December Jobs Data Awaited, Tariff Ruling Possible

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, January 9th. Wall Street could stare down a daily double today from data and a potential court decision. December non-farm payrolls arrive at 8.30 a.m. Eastern Time, and analysts expect lackluster jobs growth of around 55 ,000. At 10 a.m., the Supreme Court starts issuing opinions, one of which could be on President Trump's tariffs. That said, no one knows if the court's opinions today will include that one.

0:50Based on oral arguments, it is widely believed that justices will rule against the administration, upending one of the president's signature policies and perhaps triggering a complicated refund process for more than$120 billion in tariffs paid to date, said Michael Townsend, managing director of legislative and regulatory affairs at Schwab. But the president has other emergency authorities he can use to impose tariffs, so tariffs aren't going away, even if the court rules against the administration. Also, auto, steel, and semiconductor tariffs aren't affected by the case. In another White House development, defense industry stocks including Lockheed Martin and Northrop Grumman posted appreciable gains yesterday after President Trump called for a 50 % increase in the defense budget.

1:41That proposal might face challenges in a Congress concerned about rising deficits. It also could be one factor weighing on Treasuries Thursday, pushing yields higher as investors worried about heavier government spending. Yields move the opposite direction of Treasuries, and a climb can raise borrowing costs. Yesterday's action in defense names was a whipsaw from Wednesday when defense stocks fell after Trump said he will not permit defense companies to issue dividends or stock buybacks. He also tried to ban large institutional investors from buying single-family homes, which might require congressional approval.

2:19These moves are part of a pattern with this administration of pushing the limits of executive power, Townsend said. but Congress is likely to have a lot to say about some of these plans, and a number of pending court cases to be decided in the coming months may also put some limits on the administration. Returning to data, today's payrolls report is expected to show unemployment easing to 4.5 percent from 4.6 percent in November and wages edging up 0.3 percent, but the so-called whisper number for jobs growth is around 45 ,000, and the three-month average is an anemic 22 ,000. Federal Reserve Chairman Jerome Powell thinks these reports overestimate jobs growth by thousands a month, so downward revisions might occur later.

3:07And Wednesday's ADP private sector jobs report was light. So were job openings. Today's data is one puzzle piece as investors try to determine how many rate cuts the Fed might make this year. Next week's December inflation data also looms large. As of late Thursday, the futures market showed less than a 12 percent chance of a January rate cut, according to the CME FedWatch tool. Even though the government shutdown ended nearly two months ago, today's data isn't necessarily completely clean, and it may contain sharp revisions to the previous month's numbers, which were collected off schedule due to the shutdown.

3:46Powell warned a few weeks ago that labor data may have been distorted and policymakers might look at it with a somewhat skeptical eye. That means today's numbers might not be the final word on December employment as far as the Fed's concerned. Several Fed policymakers said last month they were on the fence about rate cuts even before the December rate decision, according to minutes from their last meeting, and indicated they might want to wait a while to cut again. Recent government jobs reports showed employment growth concentrated in sectors like health care and social services, though construction jobs also surged in November, possibly reflecting the AI boom.

4:29Mining could be a sector to watch today for any signs of stronger demand, as metals prices soared recently. However, energy sector job growth could decline as crude oil struggled in December. In data Thursday, initial jobless claims fell to 208 ,000, while continuing claims rose above 1.9 million to near four-year highs. A report on labor costs showed easing pressure while layoffs in December fell to around 35 ,000, lower than expected, and productivity surged. Still, total 2025 job cuts rose 58 percent from 2024, according to Challenger Gray and Christmas. Also, the U.S. trade deficit narrowed in October, possibly because tariffs kept imports down.

5:19One number from yesterday that may get more attention over coming days and weeks is the 4.9 percent rise in third-quarter U.S. non-farm business sector labor productivity. Output climbed 5.4 percent, while hours worked rose just 0.5 percent. Next week, stay tuned for the December Consumer Price Index, or CPI, on Tuesday, and the December Producer Price Index, or PPI, on Wednesday. Other reports to watch include retail sales existing in new home sales and industrial production. Before all that, investors receive preliminary University of Michigan consumer sentiment for January today, soon after the open.

