New all-time highs. That’s becoming the norm for many stocks, indices and gold. Today was no exception as index futures climbed higher overnight which meant the S&P 500 and Nasdaq 100 would open at new unchartered territories. The gains are mostly driven by ongoing AI optimism fuelling a big rally in the technology sector. As a result, the S&P 500 forecast remains firmly bullish as Wall Street continues to show an extraordinary appetite for risk, brushing aside ay bearish factors, be it political drama in Washington, tariffs, economic concerns – you name it. Ironically, the latest rally has also been buoyed by soft private payrolls data released yesterday. While the data points to a softening labour market and economy, it also reinforces expectations of a Federal Reserve rate cut later this month. This was enough to give equity bulls another excuse to buy the dip, causing markets to recover from early weakness to finish at new highs yesterday. Today, futures extended the move higher, following Europe’s strong lead, with the broader rally showing little sign of fatigue.
Jobs weakness and government shutdown brushed off
So far, the further weakness in jobs data and the start of a government shutdown has not weighed on sentiment. According to ADP, private payrolls fell by 32,000 in September, well below expectations for a 50,000 increase, while August’s figures were also revised lower. The disappointing labour data strengthened expectations that the Fed will deliver quarter-point rate cuts at each of its two remaining meetings in 2025, pressuring Treasury yields and the dollar. Meanwhile, the government shutdown has halted the release of key economic reports, including today’s weekly Jobless Claims, Factory Orders, and Durable Goods. Fitch noted that the shutdown poses no immediate threat to the US sovereign rating, though S&P estimated it could shave 0.1 to 0.2 percentage points off GDP growth for each week it continues. Nevertheless, the warning fell on deaf ears, as stocks continued to march on.
Markets await fresh stimulus
What stands out is how little the ongoing US government shutdown has dented equity sentiment. While the dollar lost further ground against the yen overnight (before it bounced back later in the day), equities have taken the episode in their stride. The lack of fresh economic data, with releases delayed by the shutdown, may encourage some light profit-taking. Still, the broader tone remains one of strength. Until either earnings disappoint, or a new macro driver emerges, downside pressure looks likely to remain contained.
For now, political uncertainty seems a greater issue for currencies than equities. The US dollar has weakened but Wall Street’s focus remains on interest rates. With the Fed expected to press ahead with at least two more cuts this year, lower yields keep equity markets attractive.
Global flows are also telling an interesting story. Europe has attracted attention in recent days, with some of the major indices hitting new record and the German DAX has been rallying strongly on expectations of fresh fiscal stimulus. Capital continues to search for opportunities where policy support is on the table, yet Wall Street remains the anchor for bullish sentiment. For now, a softer dollar and dovish Fed expectations are enough to fuel demand for equities, leaving the S&P 500 forecast largely supported.
Earnings season ahead: Can valuations hold up?
The absence of major data releases could see some investors locking in profits before the third-quarter earnings season begins in earnest. Powell reminded markets last week that there are “no risk-free paths” when it comes to rates, a nod to the potential challenges ahead. Even so, the FOMC has signalled two further cuts this year, giving equity traders the confidence to stay long.
Technology stocks, especially chipmakers, remain the heartbeat of this rally. AI-driven optimism and consistent earnings have powered valuations higher, allowing investors to dismiss overbought warnings and keep chasing returns. The danger, however, lies in the upcoming reporting season. If big tech fails to deliver the numbers to justify its lofty multiples, the broader market may wobble. The S&P 500 forecast is therefore closely tied to how these companies perform in the weeks ahead.
Technical S&P 500 forecast and levels to watch
From a technical standpoint, the S&P 500 has once again moved into overbought territory. The daily Relative Strength Index (RSI) has crossed the 70.0 threshold, having already been flagged as overbought on the weekly and monthly charts. Typically, such conditions would suggest the need for a pause or a pullback. Yet rather than signalling weakness, the elevated RSI levels are underscoring the strength of current momentum.
The index has been forming a series of higher highs and higher lows, a classic bullish pattern that reinforces the integrity of the uptrend. A healthy correction may eventually be required to relieve overbought pressures, but at present, short positions are difficult to justify. Until significant support levels begin to crack, momentum continues to favour the bulls.
In terms of levels, the short-term pivot on our SP 500 index, which is derived from underlying S&P 500 futures, is around 6650, which remains an important marker for trend watchers. Meanwhile, the most recent low at 6569 could act as a warning sign if breached, potentially opening the door to a deeper retracement towards 6500 or even lower. On the upside, the index has already cleared the September peak at 6699, unlocking a path towards the round numbers at 6800 and 6900. Beyond that, the 161.8% Fibonacci extension from February’s decline sits at 6980, tantalisingly close to the symbolic 7,000 milestone. This combination of technical drivers suggests the market remains primed for further highs, provided support zones hold.
