Yesterday, US stock indices closed with losses. The S&P 500 fell by 1.66%, while the Nasdaq 100 dropped by 2.22%. The Dow Jones Industrial Average decreased by 1.55%.
The stock indices declined after four consecutive days of growth amid uncertainty regarding the Federal Reserve's interest rate reduction and the overvaluation of technology companies, negatively impacting market sentiment. The MSCI Asia Pacific Index fell by 1.4%, with significant losses in technology companies such as SK Hynix Inc., following comments from Fed officials that weakened expectations for monetary policy easing in December. This drop concluded a week of stock gains on optimism that the end of the US government shutdown would allow for the publication of key economic data.
Investors are now closely monitoring upcoming economic reports, including inflation and employment data, hoping for greater clarity regarding the Fed's next steps. Many analysts believe that persistent inflation could force the regulator to maintain a stricter monetary policy, which would add to the pressure on the stock market. At the same time, various sectors of the economy are demonstrating different degrees of resilience. However, technology companies, which have led market growth recently, are experiencing the most pressure due to concerns about overvaluation and slowing revenue growth.
Brent crude oil jumped by 3% amid rising risks to Russian supplies due to military strikes in Ukraine and US sanctions. The British pound fell against all other major currencies in the G10 following reports that UK Chancellor Rachel Reeves is considering shelving plans to raise income tax rates in the upcoming budget.
Meanwhile, US President Donald Trump is preparing for a significant reduction in tariffs aimed at addressing high food prices, along with a series of new trade agreements, seeking to allay voter concerns about the cost of goods.
Amid a decline in risk appetite, Bitcoin dropped below $97,000 and has lost more than 20% since the beginning of October. In the commodities market, gold and silver traded higher, both metals showing significant weekly gains.
St. Louis Federal Reserve President Alberto Musalem stated that officials should approach the issue of interest rates cautiously, as inflation exceeds the target level, while his Cleveland counterpart, Beth Hammack, noted that policy should remain quite restrictive. Minneapolis Federal Reserve President Neel Kashkari said that he does not support the recent rate cut and has not yet made a decision regarding December.
Regarding the technical picture of the S&P 500, the main task for buyers today will be to overcome the nearest resistance level of $6,743. This will help the index gain ground and possibly pave the way for a potential rise to the new level of $6,756. An equally important objective for bulls will be to maintain control above $6,769, which would strengthen buyers' positions. In the event of a downward move driven by reduced risk appetite, buyers must assert themselves around $6,727. A break below this level would quickly push the trading instrument back to $6,711 and open the path toward $6,697.
