Nasdaq surges after brutal week crushes tech stocks

Wall Street witnessed a welcome turnaround Monday as the Nasdaq Composite Index clawed back significant ground following a punishing week that left tech investors reeling. The technology-heavy index posted a 1.25% gain in premarket trading, adding roughly 315 points after suffering its steepest weekly decline in more than seven months.

The previous week had been brutal for tech stocks, with the Nasdaq plummeting 5.77% and shedding 1,380 points to reach a low of 22,560. That dramatic selloff reflected mounting investor anxiety about artificial intelligence valuations, questions surrounding the profitability timeline for AI investments and concerns about circular spending patterns within the technology sector. Soft labor market data added further pressure to an already fragile market sentiment.

Technical support holds firm

The decline found a floor at 22,560, where the index encountered crucial technical support from two key indicators. The 78.6% Fibonacci retracement level and the 50-day exponential moving average both converged at that price point, creating a zone that attracted bargain hunters after a week of relentless selling pressure.

This technical cushioning proved significant as it demonstrated that despite the fear gripping markets, certain price levels remained attractive enough to spark buying interest. The bounce from this support area suggested that the worst of the liquidation may have passed, at least temporarily.

Political progress sparks optimism

Market sentiment received a substantial boost from developments in Washington as lawmakers made tangible progress toward resolving the government shutdown that had disrupted economic data releases. The Senate announced plans to amend a House-passed bill that would extend government funding through January 30, providing a potential path forward after weeks of fiscal uncertainty.

Traders interpreted this political movement as a stabilizing force for risk appetite across financial markets. A functioning government means the resumption of critical economic reporting, allowing the Federal Reserve to assess conditions more accurately when making monetary policy decisions. This clarity around data availability and liquidity expectations helped ease concerns that had weighed on stocks.

Tech giants lead the charge

Technology shares spearheaded the early recovery, reflecting renewed enthusiasm for growth-oriented investments after the prior week’s indiscriminate selling. Nvidia, the chipmaker that has become synonymous with artificial intelligence infrastructure, advanced 3.6% in premarket activity. Alphabet and Meta Platforms posted gains of 2.2% and 2% respectively, signaling that investors were ready to rebuild positions in quality names.

The semiconductor sector also participated in the rebound, with Qualcomm and Intel both trading higher after enduring heavy losses during the previous week’s rout. These gains across chip manufacturers highlighted selective buying behavior as investors gravitated toward established players with proven business models rather than speculative AI ventures.

The pattern of gains suggested market participants were beginning to differentiate between companies with sustainable competitive advantages in artificial intelligence and those riding the hype cycle without clear paths to profitability.

Critical resistance ahead

From a technical perspective, the Nasdaq now confronts immediate overhead resistance from a previously broken rising trendline that aligns with both the 100 and 50 exponential moving averages on the four-hour chart. This convergence of resistance levels represents the first meaningful test for buyers attempting to establish a short-term reversal pattern.

A decisive breakout above this resistance zone would signal strengthening investor confidence and potentially attract additional long positions as momentum traders join the rally. Such a move could propel the index toward the 23,000 level, marking a significant recovery from the recent lows.

However, failure to overcome this technical hurdle would shift focus back to the 22,500 area as critical support. A return to that level could reignite concerns about further downside risk and potentially trigger another wave of selling pressure.

What comes next

The trajectory of the Nasdaq over the coming sessions will likely depend on two primary factors. First, how quickly political progress in Washington translates into sustained market confidence as government operations normalize and economic data resumes flowing. Second, whether the rebound in AI-heavy stocks reflects genuine conviction or merely short-term covering of pessimistic bets.

Investors will be watching closely to see if Monday’s gains represent the beginning of a sustained recovery or simply a temporary reprieve in a broader downtrend. The answer may determine whether technology stocks can reclaim their leadership role or face continued scrutiny over stretched valuations and uncertain profit timelines.

Source: Traders Union

Disclaimer: This article is for informational purposes only and not financial advice. Always research before making investment decisions.