Dow Jones & Nasdaq 100 steady before key PMI release and Powell Speech

Aussie Private Sector PMIs Signal Momentum Loss

Markets brace for flash private sector PMIs, testing demand for US stock futures. Australia’s S&P Global Manufacturing PMI fell from 53 in August to 51.6 in September, while the Services PMI slid to 52 (August: 55.8).

Falling new orders and a drop in external demand slowed output, while dampening business sentiment. A fall in new orders and elevated selling price inflation across the manufacturing sector reflected the effect of tariffs on demand, raising concerns about global stagflation.

Stagflation risks could weigh on demand for US stock futures and the broader global equity markets.

USD/JPY Holds Steady as Focus Turns to LDP Leadership Race

While concerns about the effect of US tariffs on demand and prices tested risk sentiment, USD/JPY held above 147.5, providing market relief. The pair rose 0.05% to 147.783 in morning trading on Tuesday, September 23, after falling 0.17% on Monday, September 22. The recent recovery from a low of 145.481 (September 17) eased concerns about a potential yen carry trade unwind, lifting the Nikkei 225 by 0.99% in the morning session.

A USD/JPY slide and a Nikkei 225 slide could indicate the increased risk of a yen carry trade unwind. Market analysts see a sharp USD/JPY drop below 140 as a potential trigger. A break below 140 could lead to margin calls, pressuring traders to exit levered positions in risk assets, including US-listed stocks, to repay yen-denominated debt.

For context, the Nasdaq Composite Index tumbled 11% in just three sessions after the BoJ surprised the markets with a rate hike and cut to Japanese Government Bond (JGB) purchases in July 2024. The USD/JPY pair plunged from 152.748 (July 31) to 141.684 (August 5).

Hopes of a more dovish Japanese Prime Minister have eased demand for the yen. The Liberal Democratic Party leadership election is set for October 4. The election race officially started on Monday, September 22. Among the leading contenders, YOSHIMASA HAYASHI and TOSHIMITSU MOTEGI favor the Bank of Japan’s goals to reach monetary policy normalization.

However, KOIZUMI SHINJIRO is considered the front-runner. KOIZUMI has previously signaled a desire for the BoJ to work alongside the government to boost the economy and deliver price stability. His comments suggested a more moderate stance on monetary policy rather than a hawkish one.

According to Polymarket, the odds of KOIZUMI becoming the next Japanese Prime Minister sit at 75%, leading the other main contender, SANAE TAKAICHI (23%).

Markets React: US Stock Futures Hold Steady Ahead of PMI Data

US stock futures were flat in morning trading on Tuesday, September 23. The Dow Jones E-mini gained 9 points, while the Nasdaq 100 E-mini and the S&P 500 E-mini held steady after reaching new highs overnight.

Upcoming economic data and Fed speakers will influence sentiment ahead of Friday’s crucial Personal Income and Outlays report.

US Services PMI to Spotlight the Fed

After weaker Australian PMIs earlier in the session, attention shifts to the US PMI release. Economists forecast the S&P Global Services PMI to fall from 54.5 in August to 53.9 in September. A sharper drop toward the neutral 50 level could fuel recession jitters, given that the services sector accounts for around 80% of US GDP. Beyond the headline PMI, employment, and price trends also require consideration.

Higher layoffs and rising prices amid waning sector activity could fuel concerns about stagflation, weighing on risk assets.

On the other hand, a modest drop or higher headline PMI, falling prices, and a steady labor market may ease stagflation risks, boosting sentiment.

Beyond the data, Fed Chair Powell is on the calendar to speak. Further monetary policy guidance will influence demand for US stock futures.

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

Following the overnight gains and steady morning, US stock futures traded well above the 50-day and 200-day Exponential Moving Averages (EMAs), reaffirming the short-term bullish bias.

However, the bullish bias hinges on upcoming PMI data, Fed policy cues, and the BoJ rhetoric. For traders, here are the key levels driving market trends.

Dow Jones

• Resistance: September 22 record high of 46,784 and then 47,000.
• Support: 46,500, 46,000, and then the 50-day EMA (45,223).

Nasdaq 100

• Resistance: September 22 record high of 25,027 and 25,250.
• Support: 24,500, 24,000, and the 50-day EMA (23,638).

S&P 500

• Resistance: September 19 record high of 6,757 and then 7,000.
• Support: 6,500 and the 50-day EMA (6,461).

September Outlook: BoJ, Services PMI Data, and the Fed in Focus

Traders should closely monitor Bank of Japan policy signals, political developments in Japan, and USD/JPY trends. Later in the session, services sector PMI data and Fed speakers could also influence sentiment.

However, the Personal Income and Outlays Report (September 26) would likely be the main event. A higher Core PCE Price Index could temper bets on an October Fed rate cut and weigh on risk assets.

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