US Stock Futures Extend Losses on Fed Independence: S&P 500, Nasdaq, & Dow Jones Outlook

US Stock Futures Extend Losses Amid Fed Independence Doubts

Futures dropped for a second morning session as President Trump challenged the US Federal Reserve’s independence. US stock futures signaled another challenging day ahead in the Asian morning session on Tuesday, August 26.

The Dow Jones E-mini dropped 58 points, while the Nasdaq 100 E-mini and S&P 500 E-mini fell 47 points and 9 points, respectively. 10-year US Treasury yields edged higher on Tuesday, August 26, weighing on risk assets. Higher rates make future earnings less valuable, pressuring US futures markets.

President Trump Fires Fed Governor Lisa Cook

Following Fed Chair Powell’s speech at the Jackson Hole Symposium, the Fed was under the spotlight again on Tuesday, August 26. President Trump announced the firing of Fed Governor Lisa Cook. Cook challenged the dismissal in court, arguing that the President lacks the authority to remove her, and refused to resign, stating

“President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so. I will not resign.”

President Trump’s attempt to fire Fed Governor Cook triggered concerns about the Federal Reserve’s independence.

Bob Elliott, Chief Investment Officer at Unlimited Funds, commented:

“Don’t be fooled, this isn’t about Cook’s one vote skewing policy marginally more dovish. It’s about putting the whole FOMC under Trump’s control. Waller and Bowman already complicit.”

Monday’s events came as traders brace for a potentially volatile two weeks. While Fed Chair Powell hinted at a September Fed rate cut, economists remain divided on whether the Fed will aggressively lower interest rates.

The crucial US Personal Income and Outlays Report due on Friday, August 29, and the US Jobs Report, due on Friday, September 5, will likely dictate the Fed’s Q4 rate path.

Why do the numbers matter?

A spike in inflation and a resilient labor market may curb expectations of multiple Fed rate cuts, affecting sentiment. Conversely, softer inflation and a weaker labor market may raise bets on a more dovish Fed policy stance.

President Trump’s efforts to influence the Fed and looming economic data set the stage for a politically charged fortnight.

US Consumer Confidence and Fed Speakers in Focus

Later today, US consumer confidence figures will face scrutiny amid stagflation concerns. Economists forecast the Conference Board Consumer Confidence Index to fall from 97.2 in July to 96.4 in August.

A larger-than-expected drop could signal a pullback in consumer spending. Given that private consumption accounts for over 60% of the US GDP, a drop in spending and elevated inflation could raise stagflation risks. On the other hand, a higher reading may lift demand for risk assets.

Beyond the data, FOMC members’ speeches will face scrutiny after Trump’s attempt to remove Fed Governor Cook. Market focus remains on the fourth quarter. Support for multiple Fed rate cuts may boost demand for risk assets, while concerns about inflation could send US equity markets lower.

Key Asian Market Movers

Asian markets were mixed in morning trading on Tuesday, August 26, as investors considered the potential impact of Trump undermining the Fed’s independence.

The Hang Seng Index fell 0.22%, while Mainland China’s CSI 300 and Shanghai Composite advanced 0.14% and 0.11%, respectively. Mainland China’s equity markets could extend their winning streaks to five sessions in response to new stimulus measures and expectations of more government policy support.

Meanwhile, the Nikkei 225 dropped 0.89% despite USD/JPY holding onto Monday’s 0.60% gain. However, gold advanced 0.23% to $3,373, reflecting market concerns about Trump’s attempts to influence Fed policy.

No major economic data were released during Tuesday’s Asian session. However, upcoming economic data from Japan and China, and corporate earnings, could influence risk appetite.

Upbeat Japanese data (out on August 29) could boost bets on a Bank of Japan rate hike, potentially weighing on risk appetite. Chinese economic data (out on August 27 and 31) and Beijing’s stimulus measures will also influence market sentiment.

Technical Setups: The key levels traders are watching as politics collide with markets

Despite today’s losses, the broader short-term bias remains bullish, hinging on looming corporate earnings, key economic indicators, and Fed-related headlines.

Dow

• Resistance: August 22 high of 45,841, 46,000, then 46,500.
• Support: August 21 low of 44,642 and the 50-day EMA (44,309).

Nasdaq

• Resistance: August 18 high of 23,882, 24,000, then 24,500.
• Support: August 20 low of 23,035 and the 50-day EMA (23,004).

S&P 500

• Resistance: August 22 high of 6,496 and 6,750.
• Support: August 20 low of 6,363 and the 50-day EMA (6,303).

Traders looking to sharpen their technical approach and better anticipate market moves should start with Mastering Chart Patterns: How to Use Technical Analysis to Trade with Confidence and Precision.

Will key economic data, corporate earnings, and Fed signals trigger a US market recovery? The next two weeks could prove pivotal. Follow our live coverage and consult our economic calendar.