Stock market on October 6: S&P 500 and NASDAQ slightly correct

[Ben Graham]

Last Friday, US stock indices ended mixed. The S&P 500 rose by 0.01%, while the Nasdaq 100 fell by 0.28%. The industrial Dow Jones jumped by 0.51%.

On Friday, the tech rally slowed, pulling back from record highs. Optimism around artificial intelligence was dented by warnings from US President Donald Trump directed at Hamas and signs of economic weakness amid the ongoing US government shutdown. The yield on 10-year bonds, which sets the range for borrowing costs in the US, dropped by more than five basis points.

Shares of Palantir Technologies Inc. were among the leading decliners, falling by 7.5% after reports of significant problems in the communication system. Despite weakening at the end of the day, the S&P 500 index posted a slight gain, maintaining its longest winning streak since July.

President Trump warned of severe consequences if Hamas does not agree to his plan for ending the war in the Gaza Strip. Shortly before the close of the New York markets, Hamas agreed to some of these terms, including the release of hostages, before the Sunday deadline.

ISM services data published Friday showed that the US services sector stalled in September, as business activity declined for the first time since the start of the pandemic and orders barely grew. This is cause for concern, as the service sector is a vital driver of the US economy, accounting for a significant share of GDP and employment. The slowdown in business activity may be attributed to several factors, including high interest rates, elevated inflation, and weakening consumer demand. Higher borrowing costs pressure businesses, while rising prices cut consumers' disposable incomes, negatively affecting demand for services. Despite disappointing ISM data, it is important to note that the services sector overall remains healthy.

All of this instills confidence among swap traders that the Fed will cut rates by another quarter point in October, despite the absence of labor market data. Last week, Federal Reserve officials were divided on how much further borrowing costs need to be cut after reducing the base interest rate by a quarter of a percentage point last month. Chicago Fed President Austan Goolsbee reiterated his view that policymakers should proceed cautiously when lowering rates, while Fed Governor Steven Miran, who advocated for a more significant cut in September, stated he would revise his view on inflation if housing prices unexpectedly surge.

In the commodity markets, oil prices fell below $61 per barrel ahead of the upcoming OPEC+ supply decision, although crude prices did rise on Friday after President Trump's warning regarding the Gaza Strip. Gold posted a confident seventh consecutive weekly gain, supported by central bank purchases amid lower US interest rates and persistent inflation concerns.

As for the technical picture of the S&P 500, the main task for buyers today will be to break through the nearest resistance level of $6,743. This would help trigger further upside and open the possibility for a move to the next level at $6,756. No less of a priority for bulls will be maintaining control over the $6,769 mark, which would strengthen buyer positions. In the event of a downward move amid waning risk appetite, buyers must assert themselves around the $6,727 area. A break below this would quickly send the instrument back to $6,711 and open the way to $6,697.

The material has been provided by InstaForex Company - www.instaforex.com