Nasdaq Surges into Bull Territory as Tech Soars

The premier US tech index has entered a bull market while the DJIA exited correction territory as trade optimism fuels a resurgence in tech enthusiasm.

Back in the Races

The US-China trade deal brokered over the weekend provided the final push for American stock markets to return to levels seen before the "Liberation Day" tariffs caused a plunge, with 20% above its low. The index has not only left the bears behind but has gained over 13% just  the last month. For comparison, the DJIA has risen less than 5% during the same period, though it did exit its correction phase after rising more than 10%. While tariffs have dominated market talk recently, the outperformance of the Nasdaq signals a resurgence in the somewhat overlooked tech sector, with the focus squarely on tech and the shifting outlook for Fed rate cuts.

The Nasdaq's collection of high-valuation stocks implies it is a bellwether for risk appetite and expectations of cheap borrowing to support stocks with high P/E ratios. The upward, which is less directly affected by tariffs but more sensitive to economic growth and corporate capital expenditure. Other stocks that rose include the triple-digit valuation companies Tesla and Meta.

What's the Fed Up To?

Markets received an additional boost on Wednesday when than the previous month and below expectations, falling to the lowest level in four years. While the headline rate at 2.3% remains above the Fed's target, it's significant because economists had been pricing in an increase in consumer prices due to tariffs. The potential for higher inflation from increased import levies remains, but initial data hints at the possibility that the inflation effect of tariffs might not be as severe as feared.

around Fed rate policy much, which had already adjusted after the last FOMC meeting. The market now expects two rate cuts this year, with the first pencilled in for September. Traders could be banking on hopes that the climbdown in tariffs means the US economy will grow faster than anticipated and support upward momentum among tech stocks that could buoy the Nasdaq.

Broadening Top Hints at Upside

The Nasdaq index is showing a potential broadening top pattern, opening the door to an acceleration towards the 23000 handle, depending on the interaction between price and the upper trendline. However, bulls might face resistance at 22000, the record peak of 22250, and the round levels of 22500 and 22750 before reaching higher levels. On the flip side, if support is lost at the first pattern peak at 20750 and then the 20000 barrier, this may pave the way for a decline to 19000 and 18500, eventually driving the index back into bear market territory.

Source: SpreadEX / US Tech 100

Key Takeaways

The tech-heavy Nasdaq has surged into bull market territory as trade optimism appears to fuel a resurgence in tech enthusiasm. The Fed's rate cut expectations and lower-than-expected inflation data also provide further tailwinds for the index. However, the technical picture raises questions, with a potential broadening top pattern suggesting short-term gains towards the 23000 handle, which may see Nasdaq top out and trigger a reversal.