Big Week for Jobs Data, Tech Earnings 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.

0:19I'm Colette O 'Claire, and here is Schwab's early look at the markets for Monday, May 4th. Last week saw new highs for Wall Street after in April when the S &P 500 index rose 10 percent, its best monthly performance since late 2020. The week ahead brings fresh challenges if the market is going to pad those gains, including a host of jobs data and several important tech earnings results. Strong earnings have been the theme for several weeks, providing most of the power behind the April advance. With 63 % of S &P 500 companies reporting through Friday, blended earnings growth, including companies reporting already and estimates for those to come, is an outstanding 27.1%.

1:05This would be the highest since 32 % in the fourth quarter of 2021, if it lasts, Faxette said. About 84 percent of reporting companies have beaten earnings estimates. Much of the huge earnings growth was fueled by tech, but other sectors have also enjoyed solid results, including discretionary materials and financials. As the new week started, investors monitored mixed signals about the Middle East. The Trump administration is preparing new battle plans, media reports said, and wasn't impressed with Iran's latest peace proposal. A slew of tech earnings loom, highlighted by Palantir later today, followed by advanced micro-devices and arm holdings later this week.

1:52Given the recent tech rally, particularly in chips, investor expectations are high and therefore the potential for a sell-on-the-news reaction to results is elevated, said Nathan Peterson, Director of Derivatives Research and Strategy at the Schwab Center for Financial Research, or SCIFR. When Palantir reports, analysts expect earnings per share to rise 114.6 percent year-over-year and revenue to climb 74 percent. Last time Palantir reported, in early February, earnings topped Wall Street's expectations and the stock rallied. Since then, it's mainly marched in place, not keeping up with a broader rally in the tech sector.

2:34Palantir is typically lumped in with other software stocks, though its business serves a narrow niche heavily dependent on government contracts. Software as a sector continues to struggle, with key earnings from Adobe and Salesforce due later this month. Earnings from Berkshire Hathaway over the weekend drew attention as new CEO Greg Abel took over as host of the annual meeting from legendary CEO Warren Buffett. The company's outlook often has an impact on markets and could be a factor today.

3:08Beyond tech, there's plenty of earnings action this week, even if the pace slows from last week. Walt Disney stands out Wednesday morning. That same day features results from Apollo Global Management, a private equity firm that suffered sharp market losses earlier this year amid concerns about the health of the private credit market. Blue Owl, another private credit firm, climbed 10 percent after reporting Thursday. Economic data is less of a factor Monday before picking up as the week moves along. The highlight is non-farm payrolls on Friday, with analysts pegging jobs growth of just 73 ,000, down from 178 ,000 in March.

3:50Unemployment is expected to remain at 4.3 percent, historically low. In data Friday, April's ISM manufacturing index came in at 52.7 percent, slightly below the briefing.com consensus of 53.1 percent, and even with March. Anything above 50 shows expansion. On a less positive note, the employment index of the report fell to 46.4 percent from 48.7 percent, and prices soared to 84.6 percent from 78.3 percent, the biggest monthly jump in four years. Higher prices and weaker employment could be a bearish brew if the same type of reading show up in other economic reports. In another data point, the Atlanta Fed's GDP Now forecast for the second quarter fell to 3.5 percent from the previous 3.7 percent estimate.

4:48Tomorrow's data includes ISM services, which has generally remained above 50 percent over the last few months. New home sales and the March job openings and labor turnover survey jolts are also due Tuesday. Fed speeches return this week following the quiet period around last week's meeting, with Fed Governors Christopher Waller and Lisa Cook making remarks Wednesday. Speaking of the Fed, the end of Jerome Powell's chairmanship on May 15th also likely marks the last day Governor Steve Myron will be a member of the Fed's board. Assuming Kevin Warsh takes over as chairman that day, Powell will stay as Fed governor, leaving Myron without a seat.

5:31Myron was the ultra-Uber Dove, said Colin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research or Skiffer. If Powell had decided to leave, then President Trump would be able to appoint somebody else. Possibly it might have been Myron, who would have had to go through confirmation again. But an important facet of this looking ahead is that the Uber Dove is not a member of the Fed anymore. That, combined with a hawkish descent from three policymakers last week, has rate-cut odds relatively low for the rest of the year, according to the CME FedWatch tool.

