Dow Jones & Nasdaq 100 Steady as Asian Markets Cheer PMI Data

US stock futures advanced early in the Asian session on Wednesday, December 3. Bond yields eased back from Tuesday’s high, calming fears of a yen carry trade unwind. 10-year Japanese Government Bond (JGB) yields climbed to a previous session’s high of 1.869%.

Stable or falling JGB yields reduce the risk that investors will have to unwind yen carry trades, where traders borrow cheap yen to invest in risk assets. Lower yields make borrowing costs more attractive and prevent the yen from strengthening sharply.

Crucially, despite upbeat Japanese Services PMI data that would typically push yields higher, JGB yields remained stable. Stable JGB yields suggested markets were comfortable with current rate expectations, supporting demand for risk assets.

The Japanese PMI data coincided with the Chinese Services PMI, which alleviated concerns about a loss of economic momentum. The PMIs contributed to the pickup in sentiment.

In my opinion, the easing risk of a yen carry trade unwind and upbeat Services PMI data set the stage for further gains ahead of crucial US economic data.

Below, I’ll outline the key market drivers, the medium-term outlook, and the key technical levels traders should watch.

Japanese Services PMI Data Strengthen BoJ Rate Hike Bets

The S&P Global Japan Services PMI rose from 53.1 in October to 53.2 in November, signaling a fourth-quarter economic recovery. Meanwhile, higher employment, rising wages, and hotter services inflation raised expectations of a December BoJ rate hike, boosting yen demand.

USD/JPY fell 0.13% to 155.662 in early trading. However, the Nikkei 225 advanced 0.33% in the Asian morning session, supported by stable JGB yields.

Chinese Services PMI Signals Economic Resilience

PMI numbers from China also beat forecasts early in Wednesday’s session. The RatingDog China General Services PMI dropped from 52.6 in October to 52.1 in November. Economists expected a 52.0 reading.

Notably, average input prices increased, leading to higher output prices, suggesting a positive demand backdrop. A recovery in external demand was a highlight. Services sector activity contrasted with a contraction across the Chinese manufacturing sector in November. With Asian data digested, attention now turns to US economic indicators.

ISM Services PMI Takes Center Stage

Futures had a positive start to the Asian session. The Dow Jones E-mini gained 76 points, the Nasdaq 100 E-mini climbed 36 points, while the S&P 500 E-mini advanced 11 points.

Later on Wednesday, the all-important ISM Services PMI will provide insights into the US economy and inflation backdrop. Economists forecast the ISM Services PMI to fall from 52.4 in October to 52.1 in November. A modest decline in the headline PMI would signal a resilient economy, given that services account for roughly 80% of US GDP.

However, traders should consider employment and price trends, given the Fed’s concerns about elevated inflation. Softer employment conditions and falling input and output prices would support a more dovish Fed rate path, raising demand for US stock futures. Crucially, the November PMI Survey will give traders the most up-to-date snapshot of the US economy as the FOMC interest rate decision looms.

To summarize, softer services sector activity, lower employment, and falling prices would support a bullish short- to medium-term outlook for US equity futures.

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

Despite the recent market volatility, the Dow Jones E-mini, the Nasdaq 100 E-mini, and the S&P 500 E-mini remained above their 50-day and 200-day EMAs, signaling a bullish bias.

Near-term trends will hinge on BoJ rhetoric, JGB yield trends, and US data. Key levels to monitor include:

Dow Jones

• Resistance: 47,750, 48,000, and the November 12 record high of 48,528.
• Support: 47,500, 47,000, the 50-day EMA (46,839), 46,000, and then the November 21 low of 45,779.

Nasdaq 100

• Resistance: 25,750, 26,000, and then the October 30 record high of 26,399.
• Support: 25,500, the 50-day EMA (25,022), 24,500, and then 24,000.

S&P 500

• Resistance: the October 30 record high of 6,954, and then 7,000.
• Support: the 50-day EMA (6,732), 6,500, and then 6,250.

Near-Term Outlook and Bullish Medium-Term Outlook Hinge on US Data

In my opinion, the short-term outlook has turned bullish, given the rebound from the Monday, December 1, pullback. Easing bond yields have bolstered risk sentiment, setting the stage for a Santa Rally.

However, several downside risks challenge the bullish short- and medium-term outlooks, including:

• Bank of Japan signals further rate hikes in 2026, sending JGB yields higher.
• Strong US jobs data.
• Rising US inflation.
• Fed downplays post-December rate cuts.

Conclusion: Short-Term Outlook Cautiously Bullish

In summary, rising bets on a Fed rate cut support the appetite for US stock futures. However, traders should watch JGB yields, USD/JPY, and Nikkei 225 for early signs of a potential yen carry trade unwind.

Despite lingering risks of an unwind, optimism about continued US economic resilience and lower US interest rates support a bullish medium-term outlook. Ultimately, next week’s FOMC interest rate decision, FOMC economic projections, and Fed Chair Powell’s press conference will be pivotal for US stock futures.

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