Dow Jones & Nasdaq 100: US Futures Steady on Fed, Yen Watch

US stock futures posted mixed performances in early Asian market trading on Tuesday, October 28. Speculation about intervention to stem the yen’s slide weighed on investor sentiment. Japan’s Economic Minister Minoru Kiuchi reportedly warned about potential intervention.

The USD/JPY soared following Prime Minister Sanae Takaichi’s election win. Prime Minister Takaichi’s pro-stimulus and ultra-loose monetary policy stance has tempered bets on a near-term Bank of Japan rate hike. While easing back from the 153 level, USD/JPY has rallied 3.15% to 152.457 in October.

Yen Carry Trades at Risk if Intervention Occurs

Takaichi’s election win and the weaker yen have fueled yen carry trades, sending risk assets to new all-time highs. However, an intervention could push USD/JPY below 150, potentially triggering a yen-carry trade unwind. Investors are likely to be more wary than usual, considering last year’s carry trade unwind, which sent the Nasdaq 100 down 11.4% in just three sessions.

On July 31, 2024, the BoJ cut purchases of Japanese Government Bonds (JGBs) and raised interest rates. USD/JPY tumbled from 153.889 (July 31) to 141.684 (August 5), triggering margin calls.

Fed Rate Cut Bets Could Extend Winning Streak

Despite the intervention alert, US stock futures may extend their winning streak to four sessions on Tuesday, October 28. Expectations of back-to-back Fed rate cuts on Wednesday, October 29, and in December could send US stock futures to new all-time highs.

A US-China trade deal may also lift sentiment as President Trump and Chinese President Xi prepare to meet on Thursday, October 30, to discuss the trade agreement framework reached on Sunday, October 26.

US Stock Futures Eye Looming Fed Rate Decision

US stock futures eye four-day winning streaks on Tuesday. The Dow Jones E-mini dropped 2 points, while the S&P 500 E-mini fell 1 point. Meanwhile, the Nasdaq 100 E-mini gained 9 points.

Across the Pacific, US economic data and corporate earnings will draw interest ahead of the Fed’s interest rate decision on Wednesday, October 29.

Economists forecast the CB Consumer Confidence Index to fall from 94.2 in September to 93.5 in October. A sharper decline could signal a pullback in consumer spending, dampening demand-driven inflation. A softer inflation outlook would support a more dovish Fed rate path, boosting demand for risk assets.

While a higher reading may test expectations of back-to-back Fed rate cuts, concerns about the labor market will likely keep multiple rate-cut bets alive.

According to the CME FedWatch Tool, the chances of 25-basis-point rate cuts in October and December stand at 97.8% and 92.8%, respectively.

Big Tech Earnings and Fed Press Conference to Collide

Economists are bullish about US stock futures for the rest of the year. FXOpenBroker commented:

“Nasdaq 100 hits a record 25,600! Bullish gap fueled by Fed hopes, US-China trade talks & tech earnings.”

Notably, Alphabet (GOOGL), Meta Platforms (META), and Microsoft (MSFT) will release earnings on Wednesday, October 29, coinciding with the Fed’s interest rate decision and press conference.

Amazon.com (AMZN) and Apple Inc. (AAPL) will release results on Thursday, October 30.

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

Despite the mixed morning, US stock futures continued to trade well above key technical levels, signaling bullish momentum.

The near-term trends will hinge on the Fed, corporate earnings, US data, and President Trump’s meeting with President Xi. Key levels traders should monitor include:

Dow Jones

• Resistance: the October 27 record high of 47,775, then 48,000.
• Support: 47,500, 47,000, the 50-day EMA (46,223).

Nasdaq 100

• Resistance: October 28 record high of 26,018, then 26,500.
• Support: 25,750, 25,500, 25,000, the 50-day EMA (24,591).

S&P 500

• Resistance: October 28 record high of 6,918, then 7,000.
• Support: 6,750, the 50-day EMA (6,648), and 6,500.

Market Outlook: US Data, China Trade Deal, Earnings, and the Fed in Focus

Traders should brace for a crucial end to October, with key US data, corporate earnings, the Fed, and US-China trade headlines set to drive market trends.

While corporate earnings will influence sentiment, a dovish Fed rate cut and a US-China trade deal could fuel demand for US stock futures. The Nasdaq 100 could target 27,000, with the S&P 500 eyeing 7,000.

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