Nasdaq (QQQ) News and Forecast: Yields collapse, but investors flee risk assets

• Nasdaq falls again on Tuesday as tensions remain, USD hits near 2-year high against euro.
• Bond yields collapse as traders become less hawkish, gas surges.
• Equity markets recover slightly on Wednesday, but oil spikes again.

Equity indices recovered some ground this morning after more losses on Tuesday. Germany is feeling the pinch from surging gas prices and saw its main index, the Dax, fall by nearly 4% on Tuesday. US indices were not quite so bad, but all three indices finished in the red on Tuesday. The main moves happened in bond and energy markets. Oil continues its one-way bet, hitting $110 now.

Meanwhile, bond markets have grown increasingly dovish and all thoughts of a shock and awe 50-basis point rate hike in March are now off the table. Two weeks ago this was looking to be a near certainty. Powell is just out on the wires with his last speech before blackout ahead of the Fed March meeting. He does see a rate hike being reasonable (code for 25 bps). He also expects inflation to moderate this year.

We cannot agree with this. Inflation is now likely to accelerate. Look at energy prices. Sanctions will hit global growth but also supply chains. Ukraine and Russia are the breadbasket of Europe and massive soft commodity producers (wheat, corn). This will lead to food prices rising also. This is why bond traders are pushing yields lower.They see stagflation is now highly likely. Europe CPI printed a record high this morning, and that does not include oil and gas rising from the conflict. 

Nasdaq (QQQ) Stock News

The talks between Russia and Ukraine could see some volatility in the event of any positive headlines but overall equity markets remain cautious. Usually, falling yields should be supportive of higher risk zones such as technology stocks. But the macro backdrop is now becoming more severe and the Nasdaq is likely to underperform the other main indices due to its relative lack of energy or value stocks. 

Nasdaq (QQQ) Stock Forecast

Of particular note is the continued flattening of the US yield curve. This has a near 100% record over the last 50 years in predicting US recessions within three quarters of it going negative. Currently, it is 30 basis points away from going under, but it has hit a two-year low.

US 10Y - US 2Y yield, daily

The big picture remains much the same as yesterday given the slow moves. See here. 

On Wednesday $340 is the pivot. Most volume on Tuesday was at the $342 level, the point of control. The remaining below $340 will eventually lead to a capitulation trade in our view down to $328. We base this argument on the volume profile bars to the right of the 15-minute chart below. $348 is the upside pivot. 

Nasdaq (QQQ) chart, 15-minute