Will tonightโs inflation expectations weigh on QQQ?
QQQ rebounded in premarket trading. I expect it could still be prone to a rally followed by a pullback over the next one or two trading sessions. Yesterdayโs high-volume drop hasnโt been fully recovered, and thereโs another survey at 10 p.m. tonight that could affect interest-rate expectations. I think itโs a little too soon to chase the rally.
QQQ closed yesterday at $747.60, down 1.34%, on volume about 95% higher than the previous day. It was back near $754 in premarket trading tonight, recovering much of yesterdayโs decline, but it hasnโt returned to Wednesdayโs close around $758.
The preliminary results of the University of Michiganโs October Consumer Survey will be released at 10 p.m. tonight. In September, consumers expected inflation of 4.6% over the next year, up from 4.0% in August, while long-term expectations rose from 3.3% to 3.4%. Thatโs just background from the previous survey; the October results arenโt out yet.
The Fedโs September meeting minutes noted that some officials were concerned persistent high inflation was starting to affect wage and pricing decisions. If the new survey shows people expect prices to rise even faster, there could be more reason to keep raising rates. Higher interest rates make borrowing more expensive for businesses. However enticing the future earnings of tech companies may be, investors may be more reluctant to pay a premium for them, putting pressure on QQQ.
If inflation expectations ease tonight and the rebound after the open holds through the close, Iโd become more optimistic about further gains over the next one or two trading sessions. One survey alone wonโt determine the Fedโs actions. If consumers are simply more worried about jobs and income, businesses could have an even harder time. A lower confidence reading shouldnโt automatically be treated as good news for stocks.
This time, Iโd rather see Americans feeling less anxious about prices. A weaker confidence reading alone isnโt enough to carry this rebound much further.
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