US tech stocks continued their rally last week and confirmed the downtrend breakout around 11,600.
The Nasdaq was boosted by significant gains in Tesla as the automaker beat expectations and rediscovered its bullish activity.
NAS 100 – Weekly Chart
The following big targets for the Nasdaq would be at the 12,500 and 13,500 levels.
The Federal Reserve will meet for another FOMC interest rate decision this Wednesday evening. Bond traders pushed their expectations for higher US inflation this week as US stocks advanced. This signifies increased confidence that the economy can create a soft landing after seven Federal Reserve rate increases.
Even with another Fed increase expected next week, the so-called breakeven rate on five-year forward contracts has risen to about 2.3%, the highest since November, after recent lows a week earlier. Another inflation gauge in 10-year inflation-linked bonds was up to 2.32% on Friday from 2.24%.
Meanwhile, last week, investors pulled $490 million out of five major bond exchange-traded funds linked to inflation. It is by far the largest outflow since early December, according to Bloomberg.
Slowed inflation and a softer property sector are boosting hopes that the US central bank can adopt a smaller interest rate hike this week. This came as policymakers assessed their recent efforts to cool prices. Consumer inflation had soared to decades-high levels last year. The interest-sensitive property sector has slumped, retail sales have weakened, and wage growth has eased. Economists have been led to believe it is time for further slowing down of the rate hikes.
“A slower pace of rate hikes will give the committee time to assess the full economic effects of monetary tightening thus far,” said Moody’s in a report.
Markets now expect the Federal Reserve to make a 25-basis-point hike at the end of its two-day meeting, slowing the pace of increases for a second time in a row. Policymakers have talked of getting rates to “restrictive” territory but are not there yet.
