Futures Dip Ahead of NFPs and Broadcom’s Outlook

Wall Street Prepares for Key Labor Market Report as Futures Slip

Stock futures on Wall Street are showing slight declines ahead of the release of this week’s crucial labor market report, which may impact potential Federal Reserve interest rate reductions later this month. Broadcom’s forecast for sales fell short of analysts’ expectations, leading to a drop in shares of the artificial intelligence chipmaker during after-hours trading.

1. Futures Dip Ahead of Labor Market Data

On Friday, U.S. stock futures remained just below the flatline as investors braced for an important labor market report that could influence the Federal Reserve’s upcoming monetary policy decisions.

By 03:45 ET, the Dow Jones futures had decreased by 165 points, or 0.4%, while S&P 500 and Nasdaq futures slipped by 38 points (0.7%) and 210 points (1.1%), respectively. Both the Dow and the S&P finished the previous session lower, while the Nasdaq saw a gain.

Thursday’s trading was marked by volatility as investors evaluated reports indicating that U.S. private employers added the fewest jobs since 2021 in August. However, concerns about the labor market were somewhat alleviated by data showing a drop in jobless claims and growth in the services sector.

So far in September, the S&P 500 has dipped over 2.5%, aligning with historical trends that suggest September is typically a weaker month for stocks.

2. Anticipation for Nonfarm Payrolls Report

The highlight of this week’s economic calendar is the release of the August nonfarm payrolls report from the Labor Department’s Bureau of Labor Statistics set for Friday.

Economists are forecasting the addition of 164,000 jobs in August, a rise from the 114,000 reported in July. The previous month’s figures, much lower than predicted, raised concerns about a potential recession and contributed to a market decline.

This new data could significantly shape the Federal Reserve’s approach toward possible interest rate cuts during its meeting scheduled for September 17-18.

Currently, there is an estimated 59% likelihood that the Fed will reduce borrowing costs, which are at a 23-year high of 5.25% to 5.5%, by 25 basis points. However, if the payroll figures are disappointing, some analysts believe this may deepen worries about the labor market, leading the Fed to consider a more substantial rate cut of 50 basis points.

3. Broadcom’s Sales Outlook Falls Short

Shares of Broadcom declined in after-hours trading following the company’s disappointing sales guidance for the current quarter. The chipmaker projected fourth-quarter revenues of $14 billion, just below the analysts’ expectations of $14.04 billion.

During a post-earnings conference call, Broadcom’s executives referenced weaknesses in the broadband unit, which experienced a 49% revenue drop in the third quarter. This overshadowed the demand for the company’s key AI-optimized chips. Nonetheless, Broadcom raised its AI revenue forecast to $12 billion for the fiscal year, up from the previous estimate of over $11 billion.

In line with earlier results from AI semiconductor leader Nvidia, Broadcom’s subpar performance has raised concerns among investors about a potential slowdown in AI chip demand.

4. Seven & i Rejects Couche-Tard Bid

The board of Seven & i Holdings, the owner of 7-Eleven, has rejected a $38.5 billion cash offer from Canada’s Alimentation Couche-Tard. In a publicly released letter, Seven & i deemed the proposal not in the best interest of its shareholders.

The company pointed out that Couche-Tard’s cash offer of $14.86 per share, which would have represented the largest-ever foreign acquisition of a Japanese company, was "opportunistically timed" and likely to face significant antitrust challenges in the U.S. Seven & i stated it would consider any proposals sincerely but would resist offers that do not reflect the company’s intrinsic value and do not adequately address regulatory concerns.

The incoming CEO of Couche-Tard indicated that the company was prepared to finance and complete the acquisition.

5. Oil Prices Steady Ahead of Jobs Data

Oil prices saw a modest increase in early European trading as investors waited for the nonfarm payrolls report, factoring in a significant reduction in U.S. crude inventories alongside a planned output delay from OPEC+ producers.

As of 03:46 ET, Brent crude added 0.5% to $73.06 per barrel, while West Texas Intermediate futures also rose by 0.5% to $69.48 a barrel. Both contracts were set to end the week lower.

Investors are exercising caution ahead of the jobs data, especially after last month’s figures sparked a widespread sell-off in global markets. Recent data from the U.S. Energy Information Administration indicated a draw of 6.9 million barrels in crude stockpiles, significantly exceeding analyst expectations.

OPEC+ has decided to postpone a planned increase in oil production for October and November, which, despite these supportive developments, has not prevented Brent from settling at a one-year low due to ongoing concerns about demand from both the U.S. and China.