ADP report ahead, Musk's xAI seeks to raise $1 billion - what's moving markets

December 6, 2023 5:22 AM EST -- Markets are awaiting the release of more labor market data on Wednesday, as investors attempt to gauge if the Federal Reserve may soon start to retreat from a period of aggressive policy tightening. Elsewhere, Elon Musk's artificial intelligence start-up xAI looks to raise $1 billion from investors, while Nvidia (NASDAQ: NVDA) boss Jensen Huang says that the AI semiconductor manufacturer is working closely with the U.S. to develop chips that comply with Washington's curbs on exports to China.

1. Futures point higher

U.S. stock futures edged into the green on Wednesday as investors looked ahead to private payrolls data later in the session that could give more clues into the Federal Reserve's future monetary policy decisions.

By 04:41 ET (09:41 GMT), the Dow futures contract had added 27 points or 0.1%, S&P 500 futures had risen by 10 points or 0.2%, and Nasdaq 100 futures had gained 54 points or 0.3%.

The main indices on Wall Street were mixed on Tuesday, as markets digested fresh Labor Department figures showing that job openings in the U.S. dipped to their lowest mark in over two years in October. The numbers pointed to a cooling in labor demand, bolstering the case for the Fed to possibly begin backing away from a long-standing campaign of interest rate hikes.

The 30-stock Dow Jones Industrial Average and benchmark S&P 500 shed 0.2% and 0.1%, respectively, weighed down by energy stocks, while a jump in most of the Magnificent Seven big-name tech shares pushed the Nasdaq Composite up by 0.3%. U.S. Treasury yields, which typically move inversely to prices, also dipped.

2. ADP payrolls ahead

A week of major labor market data releases is set to roll on, with attention now turning to a closely-watched report tracking the monthly change in U.S. private employment.

Economists estimate that payroll processor ADP's National Employment Report will show that private employers in the U.S. added 130,000 jobs in November, up from 113,000 in the prior month.

Fed policymakers will likely be keeping a close eye on the numbers, which will serve as a warm-up act to the headline economic data this week: the all-important non-farm payrolls report on Friday.

Tempering labor demand has been one of the central pillars of the U.S. central bank's unprecedented tightening cycle that has lifted interest rates to more than two-decade highs. Officials are hoping that a softening jobs picture may defuse some upward pressure on inflation.

Figures suggesting some cooling in the labor market could persuade the Fed to start bring rates back down, while signs of resilience may bolster the argument for keeping borrowing costs elevated for a longer period of time.

3. Musk's xAI looking to raise $1 billion

Elon Musk's xAI is seeking to raise up to $1 billion in an equity offering, according to a filing with the U.S. Securities and Exchange Commission, as the artificial intelligence start-up looks to strengthen its position in the increasingly competitive field of generative AI.

The group has already raised just under $135 million in equity financing, the document showed, and is asking investors to chip in a minimum of $2 million.

Microsoft-backed OpenAI's mega-popular chatbot ChatGPT has fueled a surge in fundraising for AI start-ups over the past year, although regulators have flagged some concerns over how the nascent technology could lead to the spread of misinformation.

Musk, who has previously warned of the dangers posed to humanity by AI, launched xAI in July with a vow to build a safer version of the technology. The company unveiled its first chatbot last month, an AI model named "Grok" that is trained with data taken from X, the social media platform formerly known as Twitter that Musk purchased in 2022. Musk has said that Grok will eventually be made available to premium subscribers to X and as a standalone app.

4. Nvidia working with U.S. to develop chips compliant with China curbs - Huang

Nvidia is working with U.S. authorities to develop chips for the Chinese market that adhere to Washington's export restrictions, Chief Executive Jensen Huang said on Wednesday.

Speaking at a news conference in Singapore, Huang added that the California-based semiconductor group will continue to "work with the government to come up with a new set of products that comply with the new regulations that have certain limits."

Nvidia, the world's biggest semiconductor manufacturer which has become an AI darling during a recent spike in hype over the technology, has controlled over 90% of China's AI chip market. However, fresh U.S. curbs on exports of cutting-edge AI chips to China have threatened to eat away at Nvidia's dominance in the country and boost local rivals.

In November, the group warned that its sales in China would "decline significantly" in its current quarter. Nvidia has also postponed the launch of its most powerful China-focused AI chip until the first quarter of next year, Reuters previously reported.

5. Oil inches lower

Oil prices dropped on Wednesday as traders fretted over disappointing OPEC+ production cuts, China’s economic woes and an unexpected build in U.S. crude stockpiles.

By 04:41 ET, the U.S. crude futures traded 0.4% lower at $72.04 a barrel, while the Brent contract dipped by 0.3% to $77.00 per barrel. Both benchmarks closed at their lowest level since July in the previous session.

Crude prices have plummeted over the past six weeks, with a bulk of the losses coming in recent sessions after the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+, largely underwhelmed markets with its plans to slash output further in 2024.

Concerns over China's economy, which could limit overall fuel demand in the world's second-largest crude consumer, also weighed, especially after ratings agency Moody's downgraded its outlook on Beijing's debt pile.

Additionally, data from industry group the American Petroleum Institute showed that U.S. oil inventories grew by 594,000 barrels in the week to Dec. 1, compared to expectations for a draw of over 2 million barrels.

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