Investing.com — Wall Street stock futures edged lower ahead of a pivotal labor market report due this week that could influence the size of an interest rate cut by the Federal Reserve scheduled for later this month. Broadcom (NASDAQ:) posted a revenue outlook that fell short of analysts' expectations, sending the artificial intelligence chipmaker's shares lower in after-hours trading.
1. Futures fall slightly
U.S. stock futures traded just below flat on Friday as investors awaited a long-awaited labor market report that could influence the Federal Reserve's next monetary policy decision.
By 3:45 a.m. ET (7:45 a.m. GMT), the contract was down 165 points, or 0.4 percent, down 38 points, or 0.7 percent, and down 210 points, or 1.1 percent.
Both the 30 index and the benchmark ended the previous trading day lower, while tech-heavy stocks rose.
Trading was choppy on Thursday as investors analyzed data showing that U.S. private companies hired the fewest number of workers since 2021 in August, but a drop in jobless claims and separate figures suggesting stronger activity in the services sector eased some concerns about a worsening U.S. labor market.
So far this month, the S&P 500 is down more than 2.5%, with September historically considered a weak month for stocks.
2. Important nonfarm payrolls report looms
The main event on the economic calendar this week is the release of the August nonfarm payrolls report from the Bureau of Labor Statistics on Friday.
Economists project that the U.S. economy added 164,000 jobs last month, up from 114,000 the previous month. The much weaker-than-expected July total triggered a broader market sell-off as traders worried about a possible U.S. recession.
This time, the data could have a major impact on how the Federal Reserve approaches potential interest rate cuts at its two-day meeting on September 17-18.
According to CME Group's (NASDAQ:) closely monitored FedWatch tool, there is currently about a 59% chance that the Fed will opt to cut borrowing costs by 25 basis points, which are currently at a 23-year high of 5.25% to 5.5%.
But another weak jobs report could spur further concerns about a slowing employment situation and prompt the Fed to cut interest rates by another 50 basis points, some analysts predict.
3. Broadcom's revenue outlook disappoints
US chipmaker Broadcom Inc's shares fell sharply in after-hours trading after the company's current quarter sales outlook fell short of investor expectations.
The company now expects fourth-quarter sales of $14 billion, slightly below analysts' expectations of $14.04 billion, according to LSEG data cited by Reuters.
In a conference call after the company's earnings release, Broadcom executives pointed to weakness in its broadband division, which reported that revenue fell 49% in the third quarter.
The results tempered the strength of demand for the California-based company's key artificial intelligence-optimized chips.Broadcom again raised its AI revenue outlook for the fiscal year to $12 billion, up from a previous forecast of more than $11 billion for the period.
Echoing AI semiconductor giant Nvidia's (NASDAQ:) earnings released last week, Broadcom's numbers fell short of sky-high expectations, and investors are now wary of signs that the recent surge in demand for AI chips may be fading.
4. Seven & i rejects Couche-Tard's proposal
The board of directors of 7-Eleven parent Seven & i Holdings Co. (TYO:) has rejected a $38.5 billion cash takeover offer from Canada's Alimentacion Couche-Tard SA (TSX:), arguing in a letter made public on Friday that the proposal is not in shareholders' best interests.
Seven & i added that Couche-Tard's $14.86 per share cash offer, the largest ever by a foreign takeover of a Japanese company, comes “opportunistically timed” and will likely face tough antitrust hurdles in the U.S. The combined company would be the largest in the U.S. convenience store industry.
The group said it was open to “serious consideration” of any proposal but noted it would “resist” any plan that “does not specifically address very real regulatory concerns and deprives shareholders of the intrinsic value of the company.”
Alex Miller, incoming CEO of Circle K's parent company Couche-Tard SA, said in a conference call after the company's earnings release on Thursday that the company would be able to raise capital and complete the deal.
5. Oil prices remain stable
Oil prices rose in early European trade as investors awaited the release of non-farm payrolls data and factored in both a large withdrawal of U.S. crude oil inventories and plans by OPEC+ producers to delay production.
As of 3:46 a.m. ET, crude oil futures were up 0.5% to $73.06 a barrel, while WTI futures were up 0.5% to $69.48 a barrel. Both futures are expected to decline this week.
Analysts quoted by Reuters said investors were turning cautious ahead of the jobs report, especially after the previous month's figure triggered selling in global markets.
Meanwhile, U.S. crude oil inventories fell by 6.9 million barrels to 418.3 million barrels in the week to Aug. 30, the Energy Information Administration said on Thursday. Analysts had expected a fall of 1 million barrels, Reuters reported.
Meanwhile, the OPEC+ group of oil-producing countries said they had agreed to postpone plans to increase crude oil production in October and November.
Despite the support from these developments, Brent crude closed at its lowest in more than a year on Thursday, due in part to lingering concerns about U.S. and Chinese demand.
