Tech Titans Erupt Higher - Is a Melt-Up Coming?
Today's monster tech rally was a shot across the bow for the Federal Reserve ahead of next week's pivotal rate decision.
After initially getting smashed following a hotter-than-expected inflation print, the Nasdaq erupted 2.17% higher to 17,395 as dip buyers stormed in. The S&P 500 surged 1.07%.
Semiconductor Sizzle
Leading the charge was semiconductor heavyweight Nvidia, with shares rocketing 8% after CEO Jensen Huang talked up its AI prospects. The chip stocks were on fire, with the SMH semiconductor ETF soaring over 5%.
Traders doubled down on bets the Fed will only hike by 25 bps next week, with futures now pricing an 85% chance of a quarter-point move. They're looking past the hotter "core" CPI read and focusing on the broader disinflation trend.
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Melt-Up Mania?
With the market now betting the Fed's almost done tightening, whispers of an epic melt-up in crushed tech and growth names are growing louder.
The Nasdaq is still 15% below its record highs and trading at just 26x forward earnings - way below its decade-plus median of 30x. With rates set to level off, valuations in this space could rip higher in a fury of short-covering and FOMO buying.
Some say we got a taste today, with trillion-dollar titans like Apple, Microsoft and Amazon all surging over 2%. If the Fed signals a hawkish pause next week, momentum chasers could kick into overdrive and blast the Nasdaq to new highs by year-end.
Key Level: 17,800
The first major upside target is the Nasdaq's 200-day moving average around 17,800. A decisive breach there could unleash the floodgates as trend-followers rush to get long.
Of course, if the Fed disappoints by signaling more hikes down the road, all bets are off. But for today at least, the tech whales are in control - and giving the central bank a glimpse of the fireworks that may be coming.
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