Google drags on NASDAQ

  • Alphabet shares shed almost -8%: The shares of Google’s parent company, Alphabet, fell sharply, pulling the NASDAQ 100 Index lower. 
  • Broader Wall Street looks to be supported: The S&P 500 is hanging on to support. US futures are ticking higher early today.
  • The risk of correction remains: We still see indices at risk of correction with US Treasury yields at a crossroads  

Chatbot error sees Alphabet shares plunge 

The launch of the new Google chatbot, called Bard, shared inaccurate information in a promotional video. With the video widely shared on social media platforms, the error is a significant embarrassment for Google which is launching the product to counter an impressive product from Microsoft earlier this week.

Google has around 90% of the market share for search engines. But Microsoft is looking to eat into this pie with upgrades to its Microsoft Edge search engine, with the integrated chatbot to improve its browser technology.

The error sent Alphabet shares (Google’s parent company) diving by more than -9% at one stage yesterday. The shares closed around -7.5% lower, back around $100. By contrast, Microsoft shares were slightly higher in the session.

google espressoGoogle weighs on NASDAQ

The Alphabet decline was a sizable issue for NASDAQ yesterday. Already spooked by the prospect of rising US interest rates, the woes of Alphabet hit the tech sector.

  • Alphabet accounts for around 8% of the NASDAQ 100 Index
  • The shares pulled NASDAQ 100 Index lower by around -75 ticks.
  • Alphabet is also around 3.5% of the S&P 500 Index and pulled the index lower by around -10 ticks.

However, Wall Street remains supported, for now

It was interesting to see that the Dow (US30) did not fall yesterday. The Dow has limited tech exposure and was steady despite the declines on NASDAQ (and associated declines on the S&P 500).

It is also interesting to see that the supports have remained intact on both the NASDAQ 100 and S&P 500. 

Equity markets have been choppy in recent days as markets have been reacting to the hawkish monetary policy implication of the extremely strong US labour market. 

Rising yields have stalled for now and look to be at a key crossroads (the US 10-year yield is trading around an important downtrend).

US10yt espresso

The support holding on the NASDAQ 100 will likely be determined by whether the US 10-year yield tails back and remains below 3.70% (the high earlier in the week).

NASDAQ 100 futures remain supported above 12455

NASDAQ 100 futures (NAS100ft)

The market has been choppy in recent days. However, the weakness following Google’s mistake has not been overly detrimental to the outlook. Furthermore, it could even be seen as an opportunity.

  • The support at 12455 is holding well.
  • The futures have been in a strong recovery trend throughout January. 
  • The breakout above the old resistance 12140/12380 is now a band of support.
  • With the strong configuration of the daily RSI, weakness remains a chance to buy.
  • The resistance at 12947 is key.

NAS100 espresso

S&P 500 futures (SP500ft)

The S&P 500 futures are also supported well, holding above 4098 this week. This is still in the uptrend channel of the past month. There is also support from old breakout highs between 4050/4140.

Once more, we see the positive configuration on the daily RSI momentum and weakness looks to be a chance to buy for a test of the 4208 recent high. The key resistance is the August high at 4327.

Moving below the rising 21-day moving average (4062) would be a warning, with a break below the higher low at 4007 turning the market corrective.

SP espresso

Support and resistance levels for major markets

support and resistance espresso

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