Jobs Data Near, but First a Pause for Refreshment

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 Tuesday, February 10th. Earnings slow this week, but a wide mix of companies prepare to open their books after two solid sessions in a row that took the broader market back to where it was prior to last week's sell-off. Some firms likely to capture interest are tech names like Cisco and Applied Materials, along with consumer bellwethers like Coca-Cola, McDonald's, and Ford. The refreshment stand opens this morning as Coca-Cola reports, and investors can add a burger to the order tomorrow with McDonald's. The so-called K-shaped economy has been a trend the last few months, and the fast food and snack sector is a good one to watch for signs of spending among lower-income consumers.

1:04Guidance from Coca-Cola could be key, and investors might hear updates on the CEO transition scheduled for next month. Even if consumer spending lags at the lower end, the upper end of the income spectrum could keep the economy humming. Investors could get a better sense of that this morning with December retail sales, though the report reflects what was happening two months ago following shutdown-related delays. Analysts expect firm monthly growth of 0.4 % in headline retail sales, down sequentially from 0.6 % the previous month. Watch for possible revisions to November's numbers. Also, keep an eye on Control Group retail sales, which excludes sales from auto dealers, building materials, stores, and gas stations.

1:50Knowing the gap between headline retail sales and this number can give investors a better sense of how the government sees economic growth trending. It often differs substantially from the headline, partly because it omits volatile metrics like gas prices. Later today, Ford reports possibly providing an update on the impact of tariffs. Last time out, Ford beat earnings expectations but delivered lower guidance due to a plant fire at one of its suppliers that disrupted truck and SUV production.

2:24Wednesday's January nonfarm payrolls report is the benchmark this week, delayed due to the most recent government shutdown. It's expected to show relatively soft jobs growth of around 70 ,000, but the lowest estimates on Wall Street predict a negative number. In an interesting note that may be foreshadowing, Kevin Hassett, director of the National Economic Council, warned on CNBC Monday of possible weaker jobs numbers. Friday's Consumer Price Index is another trail marker ahead, with monthly growth seen at 0.3 % and annual at 2.5%. By the end of this week, investors should have a very good snapshot of corporate and economic health, perhaps easing some of the volatility, which to some extent reflects data uncertainty spawned by two recent government shutdowns.

3:12Another partial shutdown could be on the way, but isn't expected to affect data. While 15 % of S &P 500 companies report this week and data flows heavily, there's stuff under the surface that also could influence proceedings. Much of it is in the bond market, where longer-dated Treasury yields continue to build premium to short-term yields. That was already a trend before two events early this week that may reinforce this type of trading and keep long-term borrowing costs on the high side. Treasury yields rose Monday in what might be a reaction to the Japanese election that gave Prime Minister Takeichi's party a supermajority.

3:54Given her plans to boost the economy through fiscal policy, it's reasonable to expect upward pressure on Japan's bond yields, contributing to further upside pressure on global bonds. Japan is the largest foreign holder of U.S. treasuries, which means that its market tends to influence U.S. rates, said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research. More pressure on treasuries came when China asked its banks to limit exposure to U.S. treasuries, according to a Bloomberg report. The news from China, if proven true, comes after a European pension fund last month said it would refrain from U.S.

4:34Treasury purchases to protest U.S. policy. If China follows suit, even as Japan's growing economy attracts more assets there, the pressure on U.S. Treasuries might grow. One way to track Treasury market health on a near-term basis is to watch Treasury auctions, including today's auction of three-year notes. Results should be out by early this afternoon, and weak demand there might heighten concerns and cause the 10-year yield to retest recent highs near 4.3%. The market last week went where chips and software steered it, and the same may be true in days ahead, unless data are far from estimates or geopolitics turn hotter.

5:17The PHLX Semiconductor Index jumped nearly 6 % last Friday and another 1.5 % Monday, evidence of the chip sector's influence on the comeback. However, some chip stocks, including Micron, slid Monday on reports that South Korea's Samsung plans to release a high-bandwidth next-generation memory chip as soon as this month, CNBC said. Software, which spent much of last week in the red on worries over AI competition, continued reviving Monday out of severely oversold conditions. The software sector's 33 % drop from October highs coincided with near-record highs in the S &P 500 index. When a sector as important as software drops that much and the overall index makes new highs, it truly signals how rotation has shifted away from tech.

6:10Still, it could be tough for the S &P 500 Index to make and sustain new highs without more help from software, chip, and other tech names. The S &P 500 Index keeps bumping its head against all-time highs just above 7 ,000, but hasn't managed to close above that yet, another sign of technical struggles. However, the S &P 500's range-bound condition mainly reflects this year's drop in tech shares. Cyclical sectors like materials, energy, and industrials have performed very well. So have small-cap stocks, and strength in small-caps often reflect a robust U.S. economy, since these companies have most of their sales at home.

6:51The dollar is worth watching this week after Monday's tumble from recent highs. It descended against the yen after Japan's election Monday and may also have felt pressure from the report of China possibly pulling back U.S. Treasury buys. A weaker dollar, if it persists, can spark inflation. In U.S. markets Monday, early weakness changed to tech-fueled strength, though declining shares outnumbered advancers by a 2-to-1 ratio early in the session before catching up to around even by midday. Treasury yields dipped one basis point for the 10-year note, helped in part by Japan's announcement it won't issue additional bonds to finance the Prime Minister's fiscal agenda, Briefing.com noted.

7:37The 10-year is back at 4.20%, which represented the high end of the recent trading range before the late January breakout. Seven of 11 S &P 500 sectors climbed Monday across a wide spectrum, but Infotech's 1.7 % rise led the way, followed by a 1.5 % gain for materials as mining stocks rose, thanks to rebounds in gold and silver, with copper also up. In individual trading, Oracle climbed about 10 % Monday after getting upgraded to buy from Neutral at DA Davidson. The analyst believes a revamped open AI will return to its position as Alphabet's top challenger and be able to live up to its obligations this year, including to Oracle, which it sees removing the biggest concern from Oracle.

8:28Other tech stocks also enjoyed solid gains, including NVIDIA, Palantir, CoreWeave, Taiwan Semiconductor and Advanced Micro Devices, but Micron fell sharply on reports that South Korea's Samsung plans to launch an advanced memory chip. Novo Nordisk rose 3.6 % as HIMS and HERS decided to pull its copy of Wegovi from the market, according to CNBC. This followed threats of legal action. Retail stocks got discounted Monday with weakness in Best Buy, Gap, Macy's, Nike, and Kohl's all falling 2 % or more. This suggests some of last week's rotation out of tech and into cyclical stocks that tend to rise in the growing economy got reversed Friday and Monday as some money rolled back into tech.

9:18Cleveland Cliffs melted down more than 15 percent following earnings and revenue that missed analysts' expectations. Steel shipments and revenue were flat versus a year ago in the fourth quarter. An exception to Monday's retail route was Kroger, which powered 4 % higher after the Wall Street Journal reported the company is hiring a former Walmart executive as CEO. And Applevin shares spiked 13 % Monday after a short seller apologized for and retracted an erroneous negative report on the company. The Dow Jones Industrial Average climbed to 20.20 points Monday, or 0.04%, to 50 ,135.87. The S &P 500 Index added 32.52 points, or 0.47%, to 6 ,964.82.

10:13and the NASDAQ Composite climbed to 207.46 points or 0.9 % to 23 ,238.67. This has been the Schwab Market Update Podcast. To stay informed, visit www.schwab.com slash marketupdate 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. Join us for another update tomorrow.

10:52For important disclosures, see the show notes and schwab.com slash market update podcast.