Nasdaq Composite holds above 23,620 despite low volume and mixed Fed expectations

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Nasdaq Composite holds

Highlights

Nasdaq rally softens as volume drops and traders await January Fed policy signals
AI chip costs raise valuation concerns despite five-day Nasdaq Composite price advance
Nasdaq holds above 23,620 but trails behind S&P 500 and Dow Jones at all-time highs

Behind the upward move is a mix of supportive macro and sector-specific drivers. Strong U.S. GDP data and optimism around rate cuts in 2026 have provided a supportive backdrop for equities. However, the conviction behind Nasdaq’s rally is beginning to wane. Daily trading volumes have steadily declined across the five-day winning streak. This drop in participation hints at weakening bullish momentum, even though prices pushed higher.

Nasdaq Composite price chart (July - Dec 2025). Source: Tradingview

Market participants are tempering expectations for an immediate policy shift by the Federal Reserve. According to CME’s FedWatch Tool, the market is pricing in roughly 50 basis points worth of cuts next year. But the odds for a January rate cut are slim. This reflects the Fed’s reluctance to move quickly, especially as the economic data continues to show resilience. The upcoming change in Fed leadership around May introduces further uncertainty into the rate outlook, keeping traders cautious.

Fed policy timing and AI spending transparency temper investors' optimism

Another layer of hesitation comes from investor unease about the actual costs behind tech’s AI expansion. Companies are investing heavily in data centers and custom AI chips, but often present the costs as lumped capital expenditures. This practice obscures the timeline and risk tied to fast-depreciating chip assets versus long-term infrastructure projects, adding opacity to tech balance sheets.

Despite those concerns, the Nasdaq Composite has delivered some gains for the month so far. But compared to the S&P 500 and the Dow Jones Industrial Average, both currently trading at all-time highs, the Nasdaq has yet to break above its monthly peak near 23,700. The index also sits 1.8% below its all-time high of 24,000.

Given the current low-volatility environment typical of the festive period, the Nasdaq Composite is likely to drift sideways around the 23,700 level heading into year end. Traders may wait for clearer signals in early January before taking larger positions.

In recent analysis, we discussed how the Nasdaq bounced from 22,700 as a softer CPI revived short-term Fed cut bets. The index stalled below 23,160, where clustered EMAs signaled rejection risk ahead of sentiment data.

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