After Surprise Jobs Jump, Key Inflation Data Ahead

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, April 6th. The new week could start with a jolt as investors get their first chance to trade last Friday's March non-farm payrolls report while mulling weekend war developments and tracking oil. The latter part of the week brings a host of inflation data and minutes from the Federal Reserve's last meeting. The stock market was closed for Good Friday, but the payrolls data released that morning did get traded by the bond market. Treasury yields rose slightly after the government reported much better-than-expected March U.S.

0:52jobs growth of 178 ,000. Analysts had expected about 50 ,000. Unemployment ticked down to 4.3 percent from the previous 4.4 percent. Analysts had expected it to remain at 4.4 percent. The benchmark 10-year Treasury note yield climbed four basis points to 4.35 % in the aftermath of the data, suggesting that traders expect a hawkish reaction from the Federal Reserve. This report shouldn't change the Fed's near-term plans, and we still expect an extended pause. But this should give some of the more dovish Fed officials more comfort, as they have generally tended to focus on the potential weakening of the labor market, said Colin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research.

1:40Areas of job strength in March included health care and construction, adding 76 ,000 and 26 ,000 jobs respectively, while the federal government lost 18 ,000 roles. One important distinction is average hourly earnings, which rose less than expected by just 0.2 % for the month and 3.5 % year-over-year. The annual increase was the lowest reading since May of 2021, according to CNBC. At some point, weaker wage growth and higher non-discretionary costs, such as gas, could be a drag on consumer demand if the war in Iran continues. February's numbers were adjusted lower, reflecting a loss of 133 ,000 from the previously reported 92 ,000.

2:26Lower revisions has been the trend lately, so the strong monthly gain in March could end up being softer after revisions come in, Martin said. With revisions to January and February factored in, employment in those two months climbed 7 ,000 less than previously reported, the government said. For the first three months of the year, monthly jobs growth averaged about 68 ,000. That's relatively low, but near the level needed to keep pace with population growth. It's not a number likely to make the Fed worried about inflation, but it could keep policymakers uneasy about a much slower labor market than in recent years.

3:06Before jobs growth began slowing a year ago, monthly totals often topped 200 ,000. Jobs creation last year fell to just 181 ,000, the lowest in decades for a non-recession year. Another nugget from the report that may help explain lighter wage growth was a slight drop in financial sector jobs and flat growth in business and professional services positions. These tend to be higher paying parts of the job market. In another bearish signal for labor, labor force participation remains relatively low at 61.9 percent, though it was little change for March. Those not in the labor force who want a job or were marginally attached to the labor force rose 325 ,000 in March.

3:52The number of discouraged workers climbed 144 ,000. Those numbers could suggest that the unemployment rate decline reflected people no longer looking for work, not the signal anyone bullish about the economy would want to see. The mixed signals from Friday's jobs report, weaker wage growth and downward revisions, but a strong March headline reading and falling unemployment received a somewhat hawkish read from the futures market. Chances of at least one rate hike at some point this year climbed to 7 % soon after the data, from 0.2 % on Thursday, according to the CME FedWatch tool. Chances of a pause at the meeting later this month remained at 99%, while chances of any rate cut in 2026 fell to 12 % early Friday from about 23 % on Thursday.

4:42The U.S. jobs market, meanwhile, continued to vacillate by month. The large March gains followed a sharp February drop in job creation, which in turn came after a strong January increase. Jobs growth fell in December, but rose last November. That's why it's more constructive to follow the long-term averages that smooth out job creation volatility.

5:07While markets were closed at the end of last week for Good Friday, trading was volatile on Thursday, as investors considered how to react to President Trump's Wednesday night address. The president claimed in his speech that the U.S. is on track to complete all its military objectives in Iran, but also warned that there would be a period of intense military action. WTI crude oil futures surged above$113 per barrel, and the Dow Jones industrial average fell as much as 600 points in early trading on Thursday after the address. Then, the Iranian state media reported the country is working on a deal with Oman to allow some ships to pass through the Strait of Hormuz, helping equities recover slightly.

5:51There has been a lot of whipsaw price action driven by conflicting headlines, and while we've seen an oversold bounce in stocks this week, there's uncertainty around how long the Iran war will persist, said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research, writing last Thursday. Major U.S. market indexes ended mixed Thursday in a volatile session to close out the shortened week. The S &P 500 index and the Nasdaq Composite both recovered from sharp early losses to close slightly higher heading into the long weekend. The Dow Jones Industrial Average closed a touch lower.

