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Futures higher, potential Fed rate cut size in focus - what's moving markets

Published 2024-09-09, 04:16 a/m
© Reuters
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Investing.com -- Stock futures on Wall Street edge higher on Monday, as debate swirls around the scale and speed of potential Federal Reserve interest rate cuts following a weaker-than-anticipated jobs report. Planemaker Boeing (NYSE:BA) reaches a tentative deal with its biggest labor union, possibly avoiding a damaging walkout. Canada's Alimentation Couche Tard (TSX:ATD) says its committed to its $38.5 billion takeover offer for 7-Eleven-owner Seven & i Holdings (TYO:3382) despite the Japanese company rejecting the bid last week.

1. Futures higher

US stock futures pointed into the green on Monday after equities ended the prior session lower following an August jobs report that left traders uncertain about the size of potential Federal Reserve interest rate cuts later this month.

By 03:28 ET (07:28 GMT), the Dow futures contract had gained 188 points or 0.5%, S&P 500 futures had increased by 29 points or 0.5%, and Nasdaq 100 futures had risen by 137 points or 0.7%.

The main averages on Wall Street slipped on Friday after nonfarm payrolls figures for August showed continued slowing in the US labor market, all but guaranteeing that the Fed will slash borrowing costs at its next two-day gathering from Sept. 17-18.

For the week, the benchmark S&P 500 and 30-stock Dow Jones Industrial Average both posted their largest weekly drops since March 2023, while the tech-heavy Nasdaq Composite logged its biggest dip since January 2022.

In individual stocks, shares in Broadcom (NASDAQ:AVGO) slumped by 10.4% after the chipmaker's fourth-quarter revenue outlook missed analysts' expectations. Other semiconductor stocks also fell.

2. Possible Fed rate cut size in focus

Investors' bets that the Fed will bring down rates by 25-basis points stood at 73% on Monday morning, according to the CME Group's (NASDAQ:CME) closely-monitored FedWatch Tool.

Meanwhile, the probability of a 50-basis point cut stood at 27% after briefly jumping above 50% in the immediate wake of the jobs data.

The odds come amid ongoing uncertainty around how the central bank will react to the jobs report.

"[T]here was enough in the report to keep markets guessing," analysts at ING said in a note. Although they are projecting a 50-basis point reduction, the analysts said it was a "low conviction call made on the basis that inflation fears have receded and the Fed will want to get ahead of [labor] market weakness."

On Friday, Fed Governor Christopher Waller said "the time has come" for the Fed to decrease rates, but he remained open-minded about the depth and pace of the cuts.

3. Boeing reaches tentative deal with largest union

Boeing has tentatively agreed to a 25% pay increase for its biggest union, possibly averting a damaging strike that threatens to heap further pressure on the embattled planemaker.

Along with the wage bump, the proposed four-year deal would also include a committment to build a new plane in the US Pacific Northwest, improved retirement benefits and an increase in the union's input into jet quality.

Union leadership, who represent over 30,000 workers, have recommended that members support back the agreement. However, if it is rejected and two-thirds vote to go on strike, the workers could stage a walkout at midnight on Friday.

A labor action would ratchet up scrutiny on new Boeing Chief Executive Kelly Ortberg, who is currently attempting to improve the company's finances and rebuild its reputation after dangerous mid-air door plug breach in January.

4. Couche-Tard asks for Seven & i talks after previous takeover bid rejected

Canada's Alimentation Couche-Tard has said it remains committed to its takeover bid of Seven & i Holdings, despite the Japanese owner of the 7-Eleven convenience store chain rejecting a preliminary offer of $38.5 billion.

In a statement, Couche-Tard said that it was "highly confident that collaborative discussions" would lead to a deal that would increase value for Seven & i stakeholders.

On Friday, the board of Seven & i turned down the $14.86 per share cash bid from Circle-K-operator Couche-Tard, arguing that it was not in the best interest of its shareholders.

Seven & i added that Couche-Tard's proposal, which would be the biggest-ever foreign buyout of a Japanese firm, was "opportunistically timed" and would likely face stiff antitrust hurdles in the US.

5. Oil prices advance

Oil prices moved higher on Monday as traders eyed the impact of a possible hurricane off the US Gulf Coast and gauged the market reaction to last week's nonfarm payrolls report.

By 03:29 ET, the Brent contract had added 1.6% to $72.17 per barrel, while U.S. crude futures (WTI) were trading up by 1.6% at $68.78 a barrel. Brent had fallen by 10% at Friday's close to its lowest level since December 2021, while WTI had decreased to its lowest mark since June 2023, according to Reuters.

The US National Hurricane Center said over the weekend that a weather system in the Gulf of Mexico is projected to turn into a hurricane prior to hitting the northwestern US Gulf Coast -- a crucial region for American refining capacity.

Elsewhere, the prospect of lower interest rates also helped support crude. In theory, a dip in borrowing costs could bolster economic activity and spur an uptick in oil demand.

Reuters contributed to this report.

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