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The Federal Reserve kept the Fed funds rate unchanged last night at 5-5.25%. That said, individual FOMC member projections indicate that a majority of central bankers are now expecting two more 25bp hikes this year.

The Nasdaq Composite amplified its height gain on Thursday, the day after the Fed’s verdict, now at price levels not seen since April 2022. As a reminder, the Fed went into “skip” mode, pausing its rate hike process, suggesting that the high points (the so-called terminal rates) have not yet been reached, particularly in view of the persistent tensions on the employment front.

“Jerome Powell’s message is clearly that the Fed will not react to the mechanical fall in inflation and interest rates will remain high in order to constrain inflation expectations”, deciphers Axel Botte, Director of Market Strategy OSTRUM AM. Powell even hinted that rates wouldn’t come down on the two-year horizon. The Fed will even raise its rates significantly in real terms as inflation declines. This is the price to pay to avoid an early rise in inflation linked to the inertia of expectations.

Inflation has started to contract, but its core data (stripped of food and energy), remains particularly strong. As a reminder, prices in annualized data in April rose by 4%, against 4.1% expected and 4.9% in March, in the broadest product base. On the other hand, no deviation to report compared to the target for prices, excluding food and energy, in monthly data (+0.4%). The “core” figure, that is to say excluding food and energy prices, stood at 5.3% over one year, again exactly in line with the expectations of economists polled by Wall Street Log.

“Jerome Powell has no desire to go down in history as a second Arthur Burns. The error of analysis on inflation deemed temporary in 2021 now implies a lastingly more restrictive posture”, continued Axel Botte.

In terms of statistics, which took a back seat despite a busy schedule, currency traders took note of retail sales, in line with core data expectations, of the Philadelphia Fed’s manufacturing index, in the target at -13, 7, the New York Fed’s manufacturing index, which is back in a welcome way and into positive territory, and weekly unemployment benefit claims, at 262,000 new units, the highest since May 11. Slight disappointment on the volume of industrial production (-0.2% monthly), but not on the production capacity utilization rate (79.6%).

To follow at 4:00 p.m. the preliminary data (U-Mich), the level of consumer confidence and inflation forecasts.

KEY GRAPHIC ELEMENTS

With the resistance formed by the summer highs of 2022 and the yearly highs being breached in satisfying volumes, the new framework is now between 13,240 and 13,838 points. An old bearish gap in the immediate vicinity of 14,000 is not very far away… Its suction effect is already beginning to be felt. Note also the formation of a new tracking gap, very predictive.

FORECAST

Considering the key chart factors we have mentioned, our opinion is positive on the Nasdaq Composite index in the short term.

This bullish scenario is valid as long as the Nasdaq Composite index quotes above the support at 13240.00 points.

The News Bulletin 247 board

Nasdaq Composite
Positive
Resistance(s):
–
Medium(s):
–

CHART IN DAILY DATA

Graphic made from the software Prorealtime

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