Nasdaq Index and S&P500: Tech Stocks Rebound as US Stocks Battle Oil and Rate Uncertainty

Nasdaq Fights Back but the Questions Are Mounting

The S&P 500 and Nasdaq Composite are closing out April with their strongest monthly gains in years and the engine behind it is earnings. Oil is surging, geopolitical risk is elevated, and inflation is still running hot. None of that has stopped traders from buying what companies are reporting. That tells you where the conviction is right now. It is in the numbers, not the macro.

Technical Outlook

The Nasdaq Composite Index (IXIC) is higher at the mid-session on Thursday in a wild session that saw the tech-weighted index challenge the record high at 24859.94 then take out two lows and a pivot before turning higher again on a rebound. The volatile price action is raising questions with me. Is the bullish tree being shaken before the next run-up to new record highs? Or, is the early distribution before an even bigger decline. The key level that could answer this question is last Friday’s high at 24836.60.

A trade through 24889.37 will signal a resumption of the uptrend. There are no upside targets but we will be monitoring for any signs of selling pressure like a daily closing price reversal top.

The index broke a short-term pivot at 24544.19 earlier in the session, but the follow-through move was weak with the market stopping at 24491.83 before rebounding to 24762.20. The next break through 24544.19 and 24491.83 will signal the selling pressure is getting stronger with a Gann angle at 24317.00 the next target.

We could see another technical bounce on the test of the Gann angle, but taking it out with strong selling could trigger an acceleration into the minor bottom at 24199.00. Taking out this level will shift momentum to the downside and likely lead to a test of the short-term retracement zone at 23842.60 to 23595.56.

Watch 24836.60 into the close today and Friday. A close under this price could open the door to some heavy selling pressure next week. Until then, the trend is your friend.

GDP and Inflation Telling Two Different Stories

First quarter GDP came in stronger than expected, supported by government spending. I stripped out that component immediately because government spending is not the same as organic economic growth and it does not sustain a rally on its own. The concern is what higher gasoline prices do to the consumer in the second quarter. That is where the GDP story gets complicated and traders are starting to think about it.

The Personal Consumption Expenditures report confirmed what the Fed already knew. Core inflation is still running above target. The Fed holds and the language stays firm. Rate cuts are not getting closer and nothing in Thursday’s data changed that calculus.

Earnings Carrying the Market

Alphabet was the cleanest result of the week. Cloud growth drove it and the stock went higher and earned it. Meta Platforms and Microsoft are a different story. Both laid out capital spending plans that made investors uncomfortable. I’ve watched this before. The market does not mind spending when it sees the return. It minds spending when the timeline is unclear. Amazon beat on cloud and still got a softer reaction for exactly that reason. The question being asked across all three names right now is the same. When does the money come back.

Caterpillar is higher after a strong quarter and that matters beyond the stock price. When heavy equipment demand holds up, infrastructure and construction are still moving. That is a real economy signal and it is one reason the rally has broader footing than just technology right now.

Eli Lilly moved higher after raising its full-year outlook on continued demand for its weight-loss drugs. Healthcare joining industrials and technology in pushing the indexes higher is exactly the kind of breadth that keeps a rally from getting fragile.

Energy Is the Risk Nobody Can Ignore

Oil surged this week and I felt it immediately in how traders were talking about margins. Iran tension and supply disruption concerns drove the move. Prices have backed off slightly but not enough to change the inflation picture. Energy costs at these levels do not stay contained. They run through transportation, manufacturing and consumer prices. That is a slow burn. By the time it shows up in margins and guidance, the damage is already done.

Market Breadth Holding Up

Financials and industrials are running alongside technology this month. Advancing stocks are outnumbering decliners. That kind of breadth gives the rally a stronger foundation than a handful of mega cap names doing all the work. I’ve seen narrow rallies fail fast when the lead stocks stumble. This one has more support underneath it.

What to Watch

Nasdaq Composite 24836.60 is the level into the close Thursday and Friday. A close under it opens the door to heavier selling pressure next week. Above it and the trend stays intact. Earnings have carried April. The question heading into May is whether rising costs start showing up in guidance and whether the Fed gives any ground on the rate path. Neither one is resolved and both will drive the tape from here.

More Information in our Economic Calendar.