After Solid Rebound, Stocks Face Crucial Jobs Data

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.

0:18I'm Colette O 'Claire, and here is Schwab's early look at the markets for Friday, June 5th. Everything is on hold early today, ahead of May non-farm payrolls. Though major indexes rebounded yesterday in a rotation out of chips and into sectors like healthcare and financials, one day isn't a trend, and today's report might reset the table. The data, due at 8.30 a.m. Eastern Time, is expected to show May jobs growth of 85 ,000, down from 115 ,000 in April. This isn't historically very strong, but in the current economy, jobs growth doesn't necessarily need to be so high to keep up with worker population trends.

1:03Unemployment is expected to remain at 4.3 percent, with wages up 0.3 percent from April, according to consensus from Briefing.com. Wage growth is another key element, as recent data sent mixed signals. First quarter labor costs rose less than expected, the government said yesterday, but the ADP monthly private sector jobs report earlier this week showed more than 4 percent wage gains in May. Anything above 0.3 % consensus in today's report might have inflation hawks worried. Other trends to follow in the payrolls report include whether AI is limiting jobs growth in certain industries, especially tech, and if the workforce participation number continues to edge down.

1:50In April, so-called U6 unemployment reached 8.2 percent, the highest since December, and well above 2023 lows, below 7 percent. U6 tracks a wider number of people who are less attached to the labor force. The ADP report showed services jobs outpacing goods-producing jobs last month, so non-farm payrolls might be watched for any reinforcement of that trend. In recent months, the Bureau of Labor Statistics, or BLS, has often downwardly revised the jobs growth of previous reports, meaning investors need to look beyond the headline number to see if March and April's decent growth held up on the second look.

2:34Today's report follows mixed jobs data earlier this week. ADP jobs growth was strong, while job openings in April also easily topped estimates. However, weekly initial jobless claims yesterday hit a three-month high of 225 ,000, and May layoffs rose to 97 ,000 from 83 ,000 in April. The Federal Reserve isn't expected to change rate policy at its mid-June meeting, but if today's jobs report shows solid progress, it might give policymakers a sense that the economy could handle rate hikes designed to slow inflation growth. Next week brings key U.S. inflation data for May, and the Fed meets the week after that.

3:19No rate move is expected then, and one jobs report won't likely be enough to change expectations for the June meeting. However, any numbers far removed from the average estimate today have a chance to influence futures market predictions for meetings later this year, especially if the data is much stronger than expected. Jobs growth has risen two months in a row through April for the first time in a year. A big number would likely raise odds of a rate hike looking out to the end of 2026 or beginning of 2027. Investors might want to keep an eye on the CME FedWatch tool soon after the numbers hit today.

3:58Any major rise in sentiment for a possible rate hike later this year could send treasury yields higher, possibly hurting rate-sensitive small cap and consumer stocks. As of late Thursday, the FedWatch tool predicted about 50 % chances of a rate hike at some point this year, but no chance of one this month. Odds of a rate cut sometime in 2026 are below 2%. Treasury yields slipped mildly Thursday, but remained near 4.5 % for the 10-year note. Initially, yields were down more than four basis points as oil sank on news of a ceasefire in Lebanon. A statement from Iran reported in the media later Thursday that little progress has been made in negotiations appear to hurt treasuries and allow crude to come off its lows.

4:47However, President Trump posted that negotiations were in an advanced stage, the Wall Street Journal reported. In one other data point Thursday, first quarter U.S. nonfarm business sector labor productivity growth got downwardly revised to 0.3 % from the prior 0.8%, well below consensus for 0.8%, and down from the previous quarter's 1.6%. Turning to corporate news, this week's tech earnings had the opposite impact on the market of last week's. Broadcom toppled 12 % Thursday after narrowly beating fiscal second quarter earnings and revenue consensus compiled by FactSet, but falling just short of the revenue consensus from LSEG.