6:30Small caps climbed, treasury yields steadied, and volatility eased. All this came as crude oil surged above$113 per barrel, and the SIBO Volatility Index, or VIX, dipped below$25 for the first time in a while after the so-called fear index topped$30 in late March. The historic average is near$20. I'm still not sure the markets have capitulated, said Peterson. We are registering higher closes. The VIX is still elevated, but it is an extreme. Looking ahead, inflation data will be in the limelight this week. February's Personal Consumption Expenditures, or PCE Price Index, the Fed's favored inflation gauge, comes out Thursday.

7:17The core PCE Price Index, which excludes more volatile food and energy prices, rose 3.1 % year-over-year in January, its highest level in nearly two years. Investors will likely be closely watching that figure this week, as it remains well above the Fed's inflation target. Then, on Friday, investors will check the March Consumer Price Index data. It will be the first inflation report to include data from after the Iran war began. In February, CPI rose just 2.4 % year-over-year, but rising oil and gasoline prices could lift March's headline figure. Other major economic data this week includes the final government estimate for fourth-quarter gross domestic product, or GDP growth, minutes from the Fed's March meeting, April's preliminary consumer sentiment data, as well as durable goods and factory orders.

8:12On the earnings front, it will be a light week, with only a few major companies reporting. However, Delta Airlines' Wednesday morning report will draw attention amid surging jet fuel prices. Consensus expects Delta to post earnings per share of$0.61, which would mark a 33 % year-over-year increase. Other earnings highlights include the apparel company Levi Strauss & Company on Tuesday, the beer, wine, and spirits maker Constellation Brands on Wednesday, and the building materials giant RPM International on Wednesday. First quarter earnings season will really kick into first gear next week, starting with Goldman Sachs on April 13th and followed by JPMorgan Chase and several other major banks the next day.

8:59As far as market movers on Thursday, Tesla shares plunged more than 5 % after the EV maker reported a 14 % drop in vehicle deliveries versus last quarter. Increasing competition, the loss of federal EV tax credits last fall, and a challenging car sales market have hindered Tesla in recent quarters. Estee Lauder stock sank 2.7 % after Bloomberg reported the cosmetics giant and the Spanish beauty and fashion conglomerate PUIG are discussing a merger. Meanwhile, shares of the optical networking and AI infrastructure players Lumentum and Siena both surged more than 7 % as investors continued to speculate that AI data center spending will drive demand for fiber optics and networking equipment.

9:51Six out of 11 S &P 500 sectors ended Thursday in the green. Real estate led the way despite sinking rate cut expectations. Energy and utilities also performed well amid the rise in crude prices, while consumer discretionary and health care lagged. The market's decent performance Thursday, despite rising crude prices, was about the first time since the war began that stocks divorced from crude oil though it's unclear if that's a trend or a blip. The closely watched infotech sector finished in the green, but chip shares remained down more than 3 % since the start of the war, though that's better than the overall market, which is down more than 4 % since the end of February.

10:33Still, the PHLX Semiconductor Index, or SOX, clawed back above its 100-day moving average last week, possibly a bullish sign. Leading tech stocks Thursday included Intel, CoreWeave, Advanced Microdevices, and Super Microcomputer. While Microsoft and NVIDIA finished marginally up, it generally wasn't a great day for the Magnificent Seven. Market breadth improved at the end of last week, but remains soft versus earlier this year. Roughly 48 % of S &P 500 companies traded above their 200-day moving average as of Thursday's close, while just 28 % traded above their 50-day moving average. Breadth is generally a good measure of market health, with a broader set of names generally trading up when sentiment turns positive overall.

11:24The VIX doesn't factor in a downward track in market fear, with futures contracts for VIX mostly trading near 24 the rest of the year. Crude oil futures trading still shows prices likely falling as the year advances. The Dow Jones Industrial Average fell 61.07 points Thursday, or 0.13%, to 46 ,504.67. The S &P 500 Index climbed 7.37 points, or 0.11%, to 6 ,582.69. And the Nasdaq Composite edged up 38.23 points, or 0.18%, to 21 ,879.18. Last week, the Dow Jones Industrial Average climbed 2.9%, the S &P 500 rose 3.3%, and the NASDAQ climbed 4.4%. 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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