All Eyes on Jobs Report After Thursday's Rebound

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. I'm Colette O 'Claire, and here is Schwab's early look at the markets for Friday, September 4th. Today's non-farm payrolls report, due at 8.30 a.m. Eastern Time, stands head and shoulders above any other developments, even after Thursday's impressive rebound that positioned major indexes for another positive week. The report comes a day after yields retreated slightly on dovish Federal Reserve remarks, and with assistance from Japan, where the yen rose versus the dollar and helped cool global inflation concerns.

0:51There is growing belief that the Bank of Japan, or BOJ, will raise rates at its meeting later this month, partially addressing inflation there. At one point, the 10-year Treasury note yield fell to 4.75 percent from above 4.8 percent earlier this week, but it clawed back to 4.77 percent by the end of the day. Shorter-term yields, more exposed to Fed policy, forged steeper declines. Crude oil remains strong, however, above$91 per barrel late Thursday as progress toward a Middle East solution lagged. Still, the Trump administration said oil traffic through the Strait of Hormuz has improved. The round of tit-for-tat skirmishes earlier in the week died down a bit.

1:38Analysts expect August payrolls growth of 45 ,000 following a decline of 23 ,000 in July. Unemployment is seen ticking up to 4.2 percent from 4.1 percent, still low. Wage growth will also be eyed after a very small July increase. Jobs data heading into the report, including job openings, job cuts, private sector employment, and weekly initial jobless claims didn't send clear signals. None showed dramatic changes, and all were snapshots for that matter. So is today's report, but potential revisions to past numbers potentially give it more heft. The July report slashed May and June jobs growth by more than 100 ,000.

2:25A repeat of that for June and July in today's report, though not necessarily in store, would likely give the Fed pause before its rate decision September 16th. On the other hand, if jobs growth returns to more normal levels or exceeds expectations, it might be another sign that the Fed can raise rates without hurting the economy too much. Next week's inflation data also looms large. Digging deeper into the jobs report, keep in mind that weakness in leisure and hospitality jobs back in July might have reflected one-time developments related to jobs that ended after the World Cup. Government job cuts also played into a weaker reading.

3:08If you take those out, private payroll growth was still positive, and it was actually relatively steady, said Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research, Erskifer. Fed Governor Christopher Waller sounded slightly dovish in a Reuters interview Thursday, saying he leans toward keeping rates unchanged at the current 3.5 percent to 3.75 percent. A shift away from recent inflation progress, he added, could push him more toward a hike. As of late Thursday, chances of a hike stood at almost exactly 50 percent, according to the CME FedWatch tool, down from 63 percent Wednesday.

3:51Investors might want to give that tool another look after today's data to see if it moved. Waller's remarks followed more hawkish views expressed last week by Fed Chairman Kevin Warsh in his Jackson Hole speech last week. After jobs data, the final arbiter might be the August Consumer Price Index due a week from today. If inflation shows meaningful signs of improvement, the committee may hold, said Colin Martin, head of fixed income research and strategy at Skiffer. But the bar for a hike seems low, given Warsh's comments last week. Any upside surprises will likely shift the needle for those who have favored a hold to instead favor a hike.

4:32In data Thursday, initial weekly jobless claims of 206 ,000 held no surprises, and second quarter productivity of 1.4 percent was unchanged from the government's first estimate. Labor costs fell slightly, which may also have helped the Treasury market. The ISM service's PMI for August improved to 55.4 percent from 54.1 percent in July, above consensus. Any figure 50 percent or higher signals expansion. However, the report's price is paid metric of 72.6 percent hit a four-year high mark, thanks mostly to rising energy costs. In corporate news, apparel maker Lululemon reported after the close yesterday, and shares quickly retreated 16 % in post-market trading.

5:23Earnings per share beat estimates, but the company missed analysts' revenue consensus and lowered guidance. All of its guidance missed consensus. Before that, Snowflake's solid earnings and guidance reinforced ideas that AI is helping, not hindering, software. The sector turned positive for the year after a dismal few months to begin 2026. Major indexes had their best day in a month, up more than 1 percent, almost across the board, amid falling yields and the software rally. Though Nvidia rose, most of the chip sector sat out the gains, hurt in part by Broadcom's earnings. Nine of 11 S &P 500 sectors rose, accelerating the turnaround in market breadth that began earlier this week after a dramatic narrowing last week and Monday.

6:14Only materials and energy lagged, with materials losing ground despite gold's 2 % rise on the weaker dollar. Growth sectors like consumer discretionary, communication services, and infotech were three of the four best performers Thursday, all up 1 % or more. Financials placed third, helped in part by the slightly wider yield curve. Checking individual movers Thursday, Broadcom dropped 2.5 percent. Earnings per share of$3.32 topped consensus of$3.22, and revenue of$29.59 billion also surpassed expectations. But participants apparently hoped for an even more enthusiastic outlook. Snowflake surged 17 % after its quarter beat analysts' expectations and the cloud firm's guidance impressed.

7:08Snowflake projected fiscal third-quarter revenue growth at 37 % to 38 % annually. Analysts saw the report as evidence that AI-driven acceleration continues. Other software stocks rode up on Snowflake's coattails. Big gainers included Palantir, up 8 percent, ServiceNow, up almost 7 percent, and CrowdStrike, up more than 4 percent. SpaceX climbed 7 percent, helped by recent strength in the AI space that potentially could lift demand for its infrastructure. It's up about 40 percent since the start of August, after a choppy start following its initial public offering, or IPO, earlier this summer. Tyson Foods plunged more than 7 percent after cutting its outlook amid pressure from the cattle shortage, Reuters reported Zscaler, a cloud security firm, climbed 3.3 percent ahead of its earnings report and on news of an expanded partnership with CrowdStrike Crypto-related stocks Circle Internet Group and Strategy climbed double digits, lifted by Bitcoin's 5 percent rise to nearly four-month highs Technically, Bitcoin punched through its 200-day moving average two weeks ago, lending a strength.

8:23Meta platforms climbed 3.5%, a move CNBC attributed to the rollout of Meta's AI model Muse Spark 1.3. Tesla continued to surge, closing 6 % higher, as investors anticipated yesterday's CyberCabs event. Sienna plunged 11 percent despite strong earnings and guidance. Shares were up 51 percent year-to-date heading into earnings, so this may be a by-the-rumor, sell-the-fact situation. Campbell's company shares cooled about 8 percent after the food and beverage firm's guidance disappointed for fiscal 2027, CNBC reported. Ultragenic's pharmaceutical plunged 44 percent on disappointing phase three trial results for a drug to treat angel man syndrome, a rare genetic neurodevelopmental disorder, CNBC reported.

9:22NVIDIA climbed two percent after confirming it plans to buy a privately held open AI development platform Hugging Face for just under 13 billion dollars. The deal gives NVIDIA a platform used to freely share from millions of different AI models, Barron's reported, extending its role beyond hardware. The Dow Jones Industrial Average gained 624.16 points, or 1.18 percent Thursday, to 53 ,686.11. The S &P 500 Index added 81.11 points, or 1.06 percent, to 7 ,747.71. And the Nasdaq Composite leapt 366.23 points, or 1.40%, to 26 ,584.06. This has been the Schwab Market Update podcast. To stay informed, visit schwab.com slash market update or follow for free in your favorite podcasting app.

10:30And if you like what you've heard, please consider leaving us a rating or review. It really helps new listeners find the show.

10:43For important disclosures, see the show notes and schwab.com slash marketupdatepodcast.