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