AI Rally Fears

Tech stocks are recoiling into the middle of the week with the Nasdaq down almost 2%. The move lower comes amidst a shock sales warning from ASML which has raised fears over the integrity of the AI boom once again. The chipmaker lower its sales guidance for the coming quarter as it posted disappointing Q3 earnings yesterday. The results showed that the Dutch group realised less than 50% of the EUR4-6 billion in new machine orders the market was looking for. Consequently, ASML revised lower its guidance for the year ahead in a move which sparked fear across AI stocks. Notably, sector leader NVIDIA saw its shares dropping sharply as traders reacted with panic across the board in tech stocks.

USD & Fed

Against a backdrop of a stronger US Dollar and less dovish Fed expectations, the AMSL news has put a cap on US stocks for now. Weakness in Chinese equities is also feeding into negative sentiment with markets there shedding recent gains over stimulus disappointment. Looking ahead, traders will be watching tomorrow’s US retail sales data for the latest directional cues along with the latest weekly jobless claims. Any resultant USD strength on the back of the data should see the current pullback deepen, while bulls will be looking for a drop in the Dollar to help stabilise stock market prices ahead of the weekend.

Technical Views

Nasdaq

The rally in the Nasdaq has stalled for now ahead of the 60,668.27 level. Price remains above 19,995 for now, however. While this level holds, the focus is on a continuation higher and a fresh breakout. Below there, focus shifts to a retest of the broken bear channel and the 18,912 level as next support.