Dow Jones & Nasdaq 100 Futures Fall on Shutdown Threat

Tankan Survey Results Undermine October Hike Bets, Pressuring the Yen

Japanese data jolted U.S. futures, tempering bets on an October BoJ hike and setting a volatile tone for Q4.

The Tankan Large Manufacturers Index rose from 13 in the second quarter to 14 in the third quarter, below the consensus of 15. The increase was modest, even with tariffs on Japanese goods lowered to 15% under the US-Japan trade agreement.

Notably, the third-quarter data may give the BoJ doves the upper hand in the October monetary policy meeting, potentially delaying rate hikes until December. Several policymakers urged delaying rate hikes in September to allow time to assess incoming data. Two policymakers referenced the Tankan surveys.

The USD/JPY was up 0.14% to 147.005 in morning trading, reflecting sentiment toward the BoJ’s rate path. A delay to BoJ rate hikes could weaken the yen further, increasing carry trade exposure but reducing near-term risks of a disruptive yen Carry Trade unwind that could trigger risk asset sell-offs.

However, the threat of a US Government shutdown overshadowed the weaker yen, weighing on US stock futures and the Asian equity markets. The Nikkei 225 was down 1.2% in morning trading despite the USD/JPY pair’s morning gains.

US Government Shutdown Threat Sends US Stock Futures South

The US government edged closer to a shutdown on Wednesday, October 1. Lawmakers failed to agree on the terms for extending government funding beyond midnight in a 55-to-45 vote.

While shutdowns typically have only modest, short-lived effects, the 2018–2019 shutdown affected consumer spending and sentiment harder, shaving 0.4% off GDP.

Notably, the 2018-2019 shutdown, the longest in US history, occurred during Trump’s first term in office.

A prolonged shutdown could affect the Fed’s near-term monetary policy decisions. Without key economic data, the Fed may delay policy moves, dampening rate cut expectations and sentiment.

How Are US Stock Futures Reacting Ahead of Key Data?

US stock futures stumbled in morning trading on Wednesday, October 1. The Dow Jones E-mini slid 152 points, the Nasdaq 100 E-mini fell 102 points, and the S&P 500 E-mini dropped 25 points.

Will US Labor Market Data Lift Sentiment?

Markets now turn to the US labor market data. A smaller-than-expected rise in nonfarm payrolls could fuel Fed rate cut bets and lift US stock futures. Economists expect the ADP to report a 50k rise in nonfarm payrolls in September, down from 54k in August.

However, a higher print could temper Fed rate cut expectations. A more hawkish Fed rate path could weigh on US stock futures.

Beyond the data, traders should closely monitor developments on Capitol Hill. Failure to avert a government shutdown could further impact risk appetite.

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

Despite the pullback, US stock futures remained above the 50-day and 200-day Exponential Moving Averages (EMAs), reaffirming a short-term bullish bias.

However, the near-term outlook hinges on key US data, developments on Capitol Hill, and central bank forward guidance. Key levels traders are monitoring include:

Dow Jones

• Resistance: The September 23 record high of 47,055.
• Support: 46,500, 46,000, and then the 50-day EMA (45,497).

Nasdaq 100

• Resistance: September 22 record high of 25,027 and 25,250.
• Support: 24,500, 24,000, and the 50-day EMA (23,875).

S&P 500

• Resistance: September 22 record high of 6,757, followed by 7,000.
• Support: 6,600 and then the 50-day EMA (6,512).

US Stock Futures Enter a Pivotal Final Quarter: What Should Traders Look Out For

US stock futures reach a critical juncture at the start of the fourth quarter. Will US data support Fed cuts or will the BoJ trigger a market shock by hiking rates?

Traders should monitor BoJ commentary and USD/JPY trends. Hawkish BoJ rhetoric and dovish Fed signals may increase concerns about a yen carry trade unwind, weighing on US stock futures. Meanwhile, developments on Capitol Hill, US tariffs, and key labor market data will also influence sentiment.

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