Nasdaq 100 forecast: FOMC, META, AAPL and AMZN in focus

Technology stocks led the charge higher on Wall Street, helping to boost the Nasdaq 100 more than 3% on the session. The gains were largely driven Nvidia’s 11% surge, as beaten-down chipmakers rallied. Meanwhile, softer economic data further boosted bets that the Fed will signal a rate cut in September, with the potential for two more cuts being priced in before the year is out. The Nasdaq 100 forecast remains bullish from a technical point of view with the index holding above a key bullish trend line.

Nvidia fuels stocks bounce

Equities rallied solidly after the open, with Nvidia soaring in excessive of 11% following solid earnings from fellow chip stock AMD on Tuesday with the latter jumping on a bullish outlook – albeit the stock has since drifted lower from its opening levels. Nvidia’s impressive gains come after a difficult last few weeks, with the stock breaking below some key support levels like $116.50-$118.80, an area it was now testing from underneath. Let’s see if the bulls will have the conviction to reclaim this broken support area now.

All eyes on FOMC

We are now less than 2 hours away from the FOMC’s rate decision. As we approach the conclusion of today’s FOMC meeting, it seems almost certain that the Fed will maintain its current policy, with market expectations of a hold sitting at nearly 100%. However, the anticipation of a rate cut in September is fully priced in, meaning the future direction of the dollar and stocks will hinge on the Fed's tone regarding upcoming policy decisions.

We expect the Fed to lean dovish today. Recent comments from Fed officials, coupled with lacklustre US economic data, highlight the need for a less restrictive monetary policy. The unemployment rate has climbed to 4.1%, and CPI inflation has dipped to an annual rate of 3.0%. In line with the global trend towards policy easing (Japan being the notable exception), the Fed will likely aim to prevent unnecessary economic hardship.

Looking beyond September, market forecasts suggest a cumulative 65-70 basis points of rate cuts by year-end. If the Fed or Chairman Jerome Powell at the FOMC presser signals a dovish stance during today’s meeting, we could see expectations rise to as many as three rate cuts before the year ends. This scenario would likely boost the outlook for technology stocks. However, the Nasdaq 100 forecast could dim somewhat should the Fed opt for a hawkish hold instead.

META, AAPL and AMZN among this week’s key earnings

In terms of technology earnings, it is a big one this week. Already, we have seen results from two of the magnificent 7 giants, namely Microsoft and Alphabet. Today, we will hear from Meta Platforms after the closing bell, followed on Thursday by Apple and Amazon. This will keep the Nasdaq 100 in a sharp focus over the next few days, given we also have a busy macro calendar with the Fed deciding on rates today and on Friday we will have the monthly US jobs report.

• Meta is anticipated to provide an EPS of $4.70 on $38.29 billion revenue for its fiscal quarter on Thursday. Investors will want to hear more details on aspects such as AI integration costs, potential expense increases, and advertising performance. Previous quarter results showed a 27% increase in ad revenue, and similar growth is hoped for in Q2.

   

• Apple’s earnings are expected to reveal a $1.34 EPS on $84.3 billion revenue on Thursday. Key focus areas for investors will include iPhone sales, gross margins, and AI developments. iPhone revenue, facing competition in China, is projected to decline, while services are expected to perform strongly.

   

• Amazon's is predicted to report $1.01 EPS on $148.54 billion revenue. Analysts will focus on e-commerce, advertising, and AWS growth. The share price, up 21% this year, shows a long-term uptrend, despite a recent correction.

You can read our full Magnificent 7 earnings review HERE.

Nasdaq 100 forecast: Technical analysis

Source: TradingView.com

Interestingly, today’s rally comes right off the bullish trend line that has been in place since October. The recovery means we will have formed a bullish outside candle or a similar pattern on the daily time frame of the Nasdaq Index, assuming the gains could hold into the close. That’s a big assumption to make given the upcoming risk events mentioned (FOMC and earnings). Still, from a purely technical point of view, a close around current levels would create a strong bullish signal that could then pave the way for further follow-up gains in the days ahead.

The key support area that now needs to hold comes in around 18950 to 19100. A daily close back below this area would put the bulls in a spot of bother. In terms of resistance the area around 19570, where we also have the 21-day exponential converging, is now a key hurdle for the bulls to overcome, having lost control of his zone during last week’s selling.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R