6:00The headline is expected to stay near recent historic lows of around 53.0 per briefing.com consensus. That's down from 74.0 a year ago, dented by tariff and affordability concerns. Job worries also play a part. Earnings remain light today and Monday, but Tuesday brings the first big bank results from JPMorgan Chase. Bank earnings are expected to be solid for the most part, helped by the rising yield curve that can make the basic banking business more profitable. Treasury yields added some heft Thursday ahead of today's jobs report, climbing five basis points for the 10-year and back to the top end of the recent range at 4.18 percent.

6:45Thursday's economic data painted a more solid picture, especially as jobless claims stayed low and layoffs declined significantly. The Atlanta Fed's GDP Now forecast for fourth quarter gross domestic product, or GDP, doubled Thursday to 5.4 percent based on recent data, along with a strong balance of trade report for October, Briefing.com noted. And the New York Fed Survey of Consumer Expectations for December showed year-ahead inflation expectations climbing to 3.4 percent from 3.2 percent, though long-term inflation expectations were unchanged.

7:26Major indexes posted a mixed performance yesterday, in part because weakness in tech, which is dominated by mega caps, dragged down the indexes even as advancing shares outpaced declining ones overall. Strength in energy, staples, discretionary, and materials reflected positive economic data. The Nasdaq fell due to selling in tech names, but the Russell 2000 index of small caps climbed and so did the Dow Jones Industrial Average, while the S &P 500 index spent most of the day pivoting around unchanged. Sector-wise, yesterday looked firm. Nine of 11 S &P sectors finished green, leaving out only healthcare and infotech.

8:10The relatively sharp decline of more than 1 % in tech brought to mind sessions from early December, when the rest of the market rolled up gains while tech lagged, perhaps a signal that rotation from tech isn't over. As a sector, tech has treaded water since mid-October. That puts its second from bottom in sector performance over that period, down about 2.3%. Poor performance in three of the largest tech components, NVIDIA, Microsoft, and Apple, continue to drag tech in general despite gains in some subsectors. Profit-taking might be one reason tech slumped Thursday after a hot start to the month.

8:51Fundamentally, the bullish backdrop remains, said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research, or SCIFR. He noted a firm economy with double-digit earnings growth despite labor market softness coming stimulus from last year's major economic legislation, including tax rebates and credits, along with deregulation. The AI secular growth story is intact since we are still in infrastructure investment cycle, capital markets are opening up with AI initial public offerings expected later this year, and the Fed is accommodative. Technically, Peterson added, major indexes appear in good shape after recent record highs for some, and the S &P 500 index would likely have enjoyed a nice gain Thursday had it not been for softness in a number of well-known tech names including Intel, Micron, Broadcom, Advanced Micro Devices, Oracle, NVIDIA, and Western Digital.

9:52Semiconductors fell nearly 2 percent Thursday. Looking at other individual performances Thursday, GAAP climbed nearly 6 % after UBS upgraded shares to buy from neutral. The analyst expects positive trends in sales and earnings driven by beauty, handbags, and the Athleta brand. Alcoa dropped almost 3 % on a downgrade from JPMorgan Chase to underweight. The analyst cited tariffs and valuation concerns for the aluminum company, CNBC reported. Shares of energy companies, including ExxonMobil, Chevron, and ConocoPhillips climbed Thursday as oil prices rose in response to solid U.S. economic data. Nike turned around early losses Thursday to rise 3 percent after selling its digital product subsidiary, RTFKT, in a retreat from the company's engagement in blockchain collectibles, Bloomberg reported.

10:50Costco climbed 3.7 percent after Jeffries reiterated its buy rating and price target. Urban Outfitters climbed 3 percent Thursday and set a new all-time high, possibly reflecting Microsoft's rollout of co-pilot checkout, which includes Urban Outfitters as a participating retail brand, Braving.com said. Despite rising yields, homebuilder stocks rose Thursday after the average 30-year mortgage rate dipped and amid solid economic data. The Dow Jones Industrial Average added 270.03 points Thursday, or 0.55%, to 49 ,266.11. The S &P 500 Index climbed 0.53 points, or 0.01%, to 6 ,921.46, And the NASDAQ Composite shed 104.25 points, or 0.44%, to 23 ,480.02.

11:53The Russell 2000 rose 1.1%, as strong U.S. data indicated health in the U.S. economy, where smaller companies tend to have the most exposure. 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. And if you like what you've heard, please consider leaving us a rating or review. It really helps new listeners find the show. Join us for another update Monday.

12:31For important disclosures, see the show notes and schwab.com slash marketupdatepodcast.