LIVE MARKETS-Chip stock relative strength may bode well for Nasdaq

• U.S. equity index futures rise; Nasdaq 100 up ~1%

• U.S. April core PCE price index MM, YY in-line with estimates

• Euro STOXX 600 index up ~1%

• Dollar, bitcoin ~flat; gold rises; crude slips

• U.S. 10-Year Treasury yield ~flat at ~2.74%

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CHIP STOCK RELATIVE STRENGTH MAY BODE WELL FOR NASDAQ (0900 EDT/1300 GMT)

Recent chip stock outperformance may be another positive sign for the beleaguered Nasdaq - click here:

Indeed, it’s been a rough year so far for the Philadelphia SE Semiconductor index (.SOX) and the Nasdaq Composite (.IXIC) . Both are in bear markets, posting roughly the same declines: the SOX off around 24% year-to-date, while the IXIC is down around 25%.

However, recent action paints a different picture. So far this month, the Nasdaq is off around 5%, while the SOX is up 2.6% and on track to rise for its first month this year.

Meanwhile, the SOX/IXIC ratio, which bottomed on April 14, has thrust sharply higher:

In the 29 trading days since that ratio’s low, the Composite has collapsed about 12%, while the SOX has only lost around 1%.

Of note, looking back over the past 15 years or so, burgeoning chip stock relative strength has preceded a number of major Nasdaq lows, just as chip stock divergence has been a warning sign that the Composite’s push to fresh record highs may not last.

Generally, traders want to see chips, a key high-beta sub-sector within tech (.SPLRCT) , outperforming, to add confidence in the sustainability of any Nasdaq rise.

Thus, as long as the ratio’s mid-April trough holds, the Composite may ultimately be poised to power up.

Meanwhile, at first on Thursday, Nvidia (NVDA.O) , the SOX index’s second largest component by market cap, fell more than 5% after the company provided a weak forecast on a slowing video game market.

However, shares reversed, and NVDA ended up more than 5% on the day. Upbeat price action across chips and other tech stocks, despite some negative headlines, hints that Wall Street’s recent ‘sell first, ask questions later’ mentality may be changing.

Also of note, ARK Invest resumed buying shares of Nvidia on Thursday, nearly 7 months after selling nearly all of its stake in the chipmaker.

Another SOX member, Marvell Technology (MRVL.O) , is up in premarket trade Friday after its first-quarter revenue beat estimates.

And with CME e-mini Nasdaq 100 futures (NQcv1) rising ahead of the open, the IXIC appears poised to end its seven-week losing streak.

(Terence Gabriel)

FOR FRIDAY’S LIVE MARKETS’ POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE:

SOXIXIC05272022 here

(Terence Gabriel is a Reuters market analyst. The views expressed are his own)