The Nasdaq has struggled in 2024, but recently major support was held. The release of Wednesday’s Retail Sales numbers showed a larger-than-expected increase at 0.6% vs. 0.4%. A noticeable increase was observed in General Merchandise Stores, which contributed 0.13%, and Motor Vehicle and Parts Dealers, which contributed 0.21% in sales. These two components alone made up for more than half of the increase in December’s retail sales.
The Market’s Expectations of Interest Rate Cuts:
Coming into 2024, the market had priced in 150 basis points worth of interest rate cuts. We have seen interest rate expectations trade within the range of 125 basis points to 150 basis points. After the release of retail sales, the market took one 25 basis point cut off the table for 2024, and the probability of an interest rate cut happening as soon as March was dampened.
The CME Fed Watch tool now reflects a 50% chance of an interest rate cut at the March Fed meeting; these probabilities have drastically fallen since the high 80% probabilities observed at the beginning of the year.
Can the market move away from trading off interest rate cuts?
Although the Nasdaq closed in negative territory on Wednesday’s trade, it held major support, above the support pocket and above the 21-Day EMA. If the economy can remain resilient and growth can persist, equity markets may not need to see lower interest rates to push higher.
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