Wall Street: US markets face volatility amid tech stock sell-off

US markets drop on labour market concerns and tech sell-off

US equity markets fell on Friday night, driven by concerns about a cooling labour market and a significant sell-off in the tech sector. Over the week, the Nasdaq declined by 5.89%, the S&P 500 dropped 4.25%, and the Dow Jones lost 2.93%.

Mixed signals from jobs report

The much-anticipated jobs report delivered mixed signals. Payrolls grew by 142,000, falling short of the 165,000 expected, while the figures for the previous two months were revised downward. July’s already weak number was adjusted down to 89,000 from 114,000. On a positive note, the unemployment rate edged lower to 4.2%, down from 4.3%.

Although the data shows signs of a slowdown, it wasn’t weak enough to ensure a 50 basis point (bp) interest rate cut. Comments from Federal Reserve (Fed) officials Williams and Waller suggest the Fed may lean towards a 25 bp cut at its next meeting on 18 September, as it enters the blackout period ahead of the Federal Open Market Committee (FOMC) meeting.

Tech sector struggles as major players drop

In the tech sector, major companies like Tesla, Alphabet, and Amazon suffered significant losses on Friday, with their shares dropping by 8.45%, 4%, and 3.65%, respectively. Chipmakers also took a hit, as Broadcom plunged by 10.3%, ARM dropped 4.71%, and Nvidia was down 4.1%.

All eyes are now on this week’s consumer price index (CPI) and producer price index (PPI) reports. Ahead of these updates, the rates market begins the week pricing in 32 bps of Fed rate cuts for September, with a total of 114 bps expected by year-end.

What to expect from CPI

Date: Wednesday, 11 September at 10.30pm AEST

In July, US annual headline inflation cooled for the fourth consecutive month, falling to 2.9%, its lowest level since March 2021. This was down from 3% in June and below the expected 3%. The annual core inflation rate, which excludes volatile food and energy prices, also eased to 3.2%, matching market expectations and down from 3.3% in the previous month.

For August, the forecast is for headline inflation to ease further to 2.6%, with core inflation remaining steady at 3.2% year-over-year (YoY).

Nasdaq 100 technical analysis

In last week’s update, here we moved to a tactical short bias in the Nasdaq 100.

The short recommendation was based on the idea that the correction in the Nasdaq 100 from the 20,690 high to the 17 August 17,453 low was missing a leg lower (Wave C) towards the 18,000/17,700 support level, coming from the 200-day moving average and uptrend support from the December 10,671 low, against the seasonally weak backdrop of September.

There is a possibility of a downside overshoot towards support at 17,000/16,900, a wave equality target. We take this opportunity to lower our bearish reassessment level from 19,750 to 19,450—just above last week’s high.

Nasdaq 100 daily chart

S&P 500 technical analysis

The sell-off in the S&P 500 post last Friday's non-farm payrolls has increased the chances that the S&P 500 has commenced another leg lower (Wave C) of its correction from the mid-July 5669 record high.

This brings the S&P 500 into line with the view outlined in the Nasdaq, indicating downside risks for the S&P 500 into a band of support in the 5150/5100 area. Which includes the 200-day moving average (5147), the August low (5119), and wave equality at around 5100.

The S&P 500 would need to recover above a band of resistance at the 5650/5670 area to negate the downside risks.

S&P 500 daily chart

• _{Source: TradingView. The figures stated are as of 9 September 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}