Dow Jones, Nasdaq 100 Climb on Trade Deal Hopes, Will Powell Derail the Optimism?
Optimism over a US-China trade agreement lifted US stock futures and bolstered demand for Mainland-listed stocks. The CSI edged 0.02% higher, while the Shanghai Composite Index gained 0.22% in morning trading.
US Stock Futures React to Trade Optimism
US stock futures advanced in morning trading on Tuesday, October 14, extending their gains from the previous session. The Dow Jones E-mini rose 79 points, the Nasdaq 100 E-mini gained 49 points, and the S&P 500 E-mini climbed 8 points.
Powell Speech Looms as Key Market Driver
Later on Tuesday, Fed Chair Powell will take center stage as markets bet on Fed rate cuts in October and December. Powell could cement expectations of multiple Fed rate cuts if he raises concerns about the US labor market and downplays risks of stagflation. US stock futures could climb to their recent record highs if this scenario unfolds.
On the other hand, rising concerns about stagflation, exacerbated by the US government shutdown, could send US stock futures lower, potentially reversing the previous day’s gains.
The Kobeissi Letter commented on US labor market trends, stating:
“The gap between Americans saying jobs are ‘plentiful’ and ‘hard-to-get’ fell to 7.8% in September, the lowest since 2021. This is the weakest reading in 8 years outside the 2020 pandemic spike. Historically, this measure has been a leading indicator of unemployment, suggesting higher jobless claims ahead. According to Moody’s, there is no better predictor of changes in employment than this metric. The Fed will have no choice but to continue cutting rates.”
The deteriorating labor market has signaled a more dovish Fed rate path. According to the CME FedWatch Tool, the chances of back-to-back 25-basis point rate cuts in October and December stood at 96.7% and 92.2%, respectively.
Meanwhile, traders should closely monitor Capitol Hill, where potential votes on stopgap funding bills could influence sentiment. An extended Senate stalemate could weigh on risk assets. A prolonged shutdown may slow GDP growth and increase risks of stagflation. On the other hand, US stock futures could trend higher if the Senate passes a stopgap funding bill.
Despite these headwinds, technical indicators suggest underlying momentum remains bullish.
Key Technical Levels for Dow Jones, Nasdaq 100, and S&P 500
Following the morning gains, US stock futures remained above the 50-day and 200-day Exponential Moving Averages (EMAs), reaffirming bullish momentum.
However, the near-term outlook hinges on US-China trade headlines, the Senate vote, and Fed Chair Powell’s policy stance. Key levels traders should monitor include:
Dow Jones
- Resistance: 46,500, 47,000, the October 3 record high of 47,323.
- Support: 46,000, the 50-day EMA (45,830).