Nasdaq 100 outlook: Can US stocks rebound after Nvidia- and tariffs-driven drop?

After the big Nvidia- and tariffs-driven drop, US index futures been little-changed, bouncing back a little from short-term oversold levels and taking cue from a firmer tone in Europe. In Europe, the major indices were holding gains of around 0.5% by mid-day in London, as weaker inflation data from France and Germany bolstered the case for ECB easing to counter the negative impact of US tariffs. There is some hope that the Ukraine peace process talks, which are progressing well, could provide some support for European markets. But the key threat remains tariffs, which now appear to be on the way, judging by what Trump said yesterday. Unless he changes his mind again – and that is something we cannot rule out – investors are learning to accept that tariffs will come into force and whatever damage they cause, they will have to face it. But stock markets have repeatedly defied gravity and managed to put big obstacles behind it. Can this be yet another such scenario, or will we see a more meaningful correction? Judging by how European markets have bounced back, I wouldn’t bet against a US stock market rebound. But before turning tactically bullish on the Nasdaq 100 outlook again, we will need to see some bullish price action.

Nasdaq 100 Outlook: All eyes on Nvidia again

Yesterday, US stocks tumbled, with the tech sector under pressure following Nvidia’s earnings, with the stock going on to drop more than 8% by the close and with it taking down the tech-heavy Nasdaq 100, which broke to a new 2025 low. While the results were not bad, they failed to impress investors accustomed to blockbuster numbers. The reaction underscores concern over stretched valuations in the sector, and is a reminder that the markets can take the elevator down at times. The drop also highlights concerns over AI-sector growth, particularly after Chinese start-up DeepSeek demonstrated chatbot development at a fraction of expected costs, raising questions about demand for Nvidia’s premium chips. 

With Nvidia playing a pivotal role in the index, its trajectory will likely influence broader market sentiment. If the stock struggles to rebound, the Nasdaq 100 outlook may remain under pressure. But should it be able to stage a recovery today, then that could soothe some nerves. Key support is at around $120 for the stocks.

Other tech stocks should also be watched closely —particularly chipmakers—given Washington’s crackdown on China’s technological ambitions.

But appetite for tech stocks remain insatiable. If you liked Nvidia at $150, you would love it at $120 or lower. That said, traders need to remain nimble and avoid excess risk-taking until such a time volatility calms down a little.

Tariffs Set to Take Effect on 4th March 

Trump’s stance on tariffs had been fluid, but yesterday he was unequivocal: tariffs targeting Canada, Mexico, and China will be enforced from 4th March. The uncertainty surrounding trade negotiations had left room for potential delays, but as the deadline nears, investors are bracing for the economic impact. Tariffs could dampen economic growth, exacerbate inflation, and even trigger recessions in the impacted regions. Meanwhile, China has vowed to take "all necessary measures" in response to the US move. 

Core PCE data in focus

With Nvidia’s earnings behind us, investors’ focus shifts to trade policy and the release of the Fed’s preferred inflation gauge—the core PCE price index – today. Economic data has been soft, raising concerns of stagflation. The University of Michigan (UoM) survey recently showed long-term inflation expectations climbing to a 30-year high of 3.5%. If the PCE data exceeds the projected 2.6%, further market volatility could follow.  A weaker number could calm nerves.

Technical Nasdaq 100 outlook: Key levels to watch

Source: TradingView.com

Following the big drop on Thursday, one can say that the bears have now met their objective: liquidity resting below January’s low of 20529. We mustn’t forget that the trend has been super strong on the Nasdaq over the past couple of years and many people are still looking to buy the dips. The bears understand that and may ease of the gas here, until markets recover to test old broken support levels again. With that in mind, the next couple of potential resistance levels to watch now include the July 2024 high of 20530, followed by this Tuesday’s low of 20927.

The decline has eased the Nasdaq’s RSI overbought conditions on the higher time frames somewhat, while bringing the daily RSI to near oversold levels of 30.0. This is not to say a bounce is coming, but we have seen plenty of dip-buying whenever the RSI is at these levels.

If the selling continues for a bit longer, we could see the Nasdaq slide towards its 200-day moving average at around 20,280, or even the psychologically important handle of 20,000.   

For now, the Nasdaq 100 outlook remains uncertain, with Nvidia stock and tariff developments in focus. The coming days will be crucial in determining whether the index can stabilise or faces further downside. 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R