Nasdaq: Tech Stocks Surge as Trump Signals De-Escalation, Lifting Nvidia

Stocks Surge Into the Close as Peace Talk Hopes Fuel a Relief Rally

The major U.S. stock indices are sharply higher heading into the last hour of trading on Tuesday. The catalyst behind the surge in prices are signs that tensions in the Middle East could ease. After facing a month of selling pressure tied to rising oil prices and war concerns, today’s move looks like a major shift in sentiment may be driving a massive relief rally.

Once again, the headlines played a role in the strong turnaround. One pointed toward the end of the war between the U.S. and Iran. Strong buying in the technology sector also contributed to the overall strength in the S&P 500 and Nasdaq Composite, while the Dow was led by strong growth stock buying.

Trump Opens the Door and Investors Walk Through It

The main headline today is geopolitical. Reports from the Wall Street Journal said that President Trump is open to ending the military campaign against Iran. This essentially opened the door for investors to buy. At first, the early strength looked like investors were just hoping for some kind of peace announcement, but as the day progressed, the buying got more aggressive. This may have been caused by investors betting on a full resolution.

The Market Was Ripe for Any Kind of Good News

Given oversold conditions and the back and forth chatter from the U.S. and Iran, investors have been worn out both financially and mentally. But today’s price action indicates that the market was ripe for any kind of positive development. Although the news about crude oil remains somewhat bearish, the markets are forward-looking so any bearish news may have already been priced in. This includes worries about inflation and economic slowdowns. With even a little bit of positive news, investors may finally be able to put the short-term risks to bed and start dealing with the long-term implications of supply issues, infrastructure damage and repairs.

Scratching the Worst Case Scenario Off the List

More importantly, it may have lifted some of the uncertainty over when the war would end. Investors hate uncertainty because they don’t know how to handle the risk. Just last week, analysts were floating the notion of $150 crude oil, but the market didn’t know what to believe so the idea of a price surge to that level was hard to hedge. If a deal is done quickly then investors could at least scratch that worst case scenario off the list and instead focus on how to deal with inflation, Fed policy and even Friday’s non-farm payrolls report. But more importantly, they get the chance to hedge away $100 crude oil, which seems to be a major concern right now.

Tech Leadership Is Back and That’s a Good Sign

The return of tech leadership is another positive factor on Tuesday. Money returning to growth stocks suggested improving risk appetite. Money moving back into the big names like Nvidia, Meta, Amazon and Alphabet was a strong sign of confidence.

What Tuesday’s Price Action Is Telling Us

So what did we learn from Tuesday’s price action? We learned that the stock market remains headline-driven and that the faster the war ends, the faster money flows back into the markets. If geopolitical tensions continue to ease, the rally can extend. If not, volatility is likely to stay high.

Technical Outlook

We can see that on the daily Nasdaq Composite (IXIC) chart too. The chart indicates the index has room to run until about 21881.82 before it will run into the lower end of a major retracement zone. However, regaining this level with conviction could extend the rally into what I consider is the major resistance cluster at 22316.33, 22532.88 and 22666.68. This is formed by the 200-day moving average, a long-term 50% level and the 50-day moving average, respectively.

A near-term test of this zone will either attract enough sellers to trigger a steep break, or enough buyers to fuel a breakout to the upside.

More Information in our Economic Calendar.