While Japan’s inflation keeps the BoJ in focus, political tensions in Washington are simultaneously influencing global market sentiment.
US Senate Impasse Sends Shutdown into Next Week
The US Senate fell short of the required 60 votes to pass the stopgap funding bill for a seventh time on Thursday, October 9. A 54-45 vote meant that the government shutdown will extend until at least Tuesday, October 14, when the upper chamber is expected to return.
The ongoing US government shutdown and the absence of key US economic data have fueled bets on Fed interest rate cuts in October and December, boosting demand for US stock futures.
According to the CME FedWatch Tool, the chances of a 25-basis-point Fed rate cut in October and December stand at 94.6% and 79.6%, respectively.
Notably, the Nasdaq 100 is eyeing a seven-month winning streak, reflecting the frenzied appetite for AI-linked stocks. A more dovish Fed rate path typically lifts capital-intensive stocks, including tech shares.
The Kobeissi Letter commented on the current market dynamics, stating:
“Retail investors bought +105 billion of US stocks over the last month, the largest monthly purchase on record. Retail demand has risen fivefold since April. This brings total YTD purchases to +$630 billion, already surpassing the all-time high of $590 billion in 2021. Retail investors are now on track to buy $800 billion worth of stocks in 2025. As a result, retail shares traded as a % of total hit ~30%, just below the 32% record during the 2021 meme stock frenzy.”
Crucially, a higher retail shares traded as a percentage of total exposes US stock futures to downside risks. Retail investors are typically more sensitive to uncertainty and market volatility.
How Are US Stock Futures Reacting to Capitol Hill Developments?
US stock futures posted gains in morning trading on Friday, October 10, reversing the previous day’s losses. The Dow Jones E-mini gained 68 points, the Nasdaq 100 E-mini rose 53 points, and the S&P 500 E-mini advanced 12 points.
Later Friday, consumer sentiment data and Fed speakers could influence demand for US stock futures.
Economists forecast the Michigan Consumer Sentiment Index to fall from 55.1 in September to 54.2 in October. A sharper drop in sentiment could signal a pullback in consumer spending, potentially cooling inflationary pressures. A softer inflation outlook may support more aggressive Fed rate cuts, lifting the appetite for US stock futures.
Conversely, a higher reading may temper expectations of multiple Fed rate cuts and weigh on risk assets.
Meanwhile, traders should closely monitor Fed speeches for views on the government shutdown, inflation, and monetary policy.
Key Technical Levels for Dow Jones, Nasdaq 100, and S&P 500
Following the morning gains, US stock futures traded well above the 50-day and 200-day Exponential Moving Averages (EMAs), signaling bullish momentum.
However, the near-term outlook hinges on upcoming US data and Fed commentary. Key levels traders should monitor include:
Dow Jones
- Resistance: 46,750, 47,000, the October 3 record high of 47,323.
- Support: 46,500, 46,000, the 50-day EMA (45,825).