6:06Another Fed item to watch is the Supreme Court's decision on President Trump's attempt to fire Cook. A ruling has been long-awaited and could come sometime soon. Treasury yields barely moved Friday, in part on Thursday's light gross domestic product, or GDP, reading, but remain near recent one-month highs. The 30-year bond yield touched 5 % Thursday, and the 10-year yield rose 10 basis points to 4.38 % on the week, a moderate gain. Most of the data has been solid, and the Fed appears more hawkish, which could keep yields elevated. Still, 4.5 % for the 10-year note is likely technical resistance.

6:47The yen climbed sharply against the dollar Friday on reports by Reuters and Bloomberg that the Bank of Japan, or BOJ, might have intervened to support its ailing currency. A drop in the dollar, if extended, could put pressure on treasuries as well, powering yields and hurting U.S. stocks. A more active BOJ could also cause higher yields in that market, meaning some money may migrate there from the U.S. and hurt U.S. asset prices. The European Central Bank, or ECB2, is expected to raise rates once or twice this year, analysts told the media. Chances of a rate move in the U.S. remained unlikely as the old week closed.

7:29Major indexes mostly gained Friday, with the S &P 500 index, Russell 2000, and NASDAQ composite all making new highs. But it wasn't a convincing day in terms of market breadth, and indexes finished well off their intraday peaks. A 1.6 percent gain for Infotech likely kept the market from going red, with 7 of 11 S &P 500 sectors ending flat to lower. Volume stayed below average for both the New York Stock Exchange and the Nasdaq. None of the sector losses were steep, though energy fell 1 percent as oil prices backtracked on hopes for weekend progress in the war. That said, oil rose sharply last week, and the U.S.

8:14weekly rig count rose by only three, according to Baker Hughes, despite roaring export demand.

8:23Checking individual movers Friday, Apple gained more than 3 percent, though shares finished off intraday highs. Apple's earnings and revenue topped expectations, while iPhone sales growth came in slightly short of consensus. Gross margin impressed at 49.3%, above the consensus of 48.4%, and the company announced more share buybacks and raised its dividend. There is concern about higher memory-related chip costs hurting margin down the road. Western Digital fell 2%, despite exceeding earnings and revenue expectations, raising guidance and raising its dividend. shares have been on a parabolic rally and the early stumble might reflect post-earnings profit-taking.

9:10Crypto-related stocks like Circle Internet Group and Strategy rallied Friday as Bitcoin futures rolled up 2.6 % gains to come within range of their highest level since before the war. Amgen fell almost 5 % despite an earnings beat as investors seemed disappointed by guidance. SanDisk turned around early losses Friday to post solid gains after earnings and outlook topped consensus. Micron, another memory chip giant, also reversed losses. Clorox fell 10 % as the company cut its outlook, even though it posted higher than expected quarterly results. The guidance cut reflected an acquisition. The Philadelphia Semiconductor index, which got clipped earlier in the week by concerns about demand at OpenAI, rose 1 % Friday and ended the week with light gains to post new all-time highs.

10:08Some chip and AI-related stocks making headway Friday included CoreWeave, Oracle, Intel, and Advanced Microdevices. AI leader NVIDIA trailed the pack and finished the week well below its highs, hurt by worries about chip competition from other mega caps. Software shares found footing Friday ahead of earnings from many major firms in coming weeks. Salesforce posted 4 % gains and Palantir rose 3.5%. Other software gainers Friday included ServiceNow, Microsoft, and Adobe. Roku rose 6%, responding to better-than-expected quarterly results and higher guidance. Subscriptions revenue rose 30 % year-over-year.

10:56Rivian fell 8 % despite earnings beating Wall Street consensus and a 20 % rise in delivery volumes year-over-year. It's also increasing production capacity. The weakness might reflect investors being disappointed the company didn't share more details about demand for its new R2 electric SUV, Bloomberg reported. The Dow Jones Industrial Average slipped 152.87 points Friday, or 0.31%, to 49 ,499.27. The S &P 500 Index rose 21.11 points, or 0.29%, to 7 ,230.12, and the NASDAQ Composite climbed 222.13 points, or 0.89%, to 25 ,114.44. For the week, the Dow Jones rose 0.55%, the S &P 500 index climbed 0.91%, and the Nasdaq composite added 1.12%.

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12:33For important disclosures, see the show notes and schwab.com slash marketupdatepodcast.