Jobs Set to Dominate Calendar

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 29th. A shortened holiday week awaits investors licking their wounds after recent technology sector losses. With few earnings reports on the calendar, jobs data will take the spotlight in a series of reports that crescendo Thursday with June non-farm payrolls. That report, normally a Friday affair, comes out a day earlier than usual, as markets will be closed Friday for Independence Day. As a result, the release calendar will be compressed into a three-day window that opens tomorrow with the May Job Openings and Labor Turnover Survey, or JOLTS.

0:57Jobs numbers aren't the only data on the near horizon. The ISM U.S. Manufacturing Purchasing Managers Index, or PMI, report for June is due Wednesday and will reveal whether the expansion in manufacturing activity that kicked off at the start of the year kept pace through the first half of the year. This recovery in manufacturing activity has filtered through to the market, supporting sectors beyond those heavily exposed to tech.

1:26Before digging into some forecasts for the coming data releases and what they could mean for Federal Reserve's interest rate policy in the latter half of the year, it's worth noting that last week's relatively disappointing action among the benchmark stock indexes masked a couple of encouraging trends. Market breadth, an important indicator of Wall Street's underlying health and investor sentiment, improved over the course of June. By late Friday, roughly 63 % of S &P 500 stocks traded above their 50-day moving averages, up from 50 % a month ago. Six of 11 S &P 500 sectors have risen over the last month, led by industrials, with financials and materials also in the mix.

2:08These sectors are cyclical, meaning they tend to do better when the economy does better. This contrasts with a more than 10 % dive in communications services since late May, where Magnificent 7 stocks like Alphabet and Meta platforms have faltered. NVIDIA, Microsoft, Apple, and other tech stocks also have been fairly weak, but the tech sector is down only around 5 % over the same period, thanks to the relative strength of chip stocks. The market appears concerned about AI costs and returns on investment, and Apple and Microsoft announced price increases last week that suggest both could be grappling with margin issues.

2:49Those able to look past Magnificent Seven and AI concerns might also be focused on falling oil prices and the easing in treasury yields over the last few weeks. That said, yields could leap back up if the ceasefire in the Gulf starts coming apart, driving oil prices up in turn. Still, for the moment, these trends could support consumer stocks, though the consumer discretionary sector has been a bit of a laggard in recent weeks, due in part to poor showings from names like Amazon, Tesla, and Nike. Nike is expected to report earnings late tomorrow. Turning back to economic data, last week's Personal Consumption Expenditures, or PCE, price report showed headline inflation up 4.1 % in May from a year earlier, the fastest pace since 2023.

3:40Falling crude oil prices and yields suggest inflation may be pausing slightly. a positive sign which could take pressure off a Federal Reserve concerned about resurgent price increases. This week's jobs data will surely be of interest to Fed watchers. Tomorrow brings the May Jolts release just after the opening bell. The April reading came in at 7.6 million, well above expectations, and May's is expected to be in that area as well. These are the highest levels in more than a year, suggesting companies may have started to emerge from the no-hire-no-fire conditions that have prevailed. It's too early to save for sure, but the U.S.

4:23economy did add jobs each month from March to May. Analysts expect more gains for June, if not at the pace of previous months. Analysts' consensus forecast is for a 114 ,000 increase in June, down from 172 ,000 in May. Closing out last week, the University of Michigan's final consumer sentiment report for June showed a solid improvement after recently plumbing all-time lows, with the index rising to 49.5, just below the cutoff separating optimism and pessimism from 44.8 in May. Analysts had expected a headline figure of 48.9, Briefing.com said, unchanged from the initial estimate. Year-ahead inflation expectations eased slightly to 4.6 % from 4.8 % in May, though they are still sharply higher than 3.4 % inflation seen in February's report before the start of the conflict in Iran.

5:23Data took a backseat to AI concerns last week, despite memory chip giant Micron's robust earnings and guidance. Good news for Micron isn't necessarily great for tech in general. Micron and its competitors keep improving their results thanks to the rising cost of the memory chips used in products from phones to laptops to automobiles. As Briefing.com noted Thursday, this could potentially reinforce a growing wedge in the tech sector with memory chip companies like Micron far surpassing gains of hyperscaler stocks like Microsoft, Amazon, and Alphabet. The latter three spend heavily on chips and face rising costs as they try to grow their AI data centers.

6:05Those high costs are seen persisting through 2027 and perhaps into 2028, analysts say, driven by increasing data center demand and by NVIDIA's rapid introduction of updated AI chips with each new cycle requiring more memory. Friday morning saw fresh tech weakness after the New York Times reported that OpenAI might be poised to wait until next year to present its initial public offering. Executives at OpenAI may shift from an earlier IPO in the face of choppy global markets and the rough performance of SpaceX shares after its IPO early this month, the newspaper reported. Treasury note yields eased again Friday.

6:50The benchmark 10-year note yield hovered above 4.5 percent earlier this week, only to slip back below 4.4 % as oil prices declined. The 10-year yield remains near its lowest point since early May. As of late Friday, investors were still pricing in 46.8 % chances of the Fed raising rates as soon as September, according to the CME Group's FedWatch tool. The major indexes were mostly lower at the close of last week, though the blue-chip Dow Jones Industrial Average eked out a small gain. Some of the weakness late this month could represent consolidation after such a strong rally in April and May.

7:33Funds may be trimming some of their exposure to equities in a quarter-end rebalancing move, perhaps adding bond exposure at the same time. Choppiness returned to the market late last week as the SIBO Volatility Index, or VIX, rose above 20 before settling slightly lower on Friday. More bumps could be ahead, thanks in part to the FTSE-Russell's semi-annual rebalancing, which took place after Friday's close. Despite the wobbles in the headline indexes, six of the 11 S &P 500 sectors gained Friday, with health care, real estate, and consumer staples leading. Technology and industrials were the laggards.

8:12Among individual movers Friday, memory chip stocks, including Micron, retreated sharply after blockbuster gains the day before. This followed overnight weakness in South Korea's semiconductor-dominated stock market. Chip infrastructure firms like Lumentum, Marvell Technology, and Corning were also down quite a bit. On Semiconductor plunged almost 24 % after agreeing to buy Synaptics, a company that specializes in custom-designed human interfaces, in an all-stock deal worth$7 billion. Shares of Synaptics were roughly 2 % lower. On makes chips for automotive and industrial markets. And NVIDIA slipped 1.4 % and was nearly 9 % lower for the week, its worst week in more than a year, reflecting competition from memory stocks and worries about the pace of AI spending, Barron's reported.

9:10The Dow Jones Industrial Average shed 45 points, or 0.09%, Friday to 51 ,876.11. the S &P 500 index sank nearly 4 points, or 0.05%, to 7 ,354.02, and the Nasdaq Composite lost 61 points, or 0.24%, to 25 ,297.62. For the week, the Dow Jones Industrial Average gained around 0.6%, while the S &P 500 lost ground at 2%, and the tech-focused Nasdaq dropped nearly 5%. 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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