Higher futures, Fed rate potential reduced size in focus

Investing.com — Wall Street futures rose on Monday as debate swirled over the size and pace of potential Federal Reserve interest rate cuts following a weaker-than-expected jobs report. Aircraft maker Boeing (NYSE: ) is reaching a tentative agreement with its largest union, potentially avoiding a damaging walkout. Canada’s Alimentation Couche Tard (TSX: ) says it has committed to its $38.5 billion takeover bid for Seven & i Holdings (TYO: ), the owner of 7-Eleven, despite the Japanese company rejecting the offer last week .

1. Futures above

U.S. stock futures were in the green on Monday after stocks ended the previous session lower following an August jobs report that left traders uncertain about the size of potential Federal Reserve interest rate cuts at the end of this month.

By 03:28 ET (0728 GMT), the contract had gained 188 points, or 0.5 percent, was up 29 points, or 0.5 percent, and was up 137 points, or 0.7 percent.

Wall Street’s main averages fell on Friday after nonfarm payrolls for August showed a continued slowdown in the U.S. labor market, all but guaranteeing the Fed will cut borrowing costs at its next two-day meeting on Sept. 17-18 .

For the week, the benchmark index and 30 stocks posted their biggest weekly declines since March 2023, while the tech industry posted its biggest drop since January 2022.

In individual stocks, Broadcom (NASDAQ: ) fell 10.4% after the chipmaker’s fourth-quarter revenue forecast missed analysts’ expectations. Other semiconductor stocks also fell.

2. Possible Fed rate cut in focus

Investors’ bets that the Fed will cut rates by 25 basis points stood at 73 percent Monday morning, according to CME Group’s (NASDAQ: ) closely watched FedWatch tool.

Meanwhile, the probability of a 50 basis point cut was 27% after briefly jumping above 50% immediately following the jobs data.

The odds come amid continued uncertainty over how the central bank will react to the jobs report.

“(There) was enough in the report to keep markets guessing,” analysts at ING said in a note. While projecting a 50 basis point cut, analysts said it was a “low conviction call, made on the basis that inflation fears have receded and the Fed will want to overcome weakness in the (labor) market.”

On Friday, Fed Governor Christopher Waller said “the time has come” for the Fed to cut interest rates, but remained open about the depth and pace of cuts.

3. Boeing reaches tentative agreement with largest union

Boeing has agreed to a 25 percent pay increase for its largest union, possibly to avoid a damaging strike that threatens to put further pressure on the embattled planemaker.

Along with the wage increase, the proposed four-year deal would also include a commitment to build a new plane in the U.S. Pacific Northwest, improved retirement benefits and an increase in the union’s contribution to the quality of the planes.

Union leadership, which represents more than 30,000 workers, recommended that members support the deal. However, if it is rejected and two-thirds vote to go on strike, workers could stage a walkout at midnight on Friday.

A job action would increase scrutiny of Boeing’s new chief executive, Kelly Ortberg, who is currently trying to improve the company’s finances and rebuild its reputation after a dangerous mid-air door plug breach in January.

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

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

In a statement, Couche-Tard said it was “highly confident that the collaborative discussions” will lead to a deal that will increase value for Seven & i’s stakeholders.

On Friday, Seven &’s board rejected the $14.86 per share cash offer from Circle-K operator Couche-Tard, arguing it was not in the best interests of its shareholders.

Seven & i added that Couche-Tard’s proposal, which would be the largest-ever foreign takeover of a Japanese firm, was “opportunistic” and likely to face tough antitrust hurdles in the US.

5. The price of oil is advancing

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

By 3:29 a.m. ET, the contract added 1.6 percent to $72.17 a barrel, while futures (WTI) traded up 1.6 percent to $68.78 a barrel. Brent fell 10 percent to its lowest since December 2021 on Friday, while WTI fell to its lowest since June 2023, according to Reuters.

The U.S. National Hurricane Center said over the weekend that a weather system in the Gulf of Mexico is projected to become a hurricane before hitting the northwest U.S. Gulf Coast — a region crucial to U.S. refining capacity.

Elsewhere, the prospect of lower interest rates also helped support crude oil. In theory, a drop in borrowing costs could boost economic activity and spur an increase in demand for oil.

Reuters contributed to this report.