-cloud businesses most exposed to the fallout across the AI sector.

Reports of anticipated strong investor demand for Anthropic's IPO have provided another lift to AI sentiment. The expected listing date for the Claude maker is November 18 or 19. Pricing at $70 to $78 per share would give it a valuation of $1.4 trillion.

Financial markets are on an uncertain footing as the listing approaches. Days earlier, the U.S. midterm elections triggered a technology sell-off within a $3.2 trillion rout that shook Wall Street. Yet initial roadshow feedback suggests strong demand, and the leading banks involved in the transaction are set to proceed at a higher share price.

Treasury yields rise on CPI surprise and hawkish Fed signals

Two headwinds could constrain the AI-led rebound in the technology-heavy Nasdaq. Nvidia remains under selling pressure (-11% in 2 days), while Treasury yields are climbing in response to stronger U.S. inflation data and hawkish Fed remarks.

October's U.S. headline CPI rose 0.4% month-on-month, exceeding the 0.3% forecast despite easing from September's 0.6% increase. The core measure, excluding volatile items such as food and fuel, stood at 0.3%. It was unchanged from September but higher than the 0.2% expected.

Just days before CPI exceeded forecasts, nonfarm payrolls had delivered a substantial upside surprise. Labour market resilience and persistent inflation together provide the conditions for further monetary tightening. The extent of any additional Fed action is now the central issue.

For December, markets broadly anticipate a 25-basis-point rate increase. They also assign a 10% probability to a larger 50-basis-point hike next month after hawkish remarks by Federal Reserve Governor Christopher Waller. According to Waller, even an improvement in October inflation would not prevent him from supporting a 25-basis-point December increase. A larger 50-basis-point adjustment could be considered if price pressures remain elevated, he said.

A hawkish tone has emerged elsewhere at the Fed, too. Fed Vice Chair for Supervision Michelle Bowman also delivered hawkish comments, though her focus on timing and pace indicates a preference for more gradual tightening.

The coming days will keep Fed communication under scrutiny. Barr, Hammack and Daly are due to speak on Thursday; PPI inflation figures follow on Friday.

The 10-year Treasury yield has reached 5%, having stood at 4.88% before yesterday's CPI data. Elevated inflation and hawkish Fed commentary could drive yields higher still. With rising yields reducing demand for riskier assets, any further advance may hinder the Nasdaq's attempt to breach key resistance at the 200 EMA.

Nasdaq resistance test: technical analysis

The rebound from the Nasdaq's 26,260 low has brought two technical barriers into play: the 200 EMA at 28,100 and the 38.2% Fibonacci retracement of the rise between the 22,840 low and the 31,365 high.

A firmer footing for prices would require buyers to regain this key resistance. That would bring the 29,200 resistance zone, the 50 EMA and the 23.6% Fibonacci level into view. Clearing 30,000 would give the outlook a more constructive tone.

The bearish trend could retain control if the Nasdaq fails to close above the 200 EMA and resistance at 28,100. Attention would shift first to 27,100, the 50% Fibonacci retracement and July low, and then to support at 26,000.