Dow Jones & Nasdaq 100 Futures Up on Weaker Yen, US Data and the Fed in Focus

Risk Appetite Lifts in Asia as Yen Weakens; Traders Brace for Fed and BoJ Signals

Asian markets found support on Thursday after a weaker yen fueled risk appetite, with USD/JPY edging back from the 150 handle. The move lifted US stock futures and Asian equities as traders weighed US-Japan interest rate differentials.

The Nikkei gained 0.13% in morning trading, while USD/JPY eased 0.16% to 148.653, partially reversing the previous session’s 0.85% surge.

The Bank of Japan’s minutes from the July monetary policy meeting initially lifted demand for the yen. But, subsequent Japanese data challenged bets on an October rate hike, limiting their influence.

A hawkish BoJ policy stance, combined with expectations of further Fed policy easing, could narrow the US-Japan rate differential in favor of the yen. A sharp drop in USD/JPY toward 140 may fuel a yen carry trade unwind, potentially triggering a sharp drop in US stock futures.

Upcoming Japanese and US data could change the narrative, with the BoJ and the Fed sensitive to labor market and inflation data.

Markets React: US Stock Futures Advance Amid Fed Policy Uncertainty

US stock futures advanced in morning trading on Thursday, September 25. The Dow Jones E-mini climbed 88 points, the Nasdaq 100 E-mini gained 47 points, and the S&P 500 E-mini rose 12 points.

US stock futures fell for the second consecutive session on Wednesday, September 24, after Fed Chair Powell highlighted uncertainty about the inflation outlook.

US GDP and Jobless Claims in Focus Ahead of Inflation Report

Later Thursday, the US labor market and finalized GDP numbers will face scrutiny. According to preliminary data, the US economy expanded 3.3% quarter-on-quarter in the second quarter.

A sharp downward revision may revive stagflation fears and weigh on risk assets as the Fed grapples with elevated inflation. On the other hand, an upward revision could offer market relief, potentially lifting sentiment.

However, labor market data could have a greater impact on risk appetite. Economists expect initial jobless claims to rise from 231k (week ending September 13) to 235k (week ending September 20).

A modest increase or drop in claims could temper bets on an October Fed rate cut, dampening sentiment. Conversely, a jump in claims toward 250k may boost expectations of a further policy adjustment in October and demand for risk assets.

The Kobeissi Letter recently commented on US labor market indicators, stating:

“US aggregate weekly hours worked has fallen -0.2% over the last 3 months, the largest decline since the 2020 pandemic. This indicator measures the total hours employees work in a week, reflecting overall labor market activity. A drop in hours often signals that companies are reducing work before cutting jobs, indicating that more layoffs may be coming. In previous cycles, such declines have frequently coincided with recessions.”

The GDP and labor market data precede Friday’s highly anticipated Personal Income and Outlays report. Economists forecast the Core PCE Price Index to rise 2.9% year-on-year in August, mirroring July’s increase. A higher reading could delay the timing of a Fed rate cut and raise concerns about stagflation as economic momentum slows.

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

Despite the second day of losses on Wednesday, September 24, US stock futures trade above the 50-day and 200-day Exponential Moving Averages (EMAs), reaffirming a short-term bullish bias.

However, the near-term outlook hinges on FOMC member commentary, US economic data, and the BoJ’s rate path. For traders, here are the key levels driving market trends.

Dow Jones

• Resistance: September 23 record high of 47,055 and then 47,250.
• Support: 46,500, 46,000, and then the 50-day EMA (45,317).

Nasdaq 100

• Resistance: September 22 record high of 25,027 and 25,250.
• Support: 24,500, 24,000, and the 50-day EMA (23,718).

S&P 500

• Resistance: September 22 record high of 6,757 and then 7,000.
• Support: 6,500 and the 50-day EMA (6,478).

September Outlook: US Stock Futures Near Final Test

Traders should continue to track Bank of Japan policy signals along with USD/JPY and Nikkei trends. Later in the session, US economic data and Fed chatter could also affect sentiment.

Meanwhile, Friday’s inflation data will be pivotal for US stock futures. A higher Core PCE Price Index could weigh on risk assets and reverse September’s market gains. On the other hand, cooling inflation could extend the market rally. The Dow Jones E-mini is up 2.02% month-to-date, with the Nasdaq 100 E-mini and the S&P 500 E-mini posting gains of 5.59% and 3.55%, respectively.

These key drivers could extend or reverse September’s gains. Follow our live coverage and consult our economic calendar.