Jobs in Spotlight, with Starring Role for Broadcom

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, June 1st. A light Monday kicks off a week packed with jobs data and a couple of keystone earnings reports from the tech sector. June is seasonally among the worst months of the year, historically, possibly posing a challenge to investors hoping for more records. Last week saw the broader market climb around 1.4 % to new all-time highs, buttressed by strong earnings reports from tech firms including Dell, Snowflake, and Marvell. A 10 % drop in oil prices on hopes for Middle East peace also helped, as did a decline in Treasury yields.

0:57Jobs data is sprinkled through the next days, building up to Friday's May non-farm payrolls report. Payrolls rose 115 ,000 in April, almost doubling analysts' average estimates, while unemployment remained at 4.3%. The unemployment rate has been between 4 % and 4.5 % for 22 months in a row. Consensus for May jobs growth is 96 ,000, though that could change over the course of the week, depending on results from reports like tomorrow's April Job Openings and Labor Turnover Survey or JOLTS and Wednesday's ADP monthly employment data. Last month, we got the first back-to-back month of gains since May of 2025, noted Colin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research.

1:45If we start to see a strengthening of the labor market, which is not really what we've been seeing, then maybe you start to see the idea of a potential rate hike given the inflationary pressures. But we're not there yet. The Federal Reserve meets the week after next. Recent remarks from policymakers emphasize the fight against inflation, though new Fed Chairman Kevin Warsh hasn't made public comments yet in his role. His thoughts at the post-meeting press conference a week from Wednesday will almost certainly be a highlight for Fed watchers this month. As of late Friday, futures trading predicted the Fed to stay on pause another meeting, the fourth in a row since the last rate cut in December, according to the CME FedWatch tool.

2:28Chances of a policy move this year remain roughly 50-50 as the old week wound down, slightly leaning toward a pause rather than a hike. Looking out a year from now, however, odds shift toward at least one and possibly two hikes. This week brings several critical earnings reports, arguably none bigger than Broadcom on Wednesday after the close. A member of Wall Street's trillion-dollar club, shares have flattened over the last month after an epic April rally. Like other major chip firms, Broadcom's results can give investors insight into the pace of hyperscaler AI spending. Last time out, Broadcom said it expected more than$100 billion in AI chip revenue next year.

3:14Another one to watch is Palo Alto Networks tomorrow afternoon, with cybersecurity stocks in the spotlight amid the push and pull of weakness in software, but rising demand for security as AI usage rises dramatically. CrowdStrike reports Wednesday, making it a one-two punch week for cybersecurity. In other tech-related news, NVIDIA CEO Jensen Huang delivers a keynote speech today at the Computex trade show. Tech kept up its blistering pace last week, topping all sector performers. Consumer shares generally did well last week, too, as spending looked resilient in recent data. The question is how long this can last amid rising credit card delinquencies and a savings rate that's fallen over the last year.

4:01Tomorrow's job openings report could provide clues into why consumer sentiment remains dim. Openings have generally declined over the past year, dropping below$6.9 million in March. Analysts expect a similar reading for April when the report comes out soon after the open Tuesday. Before that, investors get a look at the U.S. manufacturing economy today. The ISM manufacturing PMI due at 10 a.m. Eastern Time is expected to come in at 52.6%, well above the 50 % level needed for expansion. These manufacturing readings have actually been improving, said Lizanne Saunders, chief investment strategist at the Schwab Center for Financial Research.

4:41In fact, four months ago, we saw a move out of what would be considered recessionary territory for manufacturing back into expansion territory. One driver for manufacturing growth is supplier deliveries, a sub-factor to check in today's report. Usually, an improvement in supplier deliveries is seen as positive, meaning demand is outstripping supply. Recent movement in this category, however, might reflect supply constraints given the closure of the Strait of Hormuz. As Friday's session ended, there were only vague signs of progress towards a peace agreement. Even so, crude oil fell on hopes a deal might be close.

