Markets reassess tariff risks: What’s next for the Nasdaq 100

Market participants reassess expectations for tariff risks

Fresh tariff threats from US President Donald Trump overnight have prompted market participants to reassess their expectations of tariff risks, as his tone reflects an ally who may be harder to please and suggests a tougher path to consensus with trading partners than initially expected.

President Trump announced that his proposed 25% tariffs on Mexican and Canadian goods will take effect on 4 March 2024, alongside an additional 10% duty on Chinese imports, citing fentanyl concerns as justification. Whether this is still a negotiation tactic or a definite move remains up for debate, but markets are unwilling to take chances, with market participants further rotating out of expensive tech stocks into value plays. Any implementation of tariffs may pose downside risks to global growth, potentially bringing about higher business costs, inflationary pressures on consumers, and weaker global trade activities.

The market’s natural reaction has been to de-risk: the Nasdaq fell 2.8%, the S&P 500 dropped 1.6%, while the value-focused Dow Jones slipped just 0.4%. Growth concerns were further reinforced by weaker US data, including higher jobless claims, flat core durable goods orders, and disappointing pending home sales.

Market reaction

Treasury yields reacted to the downside on higher growth risks, with the US 10-year yields touching its lowest level since December 2024. The US dollar bounced 0.8%, with renewed tariff rhetorics and safe-haven flows aiding to push back against previous bearish sentiments. This comes as the US dollar found some near-term support off the 106.26 level, as its daily moving average convergence divergence (MACD) forms a bullish crossover. That said, given the lower-highs-lower-lows dynamics in place since the start of the year, any bounce may still leave eyes on the 108.16 level as key resistance to overcome.

Signs of weakness are further evident in the Nasdaq, with the breakdown of a rising channel. The lower trendline support, which has held the index up on at least three occasions since the start of the year, has caved in. We highlighted in yesterday’s note that a cautious tone may still be warranted before the index extended its downside towards the 20,640 level mentioned. While we may likely end this week on a weaker note, we will be watching for any near-term recovery into next week, as the weekly relative strength index (RSI) has returned to its crucial midline—a level that has held firm five times since 2023 and could attract buyers looking to defend it.

US Tech 100 daily chart:

A breakdown in the weekly RSI below the midline could be a key signal to watch, as it may increase the risk of a bear market, mirroring conditions seen in 2022 and 2018. Those times are where its weekly RSI falls below the midline and any subsequent attempts to revert back to the midline are sell-the-top opportunities. But for now, a bear market narrative may still be premature, and we will be watching for buyers to step in and defend this critical level.

US Tech 100 weekly chart: