Futures Muted, NFPs This Week, CA Governor Vetoes AI Bill – Market Movers Explained

Investing.com – US Stock Futures Remain Steady as Markets Anticipate Fed Comments and Job Reports

US stock futures are largely unchanged on Monday as investors await remarks from Federal Reserve Chair Jerome Powell and the upcoming nonfarm payrolls report later this week. Additionally, California Governor Gavin Newsom has vetoed a contentious bill aimed at regulating artificial intelligence companies in the state.

1. Futures Hold Steady

US stock futures are trading near the flatline, with market participants keenly anticipating Powell’s address and new data regarding job growth.

As of 03:30 ET, Dow futures were down by 30 points or 0.1%, while S&P 500 futures and Nasdaq 100 futures showed no significant movement.

The Dow Jones Industrial Average reached a record high in the previous session, buoyed by a report from the Commerce Department indicating a reduction in inflationary pressures and a slight increase in consumer spending.

These economic signals have raised expectations that the Federal Reserve may implement another substantial 50-basis point interest rate reduction at their next meeting, following an earlier cut of the same magnitude this month due to easing price pressures and weakening labor demand.

Market focus is now shifting to Powell’s commentary on the economic outlook scheduled for the National Association for Business Economics annual meeting in Tennessee at 13:55 ET.

2. Upcoming Jobs Market Report

This week’s economic highlights include the latest US nonfarm payrolls report, which will provide insights into the health of the labor market.

Economists project the US economy will add approximately 144,000 jobs in September, a modest increase from the 142,000 added in August. The unemployment rate is expected to remain steady at 4.2%.

In August, job growth was revised down to 89,000, falling short of the anticipated 164,000, while the jobless rate dipped from 4.3%. These results suggest a cooling in labor demand, a trend noted by various Fed officials as a significant factor in their rate reduction decision.

Analysts at ING stated that the labor market remains crucial for determining the pace of future interest rate cuts. They noted that a rise in the unemployment rate to 4.3% along with payroll gains below 75,000 could amplify calls for another substantial rate cut.

3. California Governor Vetoes AI Regulations

California Governor Gavin Newsom has vetoed a proposed bill that sought to introduce new regulations on artificial intelligence, arguing that such measures could hinder innovation.

The legislation aimed to implement stringent guidelines for AI tool developers, including mandatory safety testing for advanced AI models with development costs exceeding $100 million. It also proposed a requirement for developers to create a shutdown mechanism for AI models.

The bill’s sponsor, Democratic State Senator Scott Wiener, claimed it was necessary to safeguard the public from potential harms before AI technology becomes increasingly complex.

However, major tech companies, including those behind popular platforms, opposed the bill, cautioning that the proposed regulations would impede AI development and California’s status as a leader in the tech space.

In his veto message, Newsom highlighted that 32 of the world’s leading AI firms are based in California and expressed concerns that the new guidelines would stifle innovation necessary for public benefit.

4. Chinese Manufacturing Activity Declines

China’s manufacturing sector saw a contraction in September, marginally exceeding economists’ predictions, highlighting the difficulties facing Beijing’s policymakers in revitalizing the economy.

The official manufacturing purchasing manager’s index (PMI) was recorded at 49.8, up from 49.1 in August but still below the neutral mark of 50. The Caixin manufacturing PMI fell to 49.3 from 50.4 in August.

In other sectors, the official non-manufacturing PMI was at 50, while the Caixin services PMI decreased to 50.3 from a previous figure of 51.6.

China recently announced various stimulus measures in an effort to achieve an annual growth target of 5%. Analysts indicated that the decline in the Caixin PMIs suggests a loss of momentum in the economy, implying the need for timely stimulus support.

5. Crude Oil Prices Rise Amid Middle Eastern Tensions

Oil prices rose on Monday due to escalating tensions in the Middle East following Israeli attacks on Iranian-backed militant groups.

As of 03:30 ET, Brent crude increased by 0.9% to $72.20 per barrel, while U.S. crude futures rose by 0.8% to $68.71 per barrel.

Israel conducted airstrikes on Houthi targets in Yemen on Sunday, just days after an operation against a Hezbollah leader in Lebanon, signaling a potential for a broader conflict.

Last week, both oil contracts experienced declines as concerns regarding demand grew following China’s fiscal stimulus measures, which did little to bolster market confidence.