5:34Guidance easily exceeded the FactSet consensus, but apparently disappointed investors who'd hoped for even loftier growth. In sum, the quarter and guidance generally looked solid, but the bar was very high to meet enthusiasts on Wall Street. CrowdStrike also lost ground, falling almost 4 % after its results narrowly beat analysts' estimates and guidance for second quarter revenue was above estimates. Fiscal year guidance also topped consensus, and the company announced a 4-for-1 stock split. Sienna, another AI-exposed firm, fell sharply on earnings too, though results generally looked solid. More tech earnings loom next week, with Oracle due June 10 and Adobe on June 11.

6:20Lululemon reported late Thursday and shares immediately plunged 9 % in post-market trading. Though quarterly results beat consensus, the company cut its annual guidance, citing headwinds. Major indexes impressed Thursday, roaring back from early chip-driven weakness to finish mostly up and put the S &P 500 index on pace for a possible 10th straight week of gains, something it hasn't accomplished since late 1985. The best index performance came from the Dow Jones Industrial Average. It got a lift from healthcare giant UnitedHealthcare, which rose 5 % on an upgrade from Bank of America. Small cap stocks also rebounded nicely from Wednesday's skid.

7:08The tech-heavy Nasdaq composite clawed into the green around midday before turning slightly red in the closing minutes. Chip and AI-related stocks initially took a dive, like they do to Broadcom. Micron, which has led the charge in memory stocks the last two months, lost 5%. However, as CNBC noted, of the 20 tech stocks trading the most above their long-term average price, 19 fell by midday Thursday. This could be a sign of investors simply using Broadcom's drop as an excuse to take some profit in the chip sector, not necessarily any dramatic turnaround in the tech rally. It would likely take several days of similar trading to confirm any serious rotation out of tech, and such a move might be hard on the S &P 500 index.

7:57That was the case earlier this year when the index fell despite better breadth, an indication of how much weight the mighty market capitalizations in tech have. Technically, yes, we are near-term stretched to the upside in tech, but there really aren't any bearish reversal patterns on the charts, said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research, or SCIFR. Bitcoin, which fell almost 3 % Thursday and is approaching its February low, Could hurt sentiment across the market if weakness persists, Peterson added. Eight of 11 S &P 500 sectors rose Thursday, the kind of healthy breadth that tends to reinforce faith in rallies if it persists.

8:42Healthcare led up more than 3%, followed by financials and communication services. TET was notably absent from the leaderboard, finishing last with 1 % losses. Financial stocks enjoyed solid gains, led by Blackstone, Aries Management, and Goldman Sachs. Though there have been some recent jitters in the private credit market, there aren't any signs of widespread issues, and credit spreads remain low, which can encourage businesses to borrow. The KBW Nasdaq Bank Index climbed 3.6 percent. Among individual movers Thursday, Siena plunged 12 percent, even though the optical networking firm reported earnings and revenue that surpassed Wall Street's estimates.

9:25Revenue climbed 40 percent year over year. The company also raised guidance. Private credit stocks, including Blackstone and Blue Owl, rebounded from Wednesday's losses, with Blackstone rising 9 percent. Blackstone restricted withdrawals from its Blackstone private credit. Investors tried to pull out 10 percent of shares in the second quarter from the$79 billion Blackstone private credit. Reuters reported. Rate-sensitive stocks, including homebuilders KB Home, D.R. Horton, and Lennar, rose as Treasury note yields fell after the Lebanon ceasefire announcement. Shares of cruise lines, airlines, grocers, and restaurants also edged up.

10:09Humana soared 6 percent, helped by Strength in UnitedHealth, or UNH, after the Bank of America upgrade to UNH. The analysts there saw improving cost trends and supportive near-term data points, setting up a favorable earnings outlook for UNH. Petco dropped more than 5 percent after earnings appeared to disappoint investors, despite being mostly in line with consensus. The company also reaffirmed guidance for fiscal 2027. The Dow Jones Industrial Average soared 874.86 points Thursday, or 1.73%, to 51 ,561.93. The S &P 500 Index edged up 30.63 points, or 0.41%, to 7 ,584.31. And the Nasdaq Composite slipped 23.02 points, or 0.09%, to 26 ,830.96.

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