Nasdaq Breaks All-Time Highs at 26k Ahead of Fed Rate Cut

Jasper Osita - Market Analyst

2025-10-28 11:33:35

Nasdaq 100 hits fresh all-time highs near 26,000, validating earlier forecasts as the market fully prices in a Fed rate cut.
CME FedWatch Tool shows a 96.7% probability of a 25bps cut at the October 30 FOMC meeting, lowering the rate from 4.25% to 4.00%.
Focus now shifts to Powell’s tone at the Fed press conference — the key determinant of whether the rally extends or consolidates.

Forecast Fulfilled: Nasdaq’s Rally Reaches Record Territory

In last week’s analysis — “Nasdaq Eyes All-Time Highs Amidst Govt Shutdown — US Still Closed” — the narrative projected that once the U.S. government stalemate stabilized and rate cut expectations became dominant, the Nasdaq would surge toward uncharted highs. That projection has now fully materialized.

As of this week, Nasdaq 100 Futures have rallied to approximately 25,960–26,000, establishing new all-time highs. The price action shows nine consecutive bullish sessions — a sustained drive fueled by institutional demand and an environment flush with easing expectations.

Even with the ongoing U.S. government shutdown, investor sentiment has turned decisively risk-on. The market has chosen to look beyond fiscal paralysis, focusing instead on monetary policy easing, AI-driven tech resilience, and improving liquidity conditions.

The Catalyst: Fed Rate Cut Guaranteed

At the core of this rally lies a near-certain Federal Reserve rate cut.

According to the CME FedWatch Tool, there’s now a 96.7% probability that the Fed will reduce its benchmark rate by 25 basis points on October 30, lowering the target range from 4.25% to 4.00%. Only 3.3% of market participants expect no change, and 0% foresee a hike.

That level of conviction is rare — essentially signaling that the market has already moved ahead of the Fed.

In the world of equities, rate cuts are like oxygen: they lower borrowing costs, reduce yields, and push investors to re-allocate capital from bonds and cash into growth-driven assets like tech stocks.

The Nasdaq, as the growth engine of U.S. equities, naturally becomes the prime beneficiary.

When liquidity expectations rise, valuations expand — not because earnings immediately change, but because the discount rate applied to future cash flows falls.

This macro-mechanical repricing is what often precedes major bull runs, and it’s precisely what we’re seeing unfold.

Shutdown Paradox: When Fiscal Chaos Fuels the Rally

Interestingly, the ongoing government shutdown — initially perceived as a risk — has instead created a short-term liquidity cushion.

Here’s why:

With much of Washington in limbo, Treasury issuance has slowed, meaning fewer government bonds are flooding the market. That reduces the near-term demand for dollars and alleviates pressure on yields.

In parallel, economic data releases are being delayed, limiting immediate catalysts for hawkish monetary sentiment.

This strange silence — a “data blackout” — has turned into a tailwind for risk assets.

Investors, deprived of fresh macro volatility triggers, have doubled down on equities, particularly in sectors where growth stories remain intact.

The Nasdaq’s surge during this period underscores how liquidity dynamics can outweigh fiscal uncertainty, at least temporarily.

Tech Resilience: The Heartbeat of Nasdaq’s Climb

Behind the index’s breakout is the continued dominance of mega-cap tech and AI-related sectors.

Semiconductors are rallying on renewed optimism for global demand recovery.
AI infrastructure and cloud service providers remain magnets for institutional capital.
The so-called “Magnificent Seven” — including Microsoft, Nvidia, Apple, and Amazon — have once again become defensive growth vehicles amid easing expectations.

When rates fall, growth duration stocks benefit the most.

This isn’t just speculative enthusiasm — it’s mathematical.

Lower discount rates make long-dated cash flows more valuable, hence the Nasdaq’s outperformance versus the Dow or S&P 500 during periods of easing policy.

In essence, the market is repricing future innovation — betting that the Fed’s move to re-stimulate growth will extend the AI and tech spending supercycle into 2026.

Fed Cut Impact: Liquidity vs. Tone

1. Liquidity Injection

If the Fed follows through on the 25bps cut, it will mark the start of a transitionary easing phase, shifting from restrictive policy to neutral accommodation.

This move provides a liquidity floor beneath equities, making pullbacks more limited unless macro data severely disappoints.

Historically, initial rate cuts — especially when pre-emptive rather than reactive — have triggered multi-month rallies in equities.

That’s because they ease funding conditions before major economic stress appears.

2. Powell’s Tone is the Deciding Factor

The real volatility trigger won’t be the rate cut itself — it’s already priced in — but rather Powell’s tone during the 2:30 AM Fed press conference.

There are two possible interpretations:

Dovish Powell:

If he emphasizes the Fed’s confidence in disinflation and its willingness to support growth, risk sentiment will remain strong.

This scenario could extend Nasdaq’s breakout to 26,250–26,500, possibly initiating a fresh leg higher before year-end.

Cautious Powell:

If he frames the cut as a “technical adjustment” rather than the start of an easing cycle, markets may interpret it as a “one and done” move, leading to short-term profit-taking and a pullback toward 25,700–25,450.

In both cases, Nasdaq’s structural trend remains bullish — but tone determines the pace and depth of the next move.

GDP Data Adds Another Layer

Also on the calendar this week is the U.S. Advance GDP print (October 30, 8:30 PM), forecast at 3.0% QoQ, down from 3.8% previously.

A weaker reading would reinforce the need for easing, further supporting equities.

However, a surprise upside may briefly reignite “higher for longer” fears, creating short-term volatility.

Traders should note: the sequencing of the events matters — the rate decision first, then Powell’s tone, followed by GDP data.

By the time GDP lands, market positioning will already be established, magnifying any overreactions.

Technical Outlook: Breakout in Motion

Current Structure

On the chart, Nasdaq 100 Futures (NDAQ100Z2025) have surged into price discovery mode, holding steady around 25,950–26,000 after a nine-day consecutive advance.

Momentum remains heavily bullish, with the most recent candles showing minimal wicks — an indication of strong buying pressure and minimal intraday rejection.

Bullish Scenario: Continuation Above 26,000

A confirmed daily close above 26,000 cements breakout continuation.
Short-term targets stand at 26,250 → 26,500, aligning with Fibonacci extension projections.
Fed dovishness or favorable GDP data would amplify upside momentum.
Key structural support remains at 25,700, the last consolidation area before the breakout.

Bearish Scenario: Exhaustion Before FOMC

Failure to sustain above 26,000 could trigger a technical correction.
Pullback zones: 25,700 → 25,450, representing the top of prior resistance turned support.
A hawkish Powell or stronger GDP could prompt temporary risk-off sentiment.
However, deeper retracements below 25,300 remain unlikely unless the Fed reverses course on easing tone.

Market Narrative: Fundamentals Align with Flow

What we’re witnessing is the perfect alignment of fundamentals, liquidity, and positioning.

Institutional flows, retail sentiment, and macro expectations are synchronized in one direction — higher.

The Fed’s anticipated cut acts as both a fundamental and psychological catalyst, encouraging traders to price in renewed optimism before confirmation.

Moreover, the lack of major economic data due to the shutdown has given markets the breathing room to extend trends uninterrupted by short-term noise.

Liquidity is returning, volatility is contained, and every dip has been quickly absorbed.

But caution is warranted: when everyone is on one side of the boat, volatility spikes can be sharp once profit-taking begins.

Final Thoughts

The Nasdaq 100’s breakout into all-time highs encapsulates the forward-looking nature of modern markets.

Even as the U.S. government remains in partial shutdown, traders have turned their gaze toward monetary policy and liquidity dynamics.

The rate cut is priced in — but the tone is not.

That single variable will decide whether we see an acceleration toward 26,500 or a short-term reversion toward support.

As things stand, structural momentum favors the bulls. The rally isn’t merely speculative; it’s underpinned by liquidity repricing, institutional demand, and the return of growth optimism.

Nasdaq has officially entered its next chapter — one that could define how markets close 2025 and open 2026.

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作者

Jasper has been in the markets since 2019 trading currencies, indices and commodities like Gold. His approach in the market is heavily accompanied by technical analysis and of course, supported by fundamentals. He has a background in trading proprietary firms and has been teaching students how to navigate themselves in the markets from basic to advance concepts.