Dow Jones & Nasdaq 100 Futures Advance on BoJ Focus Ahead of Rare US Data

Japan’s Producer Prices Reignite BoJ Hike Bets as US Shutdown Boosts Risk Appetite

US stock futures shook off stronger-than-expected inflation numbers from Japan. Japanese producer prices rose 2.7% year-on-year in September, mirroring August’s increase and beating a projected 2.5%. Notably, producer prices increased 0.3% month-on-month in September, rebounding from a 0.2% decline in August.

Producers likely raised prices in September after the US lowered tariffs on Japanese goods to 15%. Lower tariffs and higher prices would likely ease pressures on profit margins.

Rising margins could enable firms to lift wages and increase hiring. An increase in wages and job creation may fuel consumer spending and demand-driven inflation. A higher inflation outlook could strengthen expectations for a December BoJ rate hike, though political dynamics have tempered near-term expectations.

Sanae Takaichi’s Liberal Democratic Party election victory sank bets on an October BoJ rate hike, weighing on demand for the yen. Takaichi is an advocate for ultra-loose monetary policy. On Thursday, October 9, she stated:

“I believe we should aim to achieve inflation driven by demand. Specific monetary policy means fall under the jurisdiction of the BOJ. But any decision it makes must align with the government’s economic policy.”

USD/JPY has soared 3.49% in October, fueling the yen carry trade and demand for risk assets, including US stock futures.

Why Traders Need to Track Producer Price Trends

The BoJ considers producer price data a leading indicator of consumer price inflation, influencing monetary policy decisions.

While resilient producer prices could keep bets on a Bank of Japan rate hike alive, Takaichi’s stance on monetary policy remains key.

While Japan’s inflation keeps the BoJ in focus, political tensions in Washington are simultaneously influencing global market sentiment.

US Senate Impasse Sends Shutdown into Next Week

The US Senate fell short of the required 60 votes to pass the stopgap funding bill for a seventh time on Thursday, October 9. A 54-45 vote meant that the government shutdown will extend until at least Tuesday, October 14, when the upper chamber is expected to return.

The ongoing US government shutdown and the absence of key US economic data have fueled bets on Fed interest rate cuts in October and December, boosting demand for US stock futures.

According to the CME FedWatch Tool, the chances of a 25-basis-point Fed rate cut in October and December stand at 94.6% and 79.6%, respectively.

Notably, the Nasdaq 100 is eyeing a seven-month winning streak, reflecting the frenzied appetite for AI-linked stocks. A more dovish Fed rate path typically lifts capital-intensive stocks, including tech shares.

The Kobeissi Letter commented on the current market dynamics, stating:

“Retail investors bought +105 billion of US stocks over the last month, the largest monthly purchase on record. Retail demand has risen fivefold since April. This brings total YTD purchases to +$630 billion, already surpassing the all-time high of $590 billion in 2021. Retail investors are now on track to buy $800 billion worth of stocks in 2025. As a result, retail shares traded as a % of total hit ~30%, just below the 32% record during the 2021 meme stock frenzy.”

Crucially, a higher retail shares traded as a percentage of total exposes US stock futures to downside risks. Retail investors are typically more sensitive to uncertainty and market volatility.

How Are US Stock Futures Reacting to Capitol Hill Developments?

US stock futures posted gains in morning trading on Friday, October 10, reversing the previous day’s losses. The Dow Jones E-mini gained 68 points, the Nasdaq 100 E-mini rose 53 points, and the S&P 500 E-mini advanced 12 points.

Later Friday, consumer sentiment data and Fed speakers could influence demand for US stock futures.

Economists forecast the Michigan Consumer Sentiment Index to fall from 55.1 in September to 54.2 in October. A sharper drop in sentiment could signal a pullback in consumer spending, potentially cooling inflationary pressures. A softer inflation outlook may support more aggressive Fed rate cuts, lifting the appetite for US stock futures.

Conversely, a higher reading may temper expectations of multiple Fed rate cuts and weigh on risk assets.

Meanwhile, traders should closely monitor Fed speeches for views on the government shutdown, inflation, and monetary policy.

Key Technical Levels for Dow Jones, Nasdaq 100, and S&P 500

Following the morning gains, US stock futures traded well above the 50-day and 200-day Exponential Moving Averages (EMAs), signaling bullish momentum.

However, the near-term outlook hinges on upcoming US data and Fed commentary. Key levels traders should monitor include:

Dow Jones

• Resistance: 46,750, 47,000, the October 3 record high of 47,323.
• Support: 46,500, 46,000, the 50-day EMA (45,825).

Nasdaq 100

• Resistance: October 9 record high of 25,394, 25,500.
• Support: 25,000, 24,500, the 50-day EMA (24,204).

S&P 500

• Resistance: October 9 record high of 6,812, 7,000.
• Support: 6,600, the 50-day EMA (6,579).

October Market Outlook: Consumer Sentiment and the Fed in Focus

US stock futures could face increased volatility given the limited US economic data releases.

A modest decline in sentiment and dovish Fed rhetoric could send US stock futures to new highs. However, a sharp drop in sentiment—a confidence shock—may fuel stagflation fears amid an elevated inflation backdrop, potentially weighing on risk assets.

Follow our live coverage and consult the economic calendar for real-time market updates.