Deadlines and Debt A Drag On Markets?

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, July 7th. On Thursday, stock traders got an early start on fireworks after a hot jobs report. The S &P 500 stock index rallied to another new all-time high on news that the economy added 147 ,000 jobs in June, topping the 110 ,000 forecast and last month's 144 ,000. Overall, it was a really good report all around, noted Cooper Howard, director of fixed income strategy for the Schwab Center for Financial Research. The economy added more jobs than were expected and revisions were positive. The unemployment rate, which has been hovering between 4 % and 4.2 % since May 24, fell to 4.1%, despite expectations that it would rise to 4.3%.

1:08It was likely helped by a participation rate that fell from 62.4 % to 62.3%. Digging a little deeper, the biggest gains were seen in state and local governments, while private sector jobs growth was the weakest since last October. Stocks ticked higher on the news, but the 10-year treasure yield rose four basis points. The jobs report did lower the odds of the Fed cutting rates, as the probability of a July 30th rate cut fell to 4.7 percent from 23.8 percent, according to the CME FedWatch tool. Chances of at least one cut by September are 71.4 percent.

1:50President Trump's July 9th tariff extension deadline and what may come after is likely to draw attention this week. The Trump administration has hinted it could extend deadlines for some countries negotiating in good faith, but hinted it might punish ones it doesn't agree with. Japan is one of the ones threatened this week by the president. Are they going to start imposing tariffs on countries that they don't feel like negotiations are going well with, said Michael Townsend, managing director of legislative and regulatory affairs at Schwab. They have been supposedly having negotiations with all these countries, but they promised 90 trade deals in 90 days, and I think we have one at this point.

2:32I think that July 9th date is going to be a really, really important date to watch because companies don't know what the tariffs are going to be going forward from there. And I think that makes it very hard to plan and make decisions. It's another element of uncertainty for businesses of all types. Last week's trade deal with Vietnam announcement put the administration one step closer. On one hand, a trade deal provides incremental clarity and suggests potential for more deals in the coming days, observed Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research.

3:07But the 20 % rate may be higher than expected, and the economic impact is unclear. Treasury auctions on Tuesday and Wednesday may draw extra attention because of heightened concerns over rising government debt. If demand falls for debt, it could push yields higher. Rising yields could mean investors are concerned about growing levels of federal debt from the quote-unquote Big Beautiful Bill. However, the passing of the bill could provide investors some relief, as this major concern is no longer weighing on the markets. The Atlanta Fed's GDP Dow updated their metric again on Thursday, increasing to 2.6 % for anticipated second-quarter gross domestic product growth, up from the prior 2.5%.

3:53Another update is due July 9th. In other economic news, the ISM Services PMI ticked above the 50 % mark, indicating expansion to 50.8. This was 0.9 percentage points higher than May's reading and above the market's expectations. Meanwhile, factory orders rebounded in May, increasing 8.2 % following a revised decline of 3.9 % the previous month. Year-over-year orders increased 3.2 % amid surging demand for commercial aircraft equipment.

4:30The Dow Jones Industrial Average rallied 344.11 points Thursday, or 0.77%, to 44 ,828.53 for a 2.3 % gain for the week. The S &P 500 index rose 51.93 points, or 0.83%, to 6 ,279.35, ending the week 1.72 % higher. Finally, the Nasdaq Composite added 207.97 points, or 1.02%, to 20 ,601.10, rising 1.62 % for the week. This has been the Schwab Market Update Podcast. To stay informed, visit www.schwab.com slash market update or follow us for free in your favorite podcasting app. And if you like what you've heard, please consider leaving us a rating or a review. It really helps new listeners find the show.

5:28Join us for another update tomorrow.

5:35For important disclosures, see the show notes and schwab.com slash market update podcast.