US Stock Futures Forecast: 5 Factors Threaten Futures Before FOMC Meeting

US stock futures steadied early in the Asian session on Tuesday, December 2, after the previous day’s sell-off. 10-year Japanese Government Bond (JGB) yields edged higher after Monday’s surge, capping rebound attempts. Crucially, the continued upswing in JGB yields exposed US equity futures to rising yen carry trade unwind risks, a potential market disrupter.

Fed Chair Powell failed to reassure markets in early trading. Powell stated at the beginning of his speech that he would not comment on economic conditions or monetary policy. The Fed’s view on the US economy and monetary policy outlook will likely be key for near-term market trends.

In my opinion, the increased risk of a yen carry trade unwind and uncertainty about the Fed’s post-December policy stance expose US stock futures to a further pullback before any sustained recovery.

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

Japanese Government Bond Yields Edge Higher

There was no respite for traders early in the Asian session as 10-year Japanese Government Bond yields rose to a high of 1.885%, their highest since 2008.

Low JGB yields have fueled yen carry trades into US equity futures. However, the Bank of Japan Governor’s hawkish speech on Monday, December 1, signaled an imminent rate hike, sending JGB yields higher.

Rising JGB yields would accelerate yen carry trade unwinds, sending risk assets lower. Despite the risk, Asian equities briefly rebounded. Notably, the Nikkei 225 rose 0.40% in morning trading. Market tensions eased as USD/JPY climbed 0.17% to 155.67. Typically, analysts monitor USD/JPY and Nikkei 225 trends alongside JGB yields for early signals of a carry trade unwind.

Fed Chair Powell Leaves Traders in the Dark

Fed Chair Powell spoke early in the Asian session, but refrained from providing insights into the Fed’s policy stance in prepared opening remarks. Recent US labor market data has signaled a cooling labor market, supporting a December cut.

However, the Fed’s view on the economy and monetary policy outlook for 2026 is likely to be crucial for risk assets. A December rate cut and optimism about avoiding a recession should lift sentiment.

The upcoming US ISM Services PMI data and September’s delayed Personal Income and Outlays report will influence bets on post-December rate cuts. Waning services sector activity and sticky inflation would revive the risk of stagflation, tempering expectations of a dovish December cut.

In my view, the near-term (1-3 weeks) outlook for US stock futures seems bearish, given uncertainties about the economy and the Fed rate path.

Fed Speakers in Focus

Futures had a mixed start to the Asian session. The Dow Jones E-mini slipped 10 points, while the Nasdaq 100 E-mini and the S&P 500 E-mini advanced 26 points and 2 points, respectively.

Later on Tuesday, traders should monitor FOMC members’ speeches for insights into labor market conditions, inflation, and rate cuts. Growing concerns about the labor market, economic momentum, and sticky inflation would send US stock futures lower, aligning with the bearish near-term outlook.

However, traders will need to wait until the FOMC interest rate decision and economic projections for a clearer picture. Traders are likely to tread cautiously ahead of the December 9-10 FOMC meeting. Over the medium-term (2-6 months), the outlook looks more bullish. Fed policy easing and increased liquidity should boost demand for risk assets.

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

Despite the mixed morning, the Dow Jones E-mini, the Nasdaq 100 E-mini, and the S&P 500 E-mini traded above their 50-day and 200-day EMAs, signaling a bullish bias. However, fundamentals have continued to shift away from the technical trend, supporting a bearish short-term outlook.

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

Dow Jones

• Resistance: 47,500, 47,750, 48,000, and the November 12 record high of 48,528.
• Support: 47,000, the 50-day EMA (46,800), 46,000, and then the November 21 low of 45,779.

Nasdaq 100

• Resistance: 25,500, 26,000, and then the October 30 record high of 26,399.
• Support: 25,000, the 50-day EMA (24,990), 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 (6,727), 6,500, and then 6,250.

Bearish Near-Term Outlook, But Bullish Medium-Term Outlook Intact

In my opinion, early market trends on December 2 highlighted growing uncertainty about the BoJ and Fed’s policy outlooks. However, several upside risks challenge the bearish short-term outlook, including:

• Bank of Japan downplays a December rate hike to avoid market disruption.
• Strong US jobs data.
• Softer US inflation.
• Fed dismisses recession risks while supporting multiple rate cuts.

Conclusion: Medium-Term Outlook Cautiously Bullish Despite Uncertainties

In summary, expectations of a BoJ rate hike and a Fed rate cut raise the risk of a yen carry trade unwind. However, appropriate central bank guidance could limit the impact of an unwind on the medium-term outlook. A resilient US economy and easing fears of stagflation would also lift sentiment, supporting US stock futures retargeting their 2025 all-time highs.

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