S&P 500 broad market index futures rose by
0.8% to 6,562 points as conciliatory remarks from U.S. President Donald Trump
briefly pulled the market back from the brink. The respite, however, proved
short-lived, and sentiment remains fragile, with investors once again peering
over the edge. The benchmark has yet to complete a standard correction of
5–10%, which would place it around 6,427 points. Last Friday’s sharp sell-off
pushed the index to a low of 6,495, and below that level, the primary target
within the current bearish technical structure stands at 6,300–6,400 points.
Tensions between Washington and Beijing
continue to escalate after Trump officially labelled the standoff a trade
“war.” U.S. Treasury Secretary Scott Bessent and Trade Representative Jamison
Greer accused China of violating the existing “peace deal” by tightening export
controls on rare earth metals. Beijing, in turn, rejected these accusations,
accusing Washington of creating hysteria and refusing to lift restrictions
despite U.S. threats to impose an additional 100% tariff on Chinese goods from November
1. Hopes for de-escalation are slowly fading. Data from Polymarket shows the
probability of a new U.S.-China trade agreement has dropped to 75%, down from
85% at the start of the week. Without new conciliatory rhetoric from the White
House, another leg down in the market appears increasingly likely.
Investors are now actively searching for
negative signals, a classic sign of deteriorating sentiment. Strong earnings
from major U.S. banks have failed to inspire optimism, while renewed concerns
about smaller lenders have emerged. The bankruptcies of mid-sized auto-sector
firms Tricolor and First Brands have put pressure on their creditors. Shares of
Western Alliance Bancorp plunged 11% on Thursday, and Zions Bancorp fell 13%,
reviving memories of First Republic Bank’s collapse in May 2023. Yet the
comparison may be exaggerated; if trade tensions ease, these isolated issues
could quickly fade from focus.
Federal Reserve (Fed) Chair Jerome Powell came
close to promising further rate cuts during his Tuesday speech, even hinting at
a possible end to the quantitative tightening programme. The upcoming October
FOMC meeting is shaping up to be distinctly dovish. Following Powell’s remarks,
data from the CME FedWatch Tool began pricing in a 5.3% chance of a
50-basis-point cut, a small but notable sign of shifting expectations.
Next week, markets will turn their attention
to third-quarter earnings reports from Netflix and Tesla, both key indicators
of broader U.S. technology sector momentum.
Large investors remain relatively steady in
equities. The SPDR S&P 500 ETF Trust (SPY) reported net outflows of $1.7
billion this week, a moderate figure suggesting no panic selling. If this trend
persists, it could indicate that institutional players are still positioned for
a rebound. Should a U.S.-China deal somehow materialise before November 1,
accompanied by strong Big Tech earnings and a dovish Fed, the market could ignite
a powerful rally, a scenario traders are already calling a potential “rocket
ship.”
Technically, the S&P 500 remains locked in
a bearish formation with a primary downside target of 6,300–6,400 points. The
index currently trades at 6,562, sitting near key support at 6,550–6,570. A
confirmed break below this zone would expose the next intermediate level at
6,450–6,470.
In the oil market, the unfavourable phase
persists and is expected to last through October. Brent crude remains below its
$65.00–$67.00 support zone, with downward momentum intensifying. The next
support stands at $55.00–$57.00, near the ultimate bearish target range of
$45.00–$55.00.
Gold set yet another all-time high at $4,379
per troy ounce, with the rally continuing unchecked. Overbought conditions have
reached record historical extremes, yet short positions remain perilous as
safe-haven demand continues amid persistent trade tensions. Only a confirmed reversal
pattern would justify a bearish stance.
In currency markets, the U.S. Dollar weakened
as the EURUSD pair neared the gap at 1.17380. No clear direction has emerged,
with both a rally above 1.19000 and a decline below 1.15000 remaining possible.
A sustained break above 1.1750–1.1780 would confirm the resumption of bullish
momentum toward 1.19000.