Futures are off, NFP this week, CA governor vetoes AI bill

Investing.com — U.S. stock futures remained near flat on Monday as markets await comments from Fed Chairman Jerome Powell and the latest non-farm payrolls report later in the week. Elsewhere, California Gov. Gavin Newsom is opposing a hotly contested bill that would have introduced new regulations on artificial intelligence companies in the state.

1. Disabled futures

US stock futures ranged around the flat line as investors looked to a speech by Powell on Monday and fresh jobs market data (more below).

By 03:30 ET (07:30 GMT), the contract was down 30 points, or 0.1 percent, while and were flat.

30 shares closed the previous session at a new high. Fueling sentiment was a report from the Commerce Department that suggested easing inflationary pressures and subdued growth in consumer spending.

The numbers supported bets that the Fed could launch another 50-basis-point interest rate cut at its next meeting, according to CME Group’s (NASDAQ: ) FedWatch tool. The central bank, prompted by signs of easing price pressures and weakening job demand, cut borrowing costs by 50 basis points earlier this month.

Traders now turn their attention to comments on the outlook for the economy from the Fed’s Powell at the annual meeting of the National Business Economics Association in Tennessee at 1:55 PM ET.

2. The job market report is due this week

Highlighting the economic calendar this week will be the latest US payrolls report, which may provide a glimpse into the health of the labor market.

Economists expect the US economy to add 144,000 jobs in September, up slightly from 142,000 the previous month. The unemployment rate, meanwhile, is seen as equal to August’s 4.2% level.

In August, payrolls rose from a revised downward reading of 89,000 and were below forecasts of 164,000, while the jobless rate fell from 4.3 percent. Overall, the numbers pointed to a slowdown in demand for labor — a trend identified by several Fed officials as a key driving force behind their decision to announce a jumbo rate cut.

Analysts at ING said in a note to clients that the jobs market continues to hold “the key to the pace” of potential future interest rate cuts, particularly as inflation — once the linchpin of a series of aggressive cost increases of Fed borrowing — showing signs of easing.

“If the unemployment rate rises next Friday to 4.3% and a print below 75,000 payrolls, we expect calls for a second rate cut of 50 (basis points) to increase significantly,” ING analysts said.

3. CA governor rejects controversial AI bill

California Governor Gavin Newsom has vetoed a bill that would have introduced new regulations on artificial intelligence, arguing the measure could stifle innovation.

The bill would have set strict guidelines on who creates AI tools, including mandates for safety testing of advanced AI models that cost more than $100 million to develop. It would also have made AI software developers create a mechanism to disable AI models, effectively the equivalent of a kill switch.

Democratic state Sen. Scott Wiener, the bill’s sponsor, said it would help protect the public from AI before the technology becomes too cumbersome.

However, prominent tech groups, including Instagram owner Meta Platforms (NASDAQ: ) and ChatGPT maker OpenAI, have voiced their opposition to it, warning that the proposed rules will hinder both the development of AI and California’s role as a destination for creating those under development. technology.

In a letter to the state senate, Newsom pointed out that 32 of the world’s top artificial intelligence firms are based in California, adding that the new framework will “reduce the very innovation that fuels progress for the public good.”

4. Chinese manufacturing activity falls in September

Chinese factory activity contracted in September, although it was slightly more than economists had forecast, in a sign of the challenges facing lawmakers in Beijing as they try to revive the world’s second-largest economy.

The official manufacturing purchasing managers’ index (PMI) came in at 49.8 during the month, up from 49.1 in August and beating expectations of 49.4. A sign below 50 indicates contraction.

The Caixin manufacturing PMI was 49.3, down from 50.4 in August and below forecasts of 50.5.

Meanwhile, the official non-manufacturing PMI read 50 and the Caixin services PMI was 50.3, down from a previous level of 51.6.

Last week, China unveiled a raft of new stimulus measures as lawmakers push to meet a target of 5 percent annual growth.

“While the official PMIs held up well in September, the Caixin PMIs fell quite sharply, suggesting that the economy has lost some momentum this month. The stimulus package announced last week thus comes at a much-needed time and should provide some short-term support. to activity,” Capital Economics analysts said in a note to clients.

5. Crude rises amid Middle East tensions

Oil prices rose on Monday on the possibility of a wider conflict in the Middle East after Israel stepped up its attacks on the Iran-backed Hezbollah and Houthi militant groups.

By 03:30 ET, the contract was up 0.9% at $72.20 a barrel, while WTI futures traded 0.8% higher at $68.71 a barrel .

Israel said it bombed Houthi targets in Yemen on Sunday, just days after killing Hezbollah leader Sayyed Hassan Nasrallah in an escalating conflict in Lebanon.

Both contracts fell last week as concerns about demand grew after fiscal stimulus from China, the world’s biggest oil importer, failed to reassure market confidence.