Wall Street’s three main indexes weakened on Friday even though the U.S. job market confirmed that the economy is on solid footing as the country reported that nonfarm payrolls rose more than expected in September.

The U.S. added 263,000 jobs in September, which surpassed economists’ estimate of  250,000 for the same month. Another positive news is that the unemployment rate fell to 3.5% from 3.7% in August, while the labor force participation rate slipped 0.1 percentage points to 62.3%.

The main reason why the U.S. stock market weakened after this news is the fact that a solid job report increased the likelihood the Federal Reserve will barrel ahead with an interest rate hiking campaign. Bill Sterling, the global strategist at GW&K Investment Management, said:

This was a classic case of good news is bad news. The market took the good news of the robust labor market report and turned it into an ever-more vigilant Fed and, therefore, potentially higher risks of a recession next year.

There is a big probability of a 75 basis-point rate hike when Fed policymakers meet at the beginning of November, and investors continue to worry that an aggressive Federal Reserve will push the economy into a deep recession.

San Francisco Fed President Mary Daly also said last week that the U.S. Central bank is going to raise rates further because of very high inflation, which is certainly not good news for the U.S. stock market.

The upside potential for Wall Street’s three main indexes remains limited in the weeks ahead, and going forward; the U.S. stock market is going to be hypersensitive to any sort of FED comments.

S&P 500 down -2.8% on Friday

S&P 500 (SPX ) weakened by -2.8% on Friday and closed the week at 3,639 points. On the chart below, we can also see that the price has moved again below the 10-day moving average, which indicates that we can see a further decline in the days ahead.

Data source: tradingview.com

S&P 500 is now down by 24% for the year to date, and the upside potential for this index remains limited. If the price falls below 3,500 points, the next target could be 3,000 points which represents a strong support level.

DJIA is trading close to 29,000 points

The Dow Jones Industrial Average (DJIA) weakened by -2.1% on Friday and closed the week at 29,296 points. The Dow also moved below the 10-day moving average, which keeps the look lower on the index.

Data source: tradingview.com

The current support level stands at 29,000 points, and if the price falls below this level, the next target could be 28,500 points. If the price jumps above 31,000 points, the next target could be resistance at 31,500 points.

Nasdaq Composite down -3.08% on Friday

Nasdaq Composite (COMP) lost -3.08% on Friday and closed the week at 10,652 points. The prospect of a more aggressive monetary policy keeps investors in a negative mood, and the upside potential for Nasdaq Composite remains limited.

Data source: tradingview.com

The current support level for Nasdaq Composite stands at 10,500 points, and if the price falls below this level, the next target could be 10,300 points.

Summary

The Dow Jones, the S&P 500, and the Nasdaq weakened on Friday even though the U.S. job market confirmed that the economy is on solid footing as the country reported that nonfarm payrolls rose more than expected in September. There is a big probability of a 75 basis-point rate hike when Fed policymakers meet at the beginning of November, and investors continue to worry that an aggressive Federal Reserve will push the economy into a deep recession.

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