Labor Market Softness, Broadcom Earnings In Focus

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 Thursday, September 4th. Though Friday's non-farm payrolls is the keystone this week, jobs are already in focus today after Wednesday's weak job openings and labor turnover survey, or JOLTS, unnerved investors and sent Treasury yields tumbling. Today's jobs-related data starts with Challenger job cuts due before the open. There were 62 ,000 cuts in July and analysts expect a rise to near 90 ,000 in August.

0:51AI-related job cuts, like the ones announced this week by Salesforce, remain front and center in many investors' minds. The ADP August National Employment Report follows at 8.15 a.m. Eastern Time. Analysts expect a drop to 69 ,000 new jobs from July's 104 ,000. But tomorrow's August payrolls report will garner most of the attention, barring some major outside news. Due at 8 30 a.m. Eastern Time Friday, the report is expected to show anemic jobs growth of 78 ,000, not much above July's 73 ,000. July also featured dramatic downward revisions to previous reports, something to monitor tomorrow. There's always a chance the government could add or subtract from prior data, so investors need to look past the headline number.

1:42In other macro data, August ISM services PMI is due at 10 a.m. Eastern Time. Economists expect a reading of 50.5 percent above July's 50.1 percent and in expansionary territory above 50 percent. Investors may want to keep an eye on the report's prices data for a look at how inflation is affecting the services sector. Broadcom's earnings await investors after the close, providing a fresh look at chip demand. Industry leader NVIDIA's shares have slumped recently, and there's new concern about AI competition from China. Last time out, Broadcom beat analysts' earnings and revenue expectations, but just barely so on the revenue side.

2:24It also provided strong guidance and reported solid AI infrastructure demand.

2:33Looking to Washington, a key Senate Banking Committee confirmation hearing starts at 10 a.m. Eastern time today for Stephen Moran, Trump's nominee to fill a Federal Reserve vacancy. The hearing could offer more drama than usual after President Trump attempted to fire Fed Governor Lisa Cook last week, a decision now tied up in the courts. Fed Governor Christopher Waller, appointed by Trump in 2020, stressed the importance of Fed independence Wednesday in a CNBC interview, but declined to comment on the Cook situation. Waller also said he'd support a rate cut to boost the slumping labor market, but if Friday's jobs data looks hotter than expected, it's possible the market could pull back on its expectations for more rate cuts later this year.

3:20Waller sees slower growth for the U.S. economy ahead, however, which would likely bolster the market's impression that more rate cuts are on the way. He's expecting multiple cuts over the next three to six months, citing the Fