Dow Jones & Nasdaq 100 Gain on Fed Update, China Data
The Kobeissi Letter also commented on Southeast Asia’s cost advantage and China’s rerouting efforts, stating:
“This comes as the region has a massive cost advantage over US and European manufacturing, which ranges from 20% to 100%, even after tariffs. Companies use Southeast Asian economies as alternative export bases to avoid China’s 37% reciprocal tariff. As a result, the amount of trade rerouting from China hit a record $23.7 billion in September.”
For context, Chinese exports surged 5.9% year-on-year in November, recovering from a 1.1% fall in October. Mainland China’s equity markets have started the year strongly, bolstering demand for risk assets such as US equity futures. The CSI 300 rallied 1.16% in morning trading, climbing to its highest level since 2021.
US Services and the Fed in Focus
US futures posted gains during the Asian morning session on Tuesday, January 6. The Nasdaq 100 E-mini and the S&P 500 E-mini advanced 62 points and 10 points, respectively, while the Dow Jones E-mini gained 18 points.
Later on Tuesday, US economic indicators will influence risk appetite, with services sector PMI data in focus. According to December’s flash PMI, the S&P Global US Services PMI fell from 54.1 in November to 52.9 in December.
A lower PMI reading would likely fuel bets on a March Fed rate cut, given that services account for approximately 80% of the US GDP. Beyond the headline PMI, sub-components, including employment and prices, also need consideration ahead of the all-important US jobs report.
Slower sector activity, softer services inflation, and rising job cuts would support a more dovish Fed rate path. Lower borrowing costs may boost margins and equity valuations, signaling a stronger appetite for shares.
Market sensitivity to US economic indicators has intensified since the US government reopened. The US ISM Manufacturing PMI fell from 48.2 in November to 47.9 in December, supporting a dovish Fed policy stance.
According to the CME FedWatch Tool, the probability of a March Fed rate cut rose from 46.5% on December 5 to 48.5% on January 5.
Key Technical Levels for Dow Jones, Nasdaq 100, and S&P 500
This week’s gains left the Dow Jones E-mini, the Nasdaq 100 E-mini, and the S&P 500 E-mini trading above their 50-day and 200-day EMAs. The EMAs indicated a bullish short- to medium-term outlook, aligning with upbeat fundamentals.
Near-term trends remain hinged on geopolitical risks, US data, and Fed chatter. Key levels to monitor include:
Dow Jones
- Resistance: the January 5 record high of 49,463, and then 50,000.
- Support: 49,000 followed by the 50-day EMA (47,864).