US Inflation, the Fed, and the Middle East in Focus
US futures posted losses during the Asian session on February 27. The Dow Jones E-mini fell 262 points, while the Nasdaq 100 E-mini and the S&P 500 E-mini dropped 66 points and 24 points, respectively.
Later in Friday’s session, US producer prices will influence sentiment toward the Fed policy stance and demand for risk assets. Economists expect producer prices to rise 2.6% year-on-year in January, down from 3.0% in December. Furthermore, economists forecast core producer prices to increase 3.0%, down from 3.3% in December.
Weaker-than-expected numbers would signal a softer inflation outlook, boosting bets on a June Fed rate cut. Lower borrowing costs could lift earnings and stock valuations, supporting the bullish medium-term outlook.
According to the CME FedWatch Tool, the probability of a June Fed cut has fallen from 58.6% on February 19 to 47.8% on February 26, weighing on risk assets. Nevertheless, markets remain optimistic about two Fed rate cuts in 2026, with a year-end target rate of 3.00%-3.25%. A June Fed rate cut remains pivotal to the year-end target rate and the bullish medium- to longer-term outlook for US stock futures.
Key Technical Levels for Dow Jones, Nasdaq 100, and S&P 500
Despite the morning pullback, the Dow Jones E-mini remained above its 50-day and 200-day EMAs. The EMA positions indicate a bullish bias. However, the Nasdaq 100 E-mini and the S&P 500 E-mini traded below their 50-day EMAs, while holding above their 200-day EMAs. The EMA positions indicate a bearish near-term bias, but a bullish longer-term outlook.
Meanwhile, Fed rate cut hopes align with the longer-term technicals and the bullish medium-term projection.
Near-term trends hinge on US economic indicators, Fed chatter, and geopolitical risk in the Middle East. Key levels to monitor include:
Dow Jones
- Resistance: 50,000, the February 10 record high of 50,611, and then 51,000.
- Support: the 50-day EMA (49,114) and then 48,500.