5:20On Friday, major indexes wrapped up a positive week and month with light gains to new record highs, though small caps faded. The Nasdaq Composite rose 8 % in May, the S &P 500 Index rose 5%, and the Russell 2000 Index of small caps rose 4%, giving up its leadership from earlier in the year. Though the market made major gains Friday, breadth was far from impressive. only the tech and financial sectors gained, putting more emphasis on the tech-oriented nature of this long rally. Tech rose 5 % last week, with Consumer Discretionary, the next best sector performer, at slightly under 2%. For the month, tech climbed 15%, and no other sector even posted as much as a 5 % gain.

6:07Still, 7 of 11 S &P sectors finished May in the green monthly, with defensive sectors in the red. Technically, major support is well below current levels at around 7 ,275 for the S &P 500 index Below that, there's support at 7 ,140 and 7 ,000 A break below those zones could lead to a faster pickup in volatility and downside pressure With the S &P 500 index at all-time highs, there's no straight-out resistance above The Relative Strength Index, a momentum indicator, is above 70, a traditional overbought signal. But overbought conditions don't mean the market can't climb further. We're entering June, which historically is not a bullish month for stocks, said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research.

7:01But the bullish momentum and animal spirits in stocks have been so strong over the past several weeks, the seasonality may not matter this time around. The Treasury yields slipped about two basis points Friday to below 4.44 percent for the 10-year note. The coming week doesn't include many big Treasury auctions, so where yields head could rest on war and oil developments, as well as any interesting job data nuggets. Treasury yields have generally followed the direction of oil since the conflict began, given the potential impact on oil, Martin said. Even if we get a true de-escalation with the straight, long-term Treasury yields are unlikely to fall much further given ongoing inflationary pressures, fiscal concerns, and upward pressure on the term premium.

7:50Checking individual movers Friday, Dell jumped 33 % after easily topping earnings consensus and issuing better-than-expected guidance. Quarterly revenue grew 88 % year-over-year. The company booked$24.4 billion in AI orders, raised full-year guidance, and hiked its AI server revenue expectations for fiscal 2027 to$60 billion. The AI opportunity shows no signs of slowing, Dell said in its release. Shares of computer companies that compete with Dell also climbed, thanks to Dell painting a positive fundamental picture. Hewlett Packard Enterprise jumped nearly 13%, and Super Microcomputer gained 11%.

8:36Software firms generally had a solid day, with Adobe and Salesforce posting solid gains. Tech stocks generally took a positive track, propelled by the Dell rally. Major tech shares climbing Friday included IBM, Arm Holdings, and Qualcomm. Gains of 12 % for IBM might reflect positive response to the company's announcement Thursday it plans to spend more than$10 billion over the next five years to advance its quantum computer business. Autodesk fell 4 % despite the software firm rolling out earnings that topped consensus and issuing guidance that mostly exceeded expectations. Shares might be dragged by a slight miss in quarterly ex-subscription revenue, CNBC reported, and by the company paying$3.6 billion for maintenance in operations software firm MaintainX.

9:29AST Space Mobile plunged 15 % and other space-related stocks also fell after Blue Origin's rocket blew up yesterday during a test, reinforcing the challenges that go with this sector. Okta soared 30 % after the cloud software company's quarterly results impressed and it offered guidance for above-consensus fiscal year revenue. Gap tumbled 16 % despite better-than-expected earnings. Participants reacted to the company's trimmed annual sales guidance. Poor demand in the women's dress category hurt quarterly results, the company said. And American Eagle Outfitters, another apparel seller, fell 13 % after the company said sales at stores open a year or more fell 2 % annually at its namesake brand.

10:20The Dow Jones Industrial Average added 363.49 points Friday, or 0.72%, to 51 ,032.46. The S &P 500 Index gained 16.43 points, or 0.22%, to 7 ,580.06. And the Nasdaq Composite climbed 55.15 points, or 0.21%, to 26 ,972.62. For the week, the Dow Jones Industrial Average rose 0.9%, the S &P 500 Index gained 1.43%, and the NASDAQ popped 2.39%. 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.

11:20Join us for another update tomorrow.

11:28For important disclosures, see the show notes and schwab.com slash market update podcast.