Nasdaq Composite drops 0.75% premarket as Trump proposal hits financial sector stocks

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Financial stocks drag the Nasdaq index

Highlights

Nasdaq loses 190 points premarket as financial stocks drag post-CPI rally
Trump credit cap proposal sinks Visa and Mastercard, weighing on Nasdaq-related ETFs
Rising wedge trendline meets 100 EMA at 23,500 ahead of PPI, retail sales

The rally was fuelled by the December CPI report which showed core inflation easing below analyst expectations. That reading strengthened expectations that the Federal Reserve could proceed with multiple rate cuts through 2026. Since lower interest rates typically increase the present value of future earnings and reduce financing costs, tech stocks initially advanced, boosting the Nasdaq.

Nasdaq Composite price chart (Dec 2025 - Jan 2026). Source: Tradingview

However, selling pressure returned later in the Tuesday session, led by declines in financial stocks. JPMorgan shares dropped as much as 4% despite beating earnings estimates. Disappointment around its investment banking fees and broader concern over regulatory risk dominated investor sentiment. A new proposal from former President Trump to cap credit card interest rates at 10% triggered widespread losses in consumer finance names.

Trump credit cap plan triggers sharp losses in Visa, Master shares

Shares of Visa and Mastercard sank up to 5% on Tuesday as traders digested the impact of the rate cap on card lending profitability. Broader concerns about credit availability also weighed on other financial stocks. Several large U.S. banks have since warned that capping rates could limit consumer and small business access to credit. This financial sector drag spilled into Nasdaq-linked ETFs and indexes, erasing early gains from the CPI-driven optimism.

Sticky inflation may expose the Nasdaq to further downside at 23,300

Technically, the Nasdaq Composite has traded inside a rising wedge pattern for over two weeks. The base of the wedge aligns with the 100 EMA on the 1-hour chart at 23,500. That level will be critical for short-term direction during today’s North American session. The PPI and retail sales reports will likely determine whether the selloff deepens beyond the 100 EMA or rebounds on it.

If the upcoming core PPI and core retail sales prints align with the earlier CPI softness, then 23,500 could act as a springboard for a rebound. A bounce from there could lift the index back above Tuesday’s high and push toward the 23,900 level. However, any sign of sticky inflation from today’s data might break the wedge pattern and expose the Nasdaq to further selloff near 23,300.

In recent analysis, we discussed how the Nasdaq Composite closed above 23,700 for the first time since November. Tuesday’s CPI data and JPMorgan earnings were expected to determine whether the bullish breakout held or faded.

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