Nasdaq 100: Assessing the Sustainability of Its Post-Cut Rally

The Nasdaq 100's rally following the Federal Reserve's October 2025 rate cut has ignited renewed optimism among investors, with the index surging 0.53% in the immediate aftermath of the decision. This move, coupled with the Fed's signal to end quantitative tightening and its projection of stronger economic growth, has positioned the tech-heavy benchmark as a focal point for market analysis. However, the sustainability of this rally hinges on a delicate interplay between technical indicators and fundamental drivers, both of which warrant closer scrutiny.

Fundamental Drivers: Policy Easing and Economic Optimism

The Fed's 25-basis-point rate cut in October 2025, which brought the benchmark rate to a target range of 3.75%-4%, marked a pivotal shift in monetary policy according to market analysis. Lower borrowing costs typically fuel equity markets by reducing discount rates for future cash flows, a dynamic that has historically benefited growth-oriented sectors like technology. According to a report by JPMorgan, the end of quantitative tightening-a program that had drained liquidity from financial systems-further amplified this effect by injecting capital into markets.

Beyond monetary policy, broader economic signals bolster the Nasdaq 100's case. The Fed's latest projections highlight a resilient growth outlook for 2025 and 2026, with inflation expected to remain "relatively contained" and unemployment trending downward. Meanwhile, easing U.S.-China trade tensions, including President Trump's hints at reduced tariffs on Chinese goods, have alleviated concerns about global supply chains. These developments, combined with robust earnings from semiconductor firms and continued AI sector momentum, create a favorable backdrop for the index.

Technical Indicators: A Mixed Picture of Strength and Caution

While fundamentals are supportive, technical analysis reveals a nuanced picture. The Nasdaq 100 has maintained its structural uptrend, with the 50-day moving average acting as a critical support level during a 6.6% pullback from its October 30 all-time high of 26,288 according to technical analysis. A bullish reversal candlestick pattern on November 14 and a rebound in the Relative Strength Index from oversold territory suggest short-term resilience. Additionally, the index remains within an ascending channel, a technical pattern that has historically signaled continuation of trends according to market data.

However, caution is warranted. The index's recent gains have been partially driven by anticipation of a potential December rate cut, with futures markets pricing in an 80% probability of a 25-basis-point reduction. If the Fed disappoints in December, the Nasdaq 100 could face renewed pressure, particularly if earnings from megacap stocks fail to meet expectations according to market forecasts. Nvidia, a 14% weight in the index, is a key watchpoint ahead of its third-quarter earnings report, which could either reinforce or undermine the rally according to technical analysis.

Risks and Uncertainties

Despite the positive momentum, several risks could derail the Nasdaq 100's trajectory. Mixed earnings from large-cap technology firms have already sparked volatility, with concerns about capital expenditures and profit margins lingering. Additionally, the U.S. government shutdown debate remains a wildcard, as fiscal uncertainty could dampen risk appetite. On the technical side, a breakdown below the 50-day moving average or a failure to retest the ascending channel's upper boundary could signal waning momentum.

Conclusion: A Balanced Outlook

The Nasdaq 100's post-rate-cut rally is underpinned by a compelling mix of policy easing, economic optimism, and technical strength. However, its sustainability will depend on whether these factors can overcome near-term headwinds, including earnings volatility and geopolitical risks. For now, the index appears to be in a phase of consolidation, with both fundamental and technical indicators pointing to a continuation of the bullish trend-if key support levels hold. Investors should remain vigilant, balancing optimism with caution as the market navigates this critical juncture.