Dow Jones, Nasdaq 100, and S&P 500 Futures Slide as Powell Investigation Hits US Markets

What to Know

• US stock futures fell after confirmation of a DOJ criminal investigation involving Fed Chair Jerome Powell, triggering short-term risk aversion.
• Dow Jones, Nasdaq 100, and S&P 500 futures pulled back during Asian trading but remained above key technical support levels.
• Falling 10-year Japanese Government Bond yields and a weaker yen supported yen carry trades, cushioning downside risks for US equities.
• Market focus shifts to Fed speakers and upcoming US CPI data, which could influence expectations for Fed rate cuts in H1 2026.
• Despite near-term volatility, optimism around corporate earnings and resilient US economic growth supports a bullish medium-term outlook.

Dow Jones & Nasdaq 100: Powell Investigation Jolts US Futures Overnight

US stock futures slipped during Asian trading on Monday, January 12, after reports emerged that the US Department of Justice had launched a criminal investigation involving the Federal Reserve. The development rattled market confidence, pushing Dow Jones, Nasdaq 100, and S&P 500 futures lower in early trading.

The pullback followed a week in which US Services PMI data and a stronger-than-expected jobs report reduced expectations for a March Fed rate cut. These developments intensified political pressure on the Federal Reserve, culminating in Fed Chair Jerome Powell confirming the investigation just ahead of the US market open.

Despite the initial shock, downside pressure was partially cushioned by moves in Japanese markets. Falling 10-year Japanese Government Bond yields and a weaker yen supported yen carry trades into US risk assets, helping stabilize futures after early losses.

Japan Political Risk Triggers Yen Sell-Off

USD/JPY climbed to an intraday high of 158.206 on January 12, marking its strongest level since January 2025. The move followed reports that Japanese Prime Minister Sanae Takaichi may consider calling a snap election, injecting fresh political uncertainty into the market.

Takaichi’s strong approval ratings could allow her Liberal Democratic Party to consolidate power, enabling further fiscal stimulus. Historically, markets have viewed her leadership as supportive of loose monetary policy. USD/JPY rallied sharply when she became LDP leader in 2025, highlighting investor expectations for continued accommodation from the Bank of Japan.

A cautious BoJ, combined with a relatively hawkish Fed stance, has widened rate differentials and fueled yen carry trades into US dollar assets, indirectly supporting US equities.

DOJ Criminal Investigation Hits Risk Appetite

Fed Chair Powell confirmed on Sunday, January 11, that the Department of Justice had opened a criminal investigation involving the Federal Reserve. In a video address, Powell warned that the action could threaten the Fed’s independence, emphasizing that monetary policy decisions must remain data-driven rather than politically influenced.

The announcement weighed heavily on market sentiment, pushing US futures lower during Asian trading hours and reversing gains from the prior session.

Fed Speakers and Inflation Data in Focus

US equity futures recorded sharp losses early Monday, with the Nasdaq 100 E-mini falling more than 200 points, the Dow Jones E-mini sliding over 200 points, and the S&P 500 E-mini declining sharply as well.

Attention now turns to Fed speakers later in the session, particularly after recent data reduced expectations for near-term rate cuts. While no major US economic releases are scheduled ahead of Tuesday’s CPI report, inflation data remains a key catalyst for market direction.

Economists expect US annual inflation to hold at 2.7% in December. Softer inflation would reinforce expectations for rate cuts in the first half of 2026, supporting equities by lowering borrowing costs and boosting valuations.

Key Technical Levels to Watch

Despite the overnight pullback, major US equity futures remain above their 50-day and 200-day exponential moving averages, maintaining a bullish technical structure.

Dow Jones E-mini faces resistance near the January 7 record high at 49,876, followed by the psychological 50,000 level. Key support sits at 49,000 and the 50-day EMA near 48,121.

Nasdaq 100 E-mini resistance stands at 26,000, followed by the October record high near 26,399. Support is seen at the 50-day EMA around 25,416 and then 24,500.

S&P 500 E-mini resistance lies near 7,018, followed by 7,500, while support is located at the 50-day EMA near 6,855 and then 6,500.

Bullish Medium-Term Outlook Remains Intact

While short-term volatility may persist, the broader outlook for US equity futures remains constructive. Expectations for Fed rate cuts in the first half of 2026, solid corporate earnings, and resilient US economic growth continue to underpin market optimism.

However, risks remain. A hawkish shift from the Bank of Japan, stronger-than-expected US inflation, disappointing earnings, or escalating geopolitical tensions could derail the bullish outlook by triggering a yen carry trade unwind or repricing Fed policy expectations.

Bullish Outlook Intact

Despite the shock surrounding the DOJ investigation into the Federal Reserve, the broader trend for US equity futures remains positive. A supportive macro backdrop, strong earnings expectations, and accommodative global liquidity conditions continue to favor higher prices over the medium term. Traders should closely monitor USD/JPY movements, Japanese bond yields, US inflation data, and Fed communication for signs of shifting market dynamics.

Visit our Indices Forecasts section for daily US stock market insights, covering Dow Jones, Nasdaq 100, and S&P 500 trends to help you make informed trading decisions.