Why the reversal. The market is repricing the rate. US inflation accelerated in September to 3.7% year-on-year versus 3.4% in August, the main driver being expensive energy amid the situation in the Middle East. The Fed already raised the rate in September to 3.75-4.00%, for the first time in three years, and the debate now is whether the next hike will come on October 27-28 or in December.
The economy is already feeling expensive money. Pending home sales collapsed 7.3% in September against expectations of -0.7%: the lowest in the entire history of observations since 2001. Single-family housing starts fell 4.6%, building permits - 4.0%, to the lowest since March 2023.
Why it hits technology specifically. The value of such stocks rests largely on the profit companies will earn years from now. The higher the rate, the cheaper that future profit is worth today - the shares fall even when the business is doing well.
And the business is doing well. SpaceX (SPCX) reported revenue of $14.6 billion for the third quarter, +161% year-on-year and its first profit since going public in June. The company's weight in the Nasdaq 100 is about 3%, so its moves alone drag the index. Super Micro Computer, a maker of servers for AI data centers, raised its quarterly revenue forecast to $18.5-19.5 billion versus the previous $14.5-15.5 billion. The data is preliminary, with the full report on November 3.
What's next. As Krisada Yoonaisil, financial markets strategist at Exness, notes, AI demand is holding up the technology sector, but expensive energy is pressuring the Fed, and weak housing data shows high rates are already working through the economy. The nearest fork in the road is the Fed meeting on October 27-28.
Watched the index shave off 2% in a session?
Days like that on the Nasdaq 100 happen a couple of times a quarter, and the most frustrating thing is not missing the direction but the volume. You played the move right, but the money came out to a sum that's not even worth withdrawing - simply because the account is small. Prop trading removes that ceiling: you pay for the evaluation stage, follow its rules, and then trade the company's notional for an agreed share of the profit. There are a few days left before the Fed meeting on October 27-28 to understand how this scheme works.