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Nasdaq Plunges Amid Rising Yields

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This week’s major highlight was the Federal Reserve Chair Jerome Powell speech at the Economic Club of New York on Thursday where he reiterated the central bank’s preference for keeping interest rates steady at the next meeting given the recent spike in long-term U.S. Treasury yields and progress regarding inflation.

Jerome Powell also left open the possibility of future rate hikes if the economy continues to show resilience. In response to his speech, short-term Treasury yields declined while long-term yields rose, leading to a steeper yield curve.

On the economic front, data this week presented a mixed picture. Applications for U.S. unemployment benefits declined to the lowest level since January, showing the labour market is still tight. Home sales have fallen to their lowest level since 2010, while retail sale, industrial production, and housing construction were ahead of forecasts.

While some of these developments were positive for stocks, reports of renewed tensions in the Middle East, exerted downward pressure on the tech index. Another central concern this week has been the surge in long-term U.S. Treasury yields, which hit their highest level in 16 years.

The additional risk around the Middle East conflict and news that the Biden administration plans to begin refilling its strategic oil reserves, pushed energy prices higher, with WTI crude oil prices trading above $89.00 on Friday, raising fresh concerns that inflation could persist for longer. Should inflation remain elevated, it might require further tightening of monetary policy.

The latest earnings results in the tech sector were mixed with Tesla shares plunging after the EV maker missed margin forecasts, while digital streaming giant Netflix surged after beating analysts’ estimates for new customers.

A screenshot of a graph

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Source: TradingView

The tech index has been trading lower this week amid rising geopolitical tensions, as well as rising bets that the Federal Reserve will hold rates higher for longer than initially anticipated. A large descending triangle has formed on the daily chart showing that selling pressure is building up. Generally, the pattern has bearish implications and points to lower levels in the coming months.

Additionally, momentum conditions have deteriorated over the past two months, with the Relative Strength Index (RSI) indicator fluctuating below 60%, which is a resistance level during bear markets.

While at this juncture in time there is no price reversal on the chart, given the bearish implications from the descending triangle pattern and the deterioration in momentum conditions, key support of 14,432 is likely to be challenged. A subsequent break below that level appears likely, which in turn could trigger further weakness in the range between 13,300 and 13,600.

Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at

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