Disney on Stage Before Jobs Data Steal Spotlight

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 Keith Lansford, and here is Schwab's early look at the markets for Monday, February 2nd. After the old week ended with President Trump's announcement of Kevin Warsh as nominee for Federal Reserve Chairman, the new one shifts focus towards a string of jobs data along with earnings from Disney, Amazon, and Alphabet. Last week, major indexes struggled to advance. The S &P 500 index closed barely up for the week following two losing weeks in a row, but did finish 1.4 % higher for the month.

0:48The big story Friday was dramatic selling in gold and silver, which fell 11 % and 31 % respectively that day. At its intraday low of$74 per troy ounce Friday, silver hit its weakest level since January 8th and was down nearly 40 % from Thursday's record high above$121. It was the worst day for silver since March of 1980. Today's market password is heavy metal, quipped Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research. Metals fell as the dollar rose after the Warsh announcement, which appeared to soothe Wall Street worries about Fed independence and policy getting too loose for conditions.

1:32Warsh was a hawk when he served on the Fed's Board of Governors from 2006 through 2011, expressing concerns about inflation even when it was less than 1 % and not diverting from those views even as unemployment rose to 10%. He was considered the most hawkish of the four possible Trump nominees, Barron's observed. President Trump has long pushed Fed Chairman Jerome Powell to lower rates, and although the Fed has cut rates six times starting in late 2024, Trump makes it no secret he thinks they should be far below current levels. Based on his previous term at the Fed, he seems to be the ideological opposite of what the president is seeking, said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research.

2:18That creates confusion for the Fed. But it's wise for investors to remember that the Federal Open Market Committee is a committee, and although the chair carries a lot of weight, the committee members can advocate for different policies. One appeal for the president might be Warsh's harsh criticism of the Fed under the last two chairs. If Warsh were to hold his previous views, the dollar would likely move higher, Jones added. Generally, metals tend to fall when the dollar rises, and higher rates also keep metals less pricey. Metals rose meteorically the last few months, and the dollar slumped as turbulent geopolitics, Fed independence concerns, and lower U.S.

3:00rates pulled money away from more traditional assets. Futures trading in the wake of the Warsh news didn't indicate much change from the day before in terms of the number and timing of anticipated rate cuts. There's still about an 80 percent chance of the Fed making its first cut at the June meeting, the first meeting Warsh would chair if his nomination gets approved, according to the CME FedWatch tool. Expectations are high for at least two rate cuts by year-end.

3:30Staying in Washington, government shutdown fears eased heading into the new week after a deal got forged Thursday night between the White House and Senate Democrats to separate funding for Homeland Security from a massive bill that provides funding for other Cabinet agencies. Both bills require votes by the House, which won't be back until today after Friday's shutdown deadline. This likely means that any shutdown will be short as the House returns and votes for the funding package approved by the Senate. This should ease investors' minds about getting this week's critical January employment data, including Friday's non-farm payrolls report.

4:09Before that, investors await tomorrow morning's December job openings and labor turnover survey, or JOLTS. Analysts expect a slight decline in openings to around 7 million, down from 7.146 million the prior month, and among the lowest post-pandemic figures yet. If the reading is that low, it could reinforce ideas that employers simply aren't all that interested in hiring right now. Layoffs have risen recently, with Amazon and UPS among major companies letting go of workers last month. Looking ahead to Friday's non-farm payrolls, analysts expect around 70 ,000 new jobs added in January, though the estimate could evolve as the report gets closer.

4:50That would be slightly above the 50 ,000 added in December, but still on the low end historically. Friday's December Producer Price Index, or PPI, expected to be somewhat sleepy, turned into a headline grabber. this headline PPI rose 0.5 percent, and CORE, excluding food and energy, climbed 0.7 percent. The consensus from Briefing.com had been 0.2 percent and 0.3 percent, respectively. On an annual basis, CORE PPI rose 3.3 percent. Still, Treasury yields moved little on Friday. The 10-year yield rose one basis point to finish unchanged for the week, but up seven basis points for the month of January at 4.24 percent.

5:35It's unclear if the surprisingly high PPI reflected any lingering issues caused by last fall's shutdown, which interrupted data collection in October and November and made monthly comparisons tougher, but it's likely to reinforce ideas that the Fed was right to leave rates paused last week rather than lower them. This also puts the Personal Consumption Expenditures, or PCE Price Index, the Fed's favored inflation metric due February 20th into more focus, with components of PPI that map over into PCE, suggesting a hotter print for December PCE, said Schwab's Gordon. This includes components like air transport, physician care and nursing home care.

6:18It's hopefully the final print that includes any shutdown-related impact, so we'll have cleaner reads moving forward, Gordon said. The culprit was the services sector, given there was a slight decline in the goods component of PPI. Earnings season rolls on this week, with another roughly 20 % of S &P 500 companies reporting. Though Alphabet late Wednesday and Amazon late Thursday might be seen as most important, a host of others could move the market, including Advanced Microdevices tomorrow afternoon and Eli Lilly Wednesday morning. Palantir and Qualcomm are two other tech firms on the list. Arm Holdings on Wednesday is another one to watch, as it can be a barometer for the chip market.

7:03The week kicked off with a trip to the movies and theme parks, says Walt Disney's shared results. Analysts went into the report expecting earnings per share of$1.57. Streaming subscribership growth will be in focus after Disney added$3.8 million in the previous quarter, and so will ad revenue as the linear TV business kept seeing declines the last time Disney reported. When Disney reported in November, it beat analysts' estimates on earnings but missed on revenue. Another thing to watch is any word on a replacement for CEO Bob Iger, expected to step down at the end of the year. Disney is seen making an announcement within the next few weeks, Barron's reported.

7:47Soon after the open, investors await the January ISM manufacturing report, with analysts expecting a reading of 48.6. Anything under 15 represents contraction, and manufacturing has been slumping for some time. The headline last time out was 47.9, so consensus is for a slight improvement. In trading Friday, the indexes fell as chip stocks took a nearly 4 % plunge. Some recent high flyers like Micron, Western Digital and Advanced Micro Devices fell sharply. The losses at Western Digital came despite a strong earnings report. Some pressure might have represented buy-the-rumor-sell-the-fact trading that spilled into other AI-related names.

8:30But it's also possible Western Digital disappointed some investors by saying on its call it plans to monetize its$4.6 billion equity stake in SanDisk by February 25th, Briefing.com reported. Perhaps not surprising, Friday was a tough day for the tech sector, and that dragged the major indexes. Only four of 11 S &P sectors gained Friday, and they were mostly defensive ones like staples, healthcare, and real estate. This could be a sign of investor caution. However, most sectors only moved a little, with Infotech and Materials, the only ones really falling out of bed. In individual trading Friday, Decker's Outdoor surged 19%, propelled by better-than-expected earnings and guidance.

9:17Hoka net sales in the third quarter climbed 19%. Verizon climbed more than 11 % Friday, supported by earnings that topped consensus, and subscriber growth surged by more than 600 ,000. SanDisk gained almost 7 % after earnings per share nearly doubled analyst estimates and guidance also impressed. SanDisk designs flash memory products required for AI computing. Mining shares fell Friday as precious metals prices slumped. The materials sector fell almost 2 % to bring up the rear of the sector list. Apple climbed less than 1 % despite earnings per share and revenue beating consensus of$138.39 billion.

10:01iPhone sales broke records and guidance topped consensus, but rising costs raised concerns. And Tesla added 3 % Friday after Bloomberg reported that Elon Musk's SpaceX is considering a merger with the EV giant or XAI as an alternative to a traditional initial public offering. A merger with either firm could potentially put SpaceX's IPO timeline in question, Bloomberg noted. SpaceX is weighing a June listing.

10:34The Dow Jones Industrial Average fell 179.09 points Friday, or 0.36%, to 48 ,892.47. The S &P 500 index dropped 29.98 points, or 0.43%, to 6 ,939.03, and the Nasdaq Composite lost 223.30 points, or 0.94%, to 23 ,461.82. For the week, the Dow Jones Industrial Average dropped 0.42%, The S &P 500 index rose 0.34%, and the NASDAQ fell 0.17%. The NASDAQ finished the month up 1%. 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.

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