Dow Jones & Nasdaq 100: Fed Cut Hopes Counter Rising JGB Yields

• 10-year JGB yields climbed to 2.07%, nearing last week's 2.1% high, while markets priced in a 52.3% chance of a March Fed rate cut
• Dow Jones, Nasdaq 100, and S&P 500 E-minis remained above key 50-day and 200-day EMAs despite volatility, with technical targets at 49,500, 26,399, and 7,000 respectively
• Yen carry trade risks persist as BoJ signals neutral rate between 1-2.5%, potentially triggering asset sell-offs if US-Japan rate differential narrows significantly

Market Summary

US stock futures remained stable on Tuesday, December 30, 2025, as expectations for a Federal Reserve rate cut in March countered concerns about hawkish Bank of Japan (BoJ) signals. The competing monetary policy outlooks highlight a potential narrowing of the US-Japan interest rate differential, creating cross-currents in global markets.

Key Market Movements:

• 10-year Japanese Government Bond (JGB) yields climbed to 2.07%, approaching last week's 2.1% level
• Nikkei 225 fell 0.28%
• US futures showed minimal movement: Dow Jones E-mini (-1 point), Nasdaq 100 E-mini (-5 points), S&P 500 E-mini (-0.5 points)
• USD/JPY reclaimed 156

Central Bank Dynamics:

The BoJ's Summary of Opinions revealed hawkish sentiments, with the central bank signaling a neutral interest rate range between 1% and 2.5%. Markets are pricing in multiple BoJ rate hikes, raising concerns about potential yen carry trade unwinding. Meanwhile, Fed rate cut probability for March stands at 52.3%, down from 53.3% on December 26.

Technical Levels:

• Dow Jones: Resistance at 49,086 (December 26 record high) and 49,500; Support at 48,500 and 50-day EMA (47,692)
• Nasdaq 100: Resistance at 26,000 and 26,399 (October 30 record high); Support at 50-day EMA (25,313) and 24,500
• S&P 500: Resistance at 6,988 (December 26 record high) and 7,000; Support at 50-day EMA (6,817) and 6,500

Market Outlook:

The medium-term outlook remains bullish, supported by Fed rate cut expectations and potential for a dovish Fed Chair appointment in H2 2026. Key risks include stronger-than-expected BoJ tightening and USD/JPY falling below 150, which could trigger