• Supply chain concerns led to a rise in semiconductor prices on May 24, 2021. 
  • US personal consumption expenditures may rise 3.5% for April 2021. 
  • Low Treasury yields and weakened dollar supported an increase in technology stock prices. 

Nasdaq Composite Index (IXIC) climbed 1.41% on May 24, 2021, at 13,661.17, buoyed by a surge in technology stock prices and increased investor confidence in positive CPI figures. Apple rose 1.33%, while Google (Alphabet A) hit +2.92%. Among the top 5, Tesla was the highest gainer at 4.40%, and Facebook was at +2.66%.

US technology stock performance on May 24, 2021

US technology stock performance on May 24, 2021

Despite the return to offices, communication technology stocks such as Zoom Video Communications (ZM) continued to surge due to the emergence of new variants. Zoom closed at a high of $321.56 (+1.63%) on May 24, 2021, from the previous day. The tech rally was also supported by a strong rally of semiconductor stocks. The VanEck Vectors Semiconductors ETF that tracks the performance of semiconductors traded at a high of $245.03 (closing at 243.80 on May 24, 2021) and a YTD change of $11.44. 

VanEck Vectors Semiconductors ETF (SMH)

VanEck Vectors Semiconductors ETF (SMH)

The rise in semiconductor prices is caused by supply chain concerns that stem from the cautious approach among producers in Asian countries such as Taiwan due to COVID-19. Car manufacturers in India are also facing a shortage of semiconductors that have derailed the production of vehicles and premium motorcycles. The surge in new COVID-19 variants has hampered chip production in Japan, the US, China, and South Korea.

Inflation concerns

Investors are also keeping an eye on inflation as the US Fed grapples with the tensions in the job market and the growing CPI. A rise in the Nasdaq indicates that there is a positive belief that employment levels will be headed towards their pre-pandemic levels as long as inflation will be controlled. 

The US Bureau of Economic Analysis (US-BEA) is scheduled to release the personal consumption expenditures (PCE) index on May 28, 2021, for April 2021. According to consensus data from Bloomberg, the BEA may announce a gain of 3.5% in the month (the highest surge since April 2008). March 2021 had seen the PCE rise 2.3%, with a monthly acceleration set at 0.6%. 

Consumer prices in April 2021 (year-on-year) inched up 4.2%, with core consumer prices (excluding food and energy prices) gaining 3% and 0.9% month-on-month. However, a surge in Asia COVID-19 cases is seen as a precursor to increasing inflation in the US. Earlier in the week, President Biden had promised that the US will be “an arsenal for vaccines” where it would send up to 20 million doses by the end of June 2021. A further 60 million doses were lined up, bringing the total to 80 million doses before the end of the second quarter.   

Technological stocks also rose on dwindling US Treasury yields on May 24, 2021. The 10-year Treasury yield declined 1.617%, while the 30-year bond dropped 2.315%. The US dollar index also declined 0.09% to a low of $89.76. It traded below the 9-day EMA at 90.084 and a 14-day RSI of 30.66. 

Technical analysis

Nasdaq Composite Index Technical Analysis

Nasdaq Composite Index Technical Analysis

The Nasdaq Composite Index traded 0.17% above the 9-day EMA at $13661.54. The index is headed towards the resistance point at 14,161.28. On May 24, 2021, the day’s support was at 13,476.71. The 14-day RSI indicates a high buying activity at 66.29. The index is expected to hit a high of 13,750.00 as it proceeds towards the key trading level at 14,000.00.