After Head-Spinning Week, Job and CPI Data Awaited

0:05Welcome to the Schwab Market Update Podcast, where we prepare you for each trading day with a recap of recent news and a look at what's ahead.

0:17I'm Keith Lansford, and here is Schwab's early look at the markets for Monday, February 9th. Last week was dominated by the tech and crypto sell-offs before a Friday rebound that almost erased those losses. This week might be more focused on data, thanks to Wednesday's delayed January jobs report and Friday's consumer inflation reading. Consumers also come into focus with tomorrow's December retail sales report and earnings this week from some of the best-known and oldest U.S. companies. Monday kicks off with investors still buzzing over Friday's comeback that suggests dip buying hasn't gone into winter hibernation.

0:55The S &P 500's close, just above long-term technical support at its 100-day moving average below 6 ,800 on Thursday, appeared to lure back the bulls, who'd vanished much of the week. By the end of the day, the broad market was barely down from a week earlier, though there was far more damage done to the tech-dominated Nasdaq 100, which fell roughly 2 % for the week and is now down two weeks in a row. While earnings season rolls on, things slow a bit in coming days, with no magnificent seven members on the calendar. Investors might be relieved to hear that after what happened to shares of Microsoft, Alphabet and Amazon after their recent reports, all of which contributed to the massive pressure on tech that knocked out$1 trillion in market value as of Thursday's lows.

1:44Even now, the software sector is reeling, having just suffered the worst loss in its forward price-to-earnings ratio since 2002. This time, software softness related to enhanced fear of AI taking over the functions of these companies, but as in AI itself and the internet bubble era, there will likely be winners and losers. Meanwhile, investors might want to take a broader view. The S &P 500 Equal Weight Index, which weighs all components equally rather than by market capitalization, forged all-time highs last week, rising 2 % even as the market capitalization-weighted S &P 500 lost ground. Market breadth remained solid, with 68 % of S &P 500 stocks trading above their 50-day moving average by late Friday.

2:35In data on Friday, the University of Michigan's preliminary February Consumer Sentiment Report featured a headline reading of 57.3%, easily topping the Briefing.com consensus of 54.3%, and up a sliver from January's 56.4%. Respondents grew more upbeat about current conditions, but less positive in their expectations. Concerns about the erosion of personal finances from high prices and elevated risk of job loss continue to be widespread, the report said. Though it's less of a mega-cap week on the earnings front, there are important reports to watch, starting with consumer bellwether Coca-Cola tomorrow.

3:17Other large consumer-oriented firms like Ford and McDonald's are also on the calendar, giving investors a chance to see if recent softness in the jobs market is translating into any weakness in consumer spending. Another consumer spending landmark this week is tomorrow morning's December retail sales report, which follows a solid 0.6 % rise in November. Excluding autos, analysts expect a 0.4 % month-over-month gain, while the annual expected rise of 2.9 % would be sequentially below the previous month's 3.3%. Last week saw AI stocks take a hit along with software, but some of that might have reflected profit-taking from recent rallies in shares like Advanced Microdevices and Micron.

4:04Meanwhile, segment leaders like NVIDIA and Broadcom kept struggling to find new buyers as investors worry about the AI story possibly growing weaker over time. This came up in guidance from AMD, which showed slower growth expected this quarter. Cisco and Applied Materials are two important tech earnings ahead in coming days, but there's nothing remotely as influential as the last two weeks. Data this week? Data this week could go a long way towards sorting things out in terms of the economy. Last month, the Federal Reserve revised its statement in an upbeat manner, and some recent data, like last week's ISM manufacturing and services reports, looked solid.

4:45Still, job openings, ADP jobs growth, and layoffs reports featured more bad news than good, reinforcing ideas of a labor market that can't get its engine started. Wednesday's January nonfarm payrolls data isn't expected to show much improvement. The consensus view is close to 70 ,000, not dreadful like the negative reports from last summer, but well below the long-term average. Anything above 100 ,000 might be seen as constructive, while revisions to the last two reports will also carry weight. As of late Friday, chances of a rate cut at the Fed's March 17th and 18th meeting remained relatively low at just under 20%, up slightly from 13 % a week earlier, according to the CME FedWatch tool.

5:31Odds like that mean investors anticipate another pause to follow the one in January, and Fed speakers last week gave little reason to expect anything else. Jobs data and inflation numbers between now and March could change all this, and the Fed's last set of projections featured one rate cut this year. Investors generally expect at least two and possibly three, according to futures trading, but it might take a real dive in the jobs market and at least some cooling of inflation to get the Fed to that point. A host of Fed speakers are on this week's schedule, including Fed Governor Christopher Waller this afternoon.

6:10Waller could be worth a listen, considering he was in the small minority in the Federal Open Market Committee that supported a rate cut last month. Treasury yields finished the old week near 4.2 percent, and well off their recent highs near 4.3%. Soft U.S. economic data and the recent dive in stocks apparently made treasuries more attractive to some investors recently, despite the perceived lack of any near-term rate cuts. The dollar also advanced from recent lows, possibly on perceptions of safety, though no asset is truly safe. A couple of treasury auctions loom, including tomorrow's important three-year auction.

6:51Fixed income markets have been relatively calm recently, said Cooper Howard, director of fixed income research and strategy at the Schwab Center for Financial Research. Volatility in the fixed income markets has been historically low, and we expect one or two rate cuts this year, depending on how the economy develops. Metals suffered sharp declines at the end of January and didn't recover much of any ground last week, though gold and silver rose fractionally on Friday. Turning overseas, Japan's election Sunday could affect U.S. markets this week amid concerns that higher fiscal spending there might raise the deficit, forcing interest rates even higher.

7:31The impact could mean higher U.S. yields as competition mounts from Japan and some money flows back toward assets there. In U.S. markets Friday, the Dow Jones Industrial Average topped 50 ,000 for the first time, and the S &P 500 surprisingly found a way to regain almost all its weekly losses in a memorable session dominated by a 4 % tech market rally. Industrials, financials, and materials also came to the party, though communication services sagged due to worries over Amazon's heightened spending plans that slammed that stock down 5%. In individual trading Friday, weakness from Amazon came even though there was evidently a lot to like about its earnings.

8:18Quarterly revenue and guidance were in line, and Amazon Web Services cloud sales rose 24%, a sequential improvement. Anticipated capital spending plans likely brought much of the pressure, driving worries about margins and return on invested capital. Amazon said on its earnings call it is monetizing AI as fast as it installs it. It's an ill wind that blows no one some good, the saying goes. That happened to be the case for AI Stocks Friday as investors grew more positive following the heavy spending plans outlined by Alphabet on Wednesday and by Amazon Thursday. Shares of NVIDIA, Supermicrocomputer, Western Digital, Marvell Technology, Broadcom, and advanced micro-devices all climbed 7 % or more NVIDIA enjoyed its best day since last April 9th, up nearly 8 % Bitcoin also had a stellar day, rising 10 % in its best outing in months and one that lifted shares of crypto-related stocks like Strategy and Coinbase 26 % and 13 % respectively.

9:29Bolstered by hopes that AI spending might reverberate around the economy, industrial and consumer names like Caterpillar, Delta Airlines, Norwegian Cruise Lines, and Constellation Energy posted gains of 5 % or more. Mining firms gained despite silver and gold's challenging week. And Stellantis cratered nearly 24 percent after the automaker announced$26 billion in charges related to a business restructuring that includes pulling back on electrification plans, CNBC reported.

10:05The Dow Jones Industrial Average rocketed 1 ,206.95 points Friday, or 2.47%, to 50 ,115.67. The S &P 500 index gained 133.90 points, or 1.97%, to 6 ,932.30, and the Nasdaq Composite added 490.63 points, or 2.18%, to 23 ,031.21. For the week, the Dow Jones Industrial Average climbed 2.5 % and topped 50 ,000 for the first time. The S &P 500 index fell 0.10%, and the NASDAQ lost 1.84%. This has been the Schwab Market Update podcast. To stay informed, visit www.schwab.com slash market update or follow us for free in your favorite podcasting app. And if you like what you've heard, please consider leaving us a rating or a review.

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