Traders have largely ignored the US administration’s proxy trade war with China. However, an escalation in trade tensions could affect sentiment, weighing on US stock futures early in the Friday morning session.
ING Economics commented on the current tariff landscape, stating:
“Calm and more stability on trade were short-lived. Uncertainty is back as major trade agreements are more fluid than US trading partners had hoped for. […] Fears of extreme developments might be gone, but the risk of further trade and tariff escalation remains real.”
Markets React: Futures Edge Lower
US stock futures trended lower in early trading on Friday morning, after the main indexes hit record highs overnight. The Nasdaq 100 E-mini slipped 15 points, the S&P 500 E-mini declined 5 points, while the Dow Jones E-mini dropped 24 points.
Fed rate cut bets cushioned the downside for US stock futures as focus shifts from inflation to tariffs. A rapidly cooling US labor market continued to support expectations of multiple Fed rate cuts.
According to the CME FedWatch Tool, the probability of a September Fed rate cut remains at 100%. However, the chances of a 50-basis-point rate cut in September eased from 8.9% to 7.3% in morning trading.
Consumer Sentiment Data Could Shift Rate Path
Today’s Michigan Consumer Survey could influence market sentiment. Economists forecast the Michigan Consumer Sentiment Index to slip from 58.2 in August to 58 in September.
Waning sentiment could indicate weaker consumer spending. Given that private consumption accounts for approximately 67% of US GDP, a pullback in spending could slow the US economy. A cooling labor market and weakening economic backdrop could support more aggressive Fed rate cuts.
On the other hand, a higher reading may temper bets on multiple Fed rate cuts, weighing on risk assets.
Key Technical Levels for Dow Jones, Nasdaq 100, and S&P 500
Despite the morning losses, the short-term bias remains bullish. However, bullish momentum hinges on the Fed’s upcoming monetary policy decision, trade developments, and recession risks. For traders, here are the key levels that could determine market direction in the coming sessions.
Dow Jones
- Resistance: September 11 record high of 46,176, then 46,500.
- Support: 46,000, 45,500, then the 50-day EMA (44,835).