The Nasdaq Composite climbed to an all-time high on Oct. 25, 2024, driven by gains in large-cap tech stocks. The tech-focused index rose 0.56% on the day, closing at 18,518.61, while the S&P 500 slipped slightly by 0.03% to end at 5,808.12. The Dow Jones Industrial Average dropped 259.96 points, or 0.61%, closing at 42,114.40.

Investor enthusiasm for tech stocks propelled the Nasdaq Composite ahead of the upcoming earnings reports. Meanwhile, the Nasdaq-100 exchange-traded fund (ETF) Invesco QQQ Trust QQQ gained 0.6% on Oct. 25.

For the week, Nasdaq Composite nudged up 0.2%, extending its gains for the seventh successive week. A rally in the Tesla stock post-earnings has been a key tailwind.  However, the S&P 500 and the Dow Jones ended the six-week winning streak, with the S&P down nearly 1% and the Dow falling 2.7% for the week.

What Lies Ahead of Nasdaq ETFs Amid Pre-Q3-Earnings Releases?

Investors should note that the Nasdaq plunged more than 30% in 2022 but overcame the downturn of the bear market to climb by 43% in 2023. Historical data offers a great picture for 2024 as well. Looking back to 1972, the year after a market rebound, the Nasdaq has historically seen an average increase of 19%, indicating that the current market upswing could continue.

Since 1990, the Nasdaq has returned an average of 215% during bull markets with average durations of about 40 months. If the current bull market remains in line with the historical average, the Nasdaq will jump by another 139% from its cyclical low during the next 22 months.

Let’s find out a few factors that could support the potential rally of the Nasdaq.

Inside Nasdaq’s Potential Rally

AI Euphoria

The Nasdaq’s climb to a record arrives with huge enthusiasm over artificial intelligence. The “Magnificent 7,” which includes Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla, have led the Nasdaq’s recovery from a tumultuous 2022 that was marred by rising interest rates and recession fears. Notably, Microsoft has emerged as a leader in the AI landscape. The likes of Alphabet, Meta and Amazon have joined the spree. Chip maker NVIDIA is supposedly the key beneficiary of AI enthusiasm.

Big Tech Earnings Show Hopes

Tesla kicked off the Q3 reporting cycle for the Magnificent 7 companies in style, with significant gains on the margins front raising hopes that competitive pressures may have started to ease. Tesla’s issues have always been unique, not providing much cues to the five Mag 7 peers that are coming up with Q3 results this week.

Of the Mag 7 members, we have Alphabet GOOGL will report on Tuesday, Oct. 29, Meta META, Microsoft MSFT on Wednesday, Oct. 30, and Amazon AMZN and Apple AAPL on Thursday, Oct. 31. The Mag 7 group is expected to record 16.9% growth in earnings in Q3 relative to the same period last year on 13.3% higher revenues.

Should Tesla’s Q3 margin gains prove durable, net margins for the “Mag 7” group would be 23.2% in Q3, up from 22.6% recorded in the year-ago quarter. The net margin for Q3 of 2025 is expected to be 24%.  The group returned to the ‘regular/normal’ growth model last year, and the trend is expected to continue this year and beyond.

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Fed Rate Cuts Likely in Near Term

The Fed enacted its first rate cut in four years in September. In November, there is a 95.1% probability of a 25-bp rate cut, per CME FedWatch Tool.  We believe that one of the key reasons behind the Nasdaq’s recent surge was speculation about Fed rate cuts.

Biotech Stocks to Rebound?

The Nasdaq has solid exposure to the biotech space. Biotech stocks have staged a rebound lately. iShares Biotechnology ETF IBB has gained 12% in the past six months. The group is being lifted by M&A activities. Novel drug launches, likely low rates and easy access to funds should buoy the zone in the coming days.

Resilient Consumers

The Nasdaq -100 index has invested 13.24% weight in consumer discretionary and 6% weight in consumer staples. Hence, a resilient consumer base is a plus for the index. Sentiment among U.S. consumers increased in October to a six-month high as households grew more upbeat about buying conditions, partly because of lower interest rates. The final October sentiment index rose to 70.5 from 70.1 a month earlier, according to the University of Michigan. The preliminary reading was 68.9.

ETFs in Focus

Against this backdrop, below, we highlight a few Nasdaq ETFs, such as Invesco QQQ QQQ, Invesco NASDAQ 100 ETF QQQM, First Trust NASDAQ-100 Equal Weighted Index Fund QQEW, Invesco NASDAQ Next Gen 100 ETF QQQJ and Direxion NASDAQ-100 Equal Weighted Index Shares QQQE.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report

Apple Inc. (AAPL) : Free Stock Analysis Report

Microsoft Corporation (MSFT) : Free Stock Analysis Report

iShares Biotechnology ETF (IBB): ETF Research Reports

Invesco QQQ (QQQ): ETF Research Reports

Alphabet Inc. (GOOGL) : Free Stock Analysis Report

First Trust NASDAQ-100 Equal Weighted ETF (QQEW): ETF Research Reports

Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE): ETF Research Reports

Invesco NASDAQ Next Gen 100 ETF (QQQJ): ETF Research Reports

Invesco NASDAQ 100 ETF (QQQM): ETF Research Reports

Meta Platforms, Inc. (META) : Free Stock Analysis Report

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