Investing.com Analysis

Stock Futures Edge Lower

Stock futures on Wall Street edged lower as investors anticipate this week’s crucial labor market report, which may impact potential Federal Reserve interest rate cuts later this month. Broadcom’s (NASDAQ:AVGO) disappointing sales outlook has led to a decline in shares during after-hours trading.

1. Futures Inch Lower

US stock futures hovered just under flatline on Friday while investors awaited the significant labor market report relevant for the Federal Reserve’s monetary policy decisions.

As of 03:45 ET (07:45 GMT):
– Dow futures dropped by 165 points or 0.4%
– S&P 500 futures fell by 38 points or 0.7%
– Nasdaq 100 futures decreased by 210 points or 1.1%

The Dow Jones Industrial Average and benchmark S&P 500 both ended the previous session in the red, while the tech-heavy Nasdaq Composite gained. Trading proved tumultuous on Thursday as investors processed US private employment data indicating the smallest number of hires since 2021. However, reassuring figures regarding jobless claims and service sector growth eased fears about the labor market’s deterioration.

So far, the S&P 500 has lost more than 2.5% this month, with September historically viewed as a weaker month for stocks.

2. Crucial Nonfarm Payrolls Report Ahead

The highlight of this week’s economic agenda is Friday’s release of the August nonfarm payrolls report from the Labor Department.

Economists forecast that the US economy added 164,000 jobs last month, an increase from 114,000 in July. The previous month’s data, which fell short of expectations, aggravated fears of a US recession.

This report could significantly sway the Fed’s direction regarding interest rate cuts at their scheduled meeting on Sept. 17-18.

The CME Group’s FedWatch Tool indicates about a 59% chance that the Fed will decrease borrowing costs by 25 basis points from the current 5.25% to 5.5%. However, a negative payroll figure could intensify concerns over job market performance, leading some analysts to predict a possible 50-basis-point cut instead.

3. Broadcom Sales Outlook Disappoints

Broadcom’s shares fell in after-hours trading following disappointing sales guidance for the current quarter.

The company forecasted $14 billion in revenue for the fourth quarter, falling short of analyst expectations of $14.04 billion. Notably, the company highlighted a 49% decline in revenue from its broadband unit in the third quarter, raising concerns about waning demand for their AI-optimized chips despite an adjusted AI revenue outlook of $12 billion for the fiscal year.

4. Seven & i Rejects Couche-Tard Offer

Seven & i Holdings (TYO:3382), owner of 7-Eleven, has rejected a cash bid of $38.5 billion from Canada’s Alimentation Couche-Tard (TSX:ATD). In their rejection letter, they noted the offer was not aligned with their shareholders’ best interests, calling it ‘opportunistically timed’ with potential regulatory challenges in the US.

Despite the rejection, Seven & i expressed willingness to consider future proposals that would not compromise shareholder value.

5. Oil Steadies

Oil prices rose in early European trading as investors awaited the nonfarm payrolls report, considering both US crude inventory withdrawals and planned output delays from OPEC+ producers.

At 03:46 ET:
– Brent crude rose 0.5% to $73.06 per barrel
– U.S. crude futures (WTI) were up by 0.5% at $69.48 per barrel

Despite these gains, both contracts were likely to post weekly declines as cautious investors awaited jobs data following a previous month’s sell-off.

Elsewhere, crude stockpiles dropped by 6.9 million barrels to 418.3 million barrels during the week ending August 30. OPEC+ has also decided to delay a planned increase in oil production for October and November. Despite supportive developments, Brent crude settled at its lowest in over a year due to ongoing demand concerns from the US and China.