• Fed Chair, Jerome Powell, confirmed that the Federal Reserve might consider tapering before the end of 2021.
  • The S&P 500 rose 0.13%, while the volatility index (VIX) was up 1.16% in reaction to as of 9:35 am GMT on August 30, 2021. 
  •  US inflation has risen from 2.6% to 5.4%.

The NASDAQ Composite (IXIC) rose 0.90% on August 30, 2021, as investors prepared to close the month’s trading amid tapering expectations from the Fed. It closed at 15.129.50 after opening at 14,966.50 and ranged to a high of 15,144.50.  

Jerome Powell, the FOMC chair, confirmed that the Federal Reserve might consider tapering in 2021. The move would mainly involve the reduction of bond purchases and not necessarily rate hikes. 

The S&P 500 rose 0.13%, while the volatility index (VIX) was up 1.16% as of 9:35 am GMT on August 30, 2021, in reaction to tapering concerns. 

Inflation target

The Fed Chair was optimistic that the current 5.4% inflation rate was transitory and would run back to the 2% target mark. 

Rising US inflation rate

The last time US inflation was less than 2% was February 2021, when it rose to 1.7%. Since March 2021, the CPI has risen from 2.6% to 5.4%, where it has been since June 2021. 

With the next FOMC meeting scheduled for mid-September 2021, there are high chances that the rate will remain unchanged. 

The US personal consumption expenditures (PCE) index for July 2021 inched lower to 12.05. 

US Personal consumption index

According to the Bureau of Economic Analysis (BEA), the PCE hit a high of 29.9 in April 2021 before slowing down to 19.6 in May 2021. It later decreased to 13.7 in June 2021 as the inflation rate hit a 13-year high of 5.4%. 

Food prices contributed 3.4% to the rate hike, while new vehicles’ supply added 6.4% in July 2021 as compared to 5.3% in June 2021. However, consumer prices rose 0.5% in July 2021, seen as the least increase in prices since February 2021 when it added 0.4%. 

Nasdaq Composite IXIC

The 0.90% increase in the Nasdaq Composite index was a follow-up to the 3.11% growth in the past 30 days and 11.34% in the last six months. This increase shows an increase in the market capitalization of common equities making up the index. 

Health stocks have made a profound difference in the investment arena in the wake of the rise of Covid-19. In the six months leading to June 2021, Pfizer reported a revenue increase of 68% as compared to the same period in 2020. Net income surged 53% (YoY) as the intake of vaccination increased throughout the entire world. 

Pfizer’s dividend yields have increased 3.3% due to share price growth. Q1 2021 saw the shareholders receive up to $4.4 billion as dividend payouts, indicating a 3% increase (YoY). 

Technical analysis 

The daily Nasdaq Composite (IXIC) chart shows the index is up 11.34% in the past six months after testing support at 12,973.73. The price is running above the 9-day EMA at 14,895.48, indicating a possible bullish continuation. After crossing 15,129.50, we expect the next move to be near 15,270.82.

Technical Chart for Nasdaq Composite (IXIC)

There is also an increase in buying momentum, with the 14-day RSI moving close to the overbought region at 64.29. The index is also experiencing a shift in volatility, with the 14-day ATR at 191.14. 

We could see a decline in price to 15,052.57 and a correction towards 14,000 in case the uptrend fails to sustain the momentum.