What key factors will shape Wall Street's trajectory in 2025?

Nasdaq 100 shines in 2024

United States (US) stocks finished last week on the back foot, weighed down by rising bond yields and a sell-off in technology stocks amid low holiday market volumes.

Despite Friday's setback, the Nasdaq 100 is up 27.62% in 2024. This year's highlights include only three down months and a single 10% pullback back in July. The index is on track to lock in a 19th year of gains over the past 22 years.

Technology stocks drive market rally

The rally in technology stocks this year has been mirrored by gains in the broader market, with the S&P 500 rising by 25%.

Key factors influencing 2025 market outlook

• Nasdaq 100’s 2024 substantial gains: build on a 53.81% rise in 2023, setting a high starting point for 2025
• Federal Reserve’s (Fed) dovish pivot: a significant portion of the 2023/2024 gains followed the Fed’s dovish pivot in October 2023, which raised expectations of upcoming interest rate cuts amid declining inflation. However, these bullish drivers faded toward the end of 2024
• Artificial intelligence (AI) boom: catalysed by the launch of Chat GPT in November 2022 and gaining traction by May 2023, has evolved from excitement to a more mature phase. This shift is evidenced by a modest fall in Nvidia's share price after its earnings release on 20 November
• President-elect Trump's inauguration: set to take place on 20 January, is expected to be followed by a series of executive orders on immigration, trade, energy, and cryptocurrency. The market's reaction to these policies will be crucial in determining whether stocks will continue to rise into early 2025 or face a correction.

Nasdaq 100 technical analysis

The Nasdaq 100's sell-off from its 22,133 high left a bearish weekly engulfing candlestick pattern. This pattern warns of the risk of a deeper pullback, further downside confirmation is required.

Specifically, the downside confirmation required is a daily close below support at 21,000 – 20,900, and a daily close below the mid-November 20,315 low.

Should both support levels break on a sustained basis, it would indicate that a medium-term high is in place at the 22,133 high and warn that a deeper pullback is underway towards the 200-day moving average (MA) at 19,477, with scope to uptrend support at 19,150.

Aware that until those two support levels mentioned above are breached, the uptrend remains in place during a seasonally bullish time of the year.

Nasdaq 100 daily chart

S&P 500 technical analysis

Early last week, the S&P 500 saw strong gains before running into sellers ahead of the 6099-record high. While last week’s rebound keeps the uptrend intact during a seasonally bullish time of the year, we have outlined below some key downside levels that the market will be closely watching in the early stages of 2025.

A sustained break below support at 5850 – 5830, would initially suggest a medium-term high at 6099 and that a deeper pullback is underway towards a band of support at 5650 – 5550. This band of support includes uptrend support from the October 2023 low and the 200-day MA.

Should the S&P 500 sustain a more significant break below 5650 – 5550, it would cause significant technical damage to the uptrend, opening the way for a deeper pullback towards the September 5402 low, with scope towards the August 5119 low.

S&P 500 daily chart

• _{Source: TradingView. The figures stated are as of 30 December 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}