Expectations of Federal Reserve rate cuts heat up, Nasdaq 100 index prepares to rebound after four consecutive declines

Shifts in Monetary Policy Become Focus, Are US Stocks About to Rebound?

The market focus is gradually shifting from geopolitical risks to the Federal Reserve’s policy path. Anna Paulson, President of the Philadelphia Federal Reserve Bank, commented this Monday, suggesting that inflation pressures are easing, the labor market is stabilizing, and economic growth in 2024 is expected to be around 2%. If these forecasts materialize, the Federal Reserve may make moderate adjustments to the federal funds rate later this year.

At the December meeting last year, Fed Chair Jerome Powell did not provide clear guidance on the timing of future rate cuts. Powell’s term ends in May, and the market widely expects the Fed to implement two rate cuts in the second half of the year. This expectation provides potential upward momentum for US stocks.

Inflation Data Eases, Market Bullish Sentiment Builds

Data from the US Department of Labor show that the Consumer Price Index (CPI) in November increased by 2.7% year-over-year, below September’s 3%; core CPI rose by 2.6% YoY. The core PCE Price Index, which the Fed closely monitors, increased by 2.8% YoY in September, in line with expectations. This indicates that inflation pressures may mainly stem from one-time shocks driven by tariff policies.

As inflation data improves, the key to the Fed’s subsequent monetary policy will depend on labor market performance. The December non-farm payroll report will be released this Friday, and markets are well prepared. Non-farm employment increased by 64,000 in November, but the unemployment rate rose to 4.6%, reaching a new high since 2021. Although the US real GDP grew significantly by 4.3% in Q3, the fastest pace in two years, the employment market remains in a “wait-and-see” stance—companies are neither hiring aggressively nor laying off extensively.

If the December unemployment rate does not rise sharply, supported by expectations of rate cuts and a strengthening dollar, further upward momentum for US stocks is likely.

Technical Outlook: Nasdaq 100 Index Down Four Days in a Row, Rebound Imminent

The Nasdaq 100 index has declined for four consecutive days, highlighting an increase in short-term bearish sentiment. However, from a medium-term perspective, the overall upward trend remains intact.

Technical support analysis shows that if the Nasdaq 100 stabilizes above 23,900 points, the medium-term bullish trend remains healthy. In the short term, investors should focus on the 25,000-point support level. If this level holds, there is still potential for a rebound to challenge 26,000 points, and further upward exploration toward 27,630 points.

Potential Boost from Global Energy Reshuffle on USD Assets

Recent changes in the global energy landscape may strengthen the appeal of USD assets. The US’s control over energy supply will help solidify the dollar-oil system, further reinforcing its global financial hegemony. Meanwhile, ample energy supplies could ease constraints on the US AI industry development, benefiting USD assets including US stocks.

Overall, supported by rising expectations of Fed rate cuts, improving inflation data, and positive energy supply prospects, the Nasdaq 100’s four-day decline may only be a short-term technical correction. The rebound could accelerate after this week’s non-farm payroll data is released. Investors can consider technical support levels and cautiously look for rebound opportunities.