Wall St set for a dull start to September on growing slowdown worries

• ISM manufacturing activity due at 10 a.m. ET
• Nvidia, AMD falls after U.S. export ban on AI chips to China
• Futures down: Dow 0.49%, S&P 0.58%, Nasdaq 0.79%

US stock indexes were on Thursday set to begin September on a dour note as weak factory activity surveys from Europe and Asia amplified fears of a global economic slowdown.

Rising borrowing costs, high inflation, the Ukraine war and China's Covid curbs led to tepid manufacturing activity across Germany, Britain, Japan and China, although there were signs of easing cost pressures. 

In the United States, the Institute for Supply Management's report, due at 10 am ET, is expected to show manufacturing activity dropped to 52.0 last month from 52.8 in July, the lowest reading since June 2020.

Meanwhile, the number of Americans filing new claims for unemployment benefits fell more-than-expected to 232,000 last week, while layoffs dropped in August, consistent with strong demand for workers.

Economists polled by Reuters had forecast 248,000 applications for the latest week. The Federal Reserve is trying to cool demand for labor and the overall economy to bring inflation down to its 2% target.

All eyes are now on the nonfarm payrolls report on Friday.

In the previous session, Wall Street's main indexes cemented their weakest August performance in seven years as investors worried about how much and how long the Federal Reserve will raise interest rates.

The benchmark S&P 500 has dropped 8.6% since hitting a four-month high in August, with much of the losses triggered by Fed Chair Jerome Powell's hawkish view on raising interest rates.

"The market has its dead eyes on re-testing the June lows. We will see how it goes after Friday's nonfarm payroll report and how things go once we get back into a full week after the Labor Day," said Robert Pavlik, senior portfolio manager at Dakota Wealth Management.

"Powell's comments put the realism back into the market... people that have gotten in since the bounce off the lows in June are quickly moving to the sidelines."

Money markets are now predicting a 75.1% chance of a third-straight 75 basis points increase in rates in September and expect it to peak at above 3.9% in March 2023.

At 8:47 am ET, Dow e-minis were down 154 points, or 0.49%, S&P 500 e-minis were down 23 points, or 0.58%, and Nasdaq 100 e-minis were down 97.5 points, or 0.79%.

Nvidia Corp slid 4.3% in premarket trading after US officials told the chip designer to stop exporting two top computing chips for artificial intelligence work to China.

Advanced Micro Devices Inc dipped 2.3% after it was told to stop exporting its top artificial intelligence chip to China. 

Qualcomm Inc slipped 1.5% after the UK-based chip firm Arm sued the chipmaker and its recently acquired chip design firm Nuvia Inc for breach of license agreements and trademark infringement. 

Hormel Foods Corporation fell 5.5% after packaged foods maker cut its full-year profit forecast.