US Economic Data and the Fed in Focus
US futures had mixed performances during the Asian morning session on Monday, December 29. The Nasdaq 100 E-mini and the S&P 500 E-mini fell 16 points and 3 points, respectively, while the Dow Jones E-mini gained 9 points.
Later on Monday, the Dallas Fed Manufacturing Index is likely to influence sentiment toward the US economy and risk appetite. Economists forecast the Dallas Fed Manufacturing Index to rise from -10.4 in November to -2.5 in December. Better-than-expected numbers would suggest improving manufacturing sector activity and a resilient US economy late in Q4, supporting risk sentiment.
However, the report is unlikely to influence market bets on a March Fed rate cut. Traders should closely monitor FOMC members’ speeches following last week’s GDP report, CPI report, and the recent Jobs report. Softer inflation and weaker labor market conditions have bolstered bets on a March cut. However, the Q3 GDP report signaled sticky inflation, fueling uncertainty about Fed policy.
Increased support for further rate cuts would likely boost demand for US stock futures, supporting the constructive short- to medium-term bias. Crucially, gradual rate cuts and gradual BoJ policy rate hikes would keep yen carry trades sufficiently profitable near term to avoid market disruption.
According to the CME FedWatch Tool, the probability of a March Fed rate cut rose from 53.3% on December 26 to 54.8% on December 29. Furthermore, market expectations that a new Fed Chair would favor lower interest rates support a more dovish Fed rate path.
The current market dynamics and increasing investment into AI have lifted investor appetite for US stock futures. The Nasdaq 100 E-mini and the S&P 500 E-mini are eyeing seven-day winning streaks, while the Dow Jones E-mini hovers near its all-time high, reinforcing the bullish sentiment.
Key Technical Levels for Dow Jones, Nasdaq 100, and S&P 500
Despite the mixed Monday morning session, 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. The EMAs indicated a bullish short- to medium-term bias, aligning with the positive outlook.
Near-term trends remain hinged on US data, Fed chatter, and BoJ’s policy stance. Key levels to monitor include:
Dow Jones
- Resistance: The December 26 record high of 49,086, and then 49,500.
- Support: 48,500 and then the 50-day EMA (47,659).