US Stock Futures Stall: Awaiting Labor Market Data & Fed's Next Move
Investing.com -- US stock futures hovered below the flatline on Friday as investors awaited a crucial labor market report, which could play a significant role in the Federal Reserve's upcoming monetary policy decision.
By 06:21 ET (10:21 GMT), major indices showed subtle declines: the Dow Jones Industrial Average contract had shed 130 points or 0.3%, the S&P 500 had slipped by 34 points or 0.6%, and the Nasdaq 100 had fallen by 207 points or 1.1%.
The 30-stock Dow Jones Industrial Average and the benchmark S&P 500 both finished the prior session in the red, while the tech-heavy Nasdaq gained.
Choppy Trading and Labor Market Concerns
Trading was volatile on Thursday as investors parsed data showing that US employers hired the fewest number of workers since 2021 in August. However, concerns over a weakening labor market were somewhat alleviated by separate figures suggesting a decline in jobless claims and an expansion in services sector activity.
So far this month, the S&P 500 has shed over 2.5%, aligning with the historical trend of September being a weaker month for stocks.
Global Equity Sentiment & AI Optimism
"The global equity mood remains somber, as prices extend their recent declines amid continued concerns about the outlook for growth," analysts at Vital Knowledge noted in a client advisory. They also pointed out that optimism around artificial intelligence is "fading" following results from US chipmaker Broadcom.
Nonfarm Payrolls: The Decider
Economists predict that the US economy added 164,000 jobs last month, an increase from the 114,000 in the prior month. The unexpectedly low July total fueled a broader market downturn as traders fretted over a potential US recession.
The upcoming data could significantly influence the Federal Reserve's approach to potential interest rate cuts at its two-day meeting on September 17-18. According to the CME Group's closely-watched FedWatch Tool, there is approximately a 59% chance that the Fed will choose to slash borrowing costs, currently at a 23-year high of 5.25% to 5.5%, by 25 basis points.
However, another disappointing payrolls figure may heighten concerns over the job market and could persuade the Fed to consider a more aggressive 50-basis point cut, as some analysts predict.
Broadcom's Sales Outlook Disappoints
Shares in Broadcom (NASDAQ:AVGO) slumped by more than 9% in premarket US trading after the company's current-quarter sales guidance fell slightly below investors' expectations. Broadcom projected $14 billion in revenue for its fourth quarter, just under estimates of $14.04 billion, according to LSEG data cited by Multibagger.
Despite strong performance in its AI segments, the forecast hinted at possible sluggishness in the company's non-AI-related operations. Broadcom raised its outlook for full-year sales of AI parts and custom chips to $12 billion, up from its prior forecast of over $11 billion.
Following Broadcom's report, other chip stocks, including Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD), also declined. Marvell Technology (NASDAQ:MRVL) and Micron Technology (NASDAQ:MU) were lower ahead of the opening bell.
Oil Prices Steady Amid Job Market Data
Oil prices saw modest gains in early European trading as investors awaited the nonfarm payrolls report and considered both a significant withdrawal from US crude inventories and a planned output delay from OPEC+ producers.
By 06:21 ET, Brent crude added 0.5% to $73.05 per barrel, while West Texas Intermediate (WTI) futures traded up 0.5% at $69.50 per barrel. Both contracts were on track to post declines for the week.
Analysts quoted by Multibagger noted that investors are exercising caution ahead of the jobs data, especially after the previous month's figures triggered a global market sell-off.
Elsewhere, crude stockpiles dipped by 6.9 million barrels to 418.3 million barrels during the week ending August 30, according to the US Energy Information Administration. Analysts had forecast a draw of 1 million barrels, Multibagger reported.
The OPEC+ group of producers also announced a postponement of a planned increase in oil production for October and November. Despite these developments, Brent settled at over a one-year low on Thursday due to lingering fears over demand in the US and China.
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Analysis Breakdown
What This Article Is About:
This article covers the current state of US stock futures, investor sentiments regarding the labor market, and how these elements might influence the Federal Reserve's upcoming decisions on interest rates. It also delves into Broadcom's latest earnings and the performance of other chip stocks, as well as the latest trends in oil prices.
How It Affects You:
- Stock Market: If you're investing in stocks, be aware that the market is currently volatile. The upcoming labor market report could further influence market trends.
- Interest Rates: The Federal Reserve's decision on interest rates could affect borrowing costs. Lower rates might make loans cheaper, which could be good for consumers and businesses.
- Tech Stocks: If you own or are considering buying tech stocks, especially in the semiconductor sector, note that companies like Broadcom have issued mixed guidance, affecting stock performance.
- Oil Prices: If you drive a lot or invest in energy stocks, be aware that oil prices are influenced by US crude inventory levels and OPEC+ production decisions.
In essence, understanding these market dynamics can help you make better-informed financial decisions, whether you're an investor or just someone looking to manage personal finances effectively.