After Record S&P 500 Finish, Iran and Yields Eyed

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, August 10th. The week starts with investors still digesting Friday's surprise loss of 23 ,000 jobs in July. The government's non-farm payroll report also showed unemployment dropping to 4.1 % as job market participation fell. It was the first monthly jobs decline since February and could ignite concerns about the pace of economic growth, especially as the government downwardly revised May and June jobs growth by a combined 103 ,000. The report caused a double-take in the markets, sending odds of a Federal Reserve rate hike down to around 44 % from 54 % before the data, according to the CME FedWatch tool, and pushing Treasury yields and the dollar lower.

1:09Stocks climbed Friday and enjoyed their strongest week since April, lifted by strong earnings and falling chances of a hike. Analysts had expected job growth of 86 ,000 and unemployment steady at 4.2%. The report should give the Fed more comfort in their decision to hold rates steady last week, said Colin Martin, head of Fixed Income Research and Strategy at the Schwab Center for Financial Research, speaking Friday. Friday's report showed labor market participation dropping to 61.4 percent, down from 62.1 percent at the start of the year. The unemployment rate fell, but not for good reasons, Martin said.

1:50People are leaving the workforce. Heavy losses in government and retail jobs led the monthly overall drop, though health care employment extended gains. Also, wages saw paltry month-over-month growth of 0.1 % below the 0.3 % expected, pushing year-over-year wage growth to 3.2 % below the inflation rate. This could send negative signals about the consumer environment weighing on earnings expectations down the road. The drop in hike chances came after several Fed speakers took a hawkish tone earlier this week. However, those comments came when jobs growth appeared headed up. Now, the 12-month jobs growth average is a dismal 34 ,000.

2:36Also, July's extremely light wage gain suggests a rate hike might make life tougher for struggling consumers. It could be worth listening to Fed speakers this week for updated thoughts now that the jobs report is in. It also might make the Fed's Jackson Hole Symposium later this month more interesting, with Fed Chairman Kevin Warsh expected to speak then.

3:02This week features key inflation data, including Wednesday's July Consumer Price Index, or CPI. Early expectations are for CPI to show a slight 0.1 % rise in July, with core CPI up 0.2 % month over month. Core extracts food and energy. Tomorrow brings existing home sales for July, seen down a tad at$4.07 million on a seasonally adjusted annual basis. Besides those reports, the calendar might bring a welcome sense of rest after the last few exhausting weeks. Cisco is a key report to watch for late Wednesday, preceded by CoreWeave and Lumentum late tomorrow. Cisco has its footprint across many technologies around the globe, making it a helpful barometer for the entire sector.

3:52With almost 90 % of earnings season over, Faxet projects blended earnings growth, including companies that reported in estimates of those yet to come, at 50.4%. Keep in mind that there's a heavy influence from the booming chip sector and from gains some big tech companies are making through owning shares of other firms. Organic earnings growth still looks impressive, however, near 30 % year-over-year. On Friday, major indexes resumed their climb following widespread losses the previous two sessions. For the week, advancing shares outpaced decliners by a 2-to-1 pace. Market breadth remains healthy, with 72 % of S &P 500 stocks above their respective 200-day moving averages, possibly reflecting earnings growth that looked solid across multiple sectors.

4:44The Iran situation remains a possible hitch. With stocks near record highs, investors may turn bearish if negotiations hit a snag. There already was controversy as the old week ended. Bloomberg reported that Iran may demand payment from hostile countries to use the strait or ban Israeli and U.S. vessels, terms the U.S. would likely reject. The Trump administration said last week that talks between the U.S. and Iran continued despite Iran denying them happening. Hopes for progress raised earlier in the week weren't borne out by late Friday. Investors remained cautious despite bullish positioning as rotations curb speculation while record margin debt and high equity allocations raise longer-term risks, noted Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research.

5:38and Lizanne Saunders, Chief Investment Strategist at the Schwab Center for Financial Research, in a recent analysis. Eight of 11 S &P 500 sectors ended higher Friday, and Infotech is up more than 7 % over the last week. Materials and Industrials, two other sectors getting support from the AI build-out, also led weekly gains. On Friday, Materials, Discretionary, and Tech finished in the top three, with discretionary stocks getting assistance from lower yields in the wake of the jobs report. Energy dropped as oil prices stayed under$77 per barrel. Stocks moving Friday included Airbnb up 17 % as earnings topped expectations and the company delivered an upbeat forecast for its third quarter.

6:25Revenue climbed 17 % annually. Instacart popped 11 % after it topped analysts' second quarter estimates and signaled continued strength in the current quarter. The grocery delivery company is benefiting from consumers' search for value, Reuters reported. Akamai Technologies dropped nearly 7 percent despite the software and cloud firm beating analysts' second-quarter earnings estimates. Atlassian surged 35 percent on an earnings beat. The workplace software developer also issued strong forecasts. Cloudflare added almost 6 % on strong earnings and guidance. Software stocks finished the week with solid gains led by Palantir and its 10 % rise on Friday, along with Muscle from ServiceNow and its 6 % gain.

7:16The software sector remains down from last fall's peaks, but is now up sharply from lows posted earlier this year amid AI competition fears. Recent solid earnings reports, including from Palantir, rekindled interest in the group. As software surged, memory chips continued to struggle Friday. SanDisk, SK Hynix, and Western Digital all fell 3 % or more as investors continued to grapple with disappointing guidance from SanDisk earlier in the week. Mining firms climbed as gold rose more than 2 % and silver jumped 3%. Newmont added 7%. A weaker dollar helped gold lately, while silver hit its highest mark since June as treasury yields stepped back and inflation fears eased.

8:04Copper has also been on a roll, with Bloomberg reporting a possible supply crunch. Corning surged 5 % as the Trump administration imposed tariffs on polysilicon to encourage the onshoring of this industry. The material is a key semiconductor building block. Solar energy stocks also rose on the news. And Circle Internet Group posted 5 % gains Friday, lifted by earnings earlier last week that topped Wall Street's expectations. The crypto-related firm is still down sharply this year.

8:41The Dow Jones Industrial Average jumped 151.83 points, or 0.28%, Friday, to 54 ,036.93. The S &P 500 index added 47.68 points or 0.62 % to a new record high close of 7 ,757.64. And the Nasdaq Composite climbed 342.26 points or 1.30 % to 26 ,690.61. That's still below the record high close posted in early June, just above 27 ,000. For the week, the Dow Jones Industrial Average rose 2.96%, the S &P 500 Index gained 3.58%, and the NASDAQ climbed 5.19%. This has been the Schwab Market Update Podcast. To stay informed, visit www.schwab.com slash marketupdate or follow us for free in your favorite podcasting app.

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9:59For important disclosures, see the show notes and schwab.com slash market update podcast.