US Tech forecast: the index hits a new all-time high after a correction

The US Tech index reached a new all-time high, but the upside momentum is weakening. The US Tech forecast for next week is positive.

US Tech forecast: key takeaways

• Recent data: the US core PCE price index rose to 3.3% year-on-year in April
• Market impact: the current data has a mixed impact on the technology sector

US Tech fundamental analysis

The release of the US core PCE price index at 3.3% year-on-year may have a restraining effect on the US Tech index. The fact that the figure matched the forecast reduces the likelihood of a sharp negative reaction, since the market had already priced in such an outcome. However, the acceleration from the previous 3.2% indicates that inflation pressures in the US remain persistent. This is an important signal for the technology sector, as shares of major tech companies are especially sensitive to interest rate expectations and the cost of capital.

This news could put short-term pressure on the US Tech index. If investors conclude that inflation is not cooling fast enough, expectations of a more dovish Fed policy may weaken. In this case, bond yields may remain elevated, which typically reduces the appeal of growth stocks, a category that encompasses much of the technology sector.

US Tech technical analysis

This news could heighten investor caution in the US stock market. A rise in the core PCE is a key indicator for the Federal Reserve, as it reflects the more persistent component of inflation. If inflation remains above a comfortable level, it is more difficult for the regulator to move swiftly towards cutting interest rates. This could lead to a revision of monetary policy expectations and limit stock market upside. Companies whose valuations are already high following a prolonged market rally will be particularly sensitive.

After hitting a new all-time high, the US Tech index began to decline. The price broke above the 29,695.0 resistance level, with the nearest support located at 28,640.0. The current trend is strong enough to expect another all-time high. If the rise continues, the next upside target could be 31,030.0.

The US Tech price forecast outlines the following scenarios:

• Pessimistic US Tech scenario: a breakout below the 28,640.0 support level could push the index down to 27,525.0
• Optimistic US Tech scenario: if the price consolidates above the 29,695.0 resistance level, the index could climb to 31,030.0

Summary

Overall, the core PCE print at 3.3% year-on-year is a moderately negative signal for the US Tech and the US stock market. The data was not worse than forecast, so a major shock is unlikely. However, the uptick versus the previous reading shows that inflation remains persistent, meaning expectations for rapid Federal Reserve easing may be revised. This is especially important for the US Tech index, as high rates reduce the appeal of growth stocks. The next upside target could be 31,030.0.

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