Nasdaq 100’s Historic Bull Run Has Further to Go, Evercore Says

Jessica Menton

Wed, Jan 22, 2025, 4:21 AM 4 min read

Treasury rates jumped to multi-month highs last week as investors parsed economic data for clues on the Federal Reserve’s next interest-rate cut following US President Donald Trump’s election victory. The win ignited bets that his economic plans — like large import tariffs and mass deportations of low-wage undocumented workers — would stoke inflation and hurt growth, reducing the Fed’s scope to lower borrowing costs. That’s dented the appeal of rate-sensitive sectors, especially those with elevated valuations like technology.

The yield on the US 10-year has since pulled back after hitting a relative strength reading that usually signals a retreat. Pair that with positive technical signals and the Nasdaq 100 and S&P 500 Index both appear poised to hit fresh all-time highs in the first quarter, according to Ross, Evercore ISI’s head of technical analysis.

“At the end of the day technology remains in an outstanding position to continue to lead this market higher,” Ross said.

Through Tuesday, the tech-heavy equities benchmark has gone 467 sessions trading above its 200-day moving average — the second-longest such streak since the index’s inception four decades ago, according to data compiled by Bloomber.

The gauge currently trades around 10% above that long-term support level, a signal of relative stability to technical analysts who monitor daily averages and other metrics to determine stock-market momentum. This comes after the benchmark rose as much as 20% above that line in July — a level that preceded a summer rout and has historically foretold past selloffs.

The weeks ahead will be a pivotal stretch for stocks as Big Tech companies gear up to report quarterly earnings and the Fed’s next policy decision looms on Jan. 29. With earnings season already underway, investors are listening for how corporate chiefs expect the coming months to look. Next week is the busiest of the season, with reports coming from the likes of Apple Inc., Microsoft Corp. and Meta Platforms Inc.

To gauge where the 100-member index goes from here, John Kolovos, head of technical strategy at Macro Risk Advisors, is monitoring the largest exchange-traded fund tracking the Nasdaq 100 (QQQ). He sees technical supports between $485 and $495, around the ETF’s November lows. In his view, any pullbacks that are still above those thresholds provide a dip-buying opportunity.

“Falling yields are good for market breadth and equity-market participation,” said Kolovos. Technical analysts are also watching for whether Apple will catch a bid as the iPhone maker nears its 200-DMA.

After the yield on the 10-year Treasury briefly topped 4.8% last week — above its 2024 high — its fallen more than 20 basis points since then to hover around 4.57% on Tuesday. For Kolovos, the next key support level on the benchmark note’s rate is 4.5%, near its 50-DMA and a November peak. He’s also watching 4.8% and the late 2023 highs at 5% for resistance. The 10-year yield’s 14-day relative strength reading topped the 70 level two weeks ago, which some technicians view as a sign of overheating.

With the Nasdaq 100 roughly 2.4% below its December record, semiconductor stocks — a high-conviction idea from Evercore ISI’s Ross — are making fresh highs relative to software shares, suggesting that traders are rotating back into the chipmakers like Nvidia Corp. that have powered the bull market’s advance for more than two years.

In fact, the VanEck Semiconductor ETF (SMH), which holds chip bellwethers like Nvidia, Applied Materials Inc. and Advanced Micro Devices Inc., has outperformed the iShares Expanded Tech-Software Sector ETF (IGV) in five of the past six weeks, data compiled by Bloomberg show.

“Higher rates weigh uniquely on smaller caps and cyclicals such that when we get relief from rates, the first response is to buy back those hard hit groups,” Ross said. “When the dust settles, we go right back to those strong secular trends, big cash piles and big moats offered by Big Tech.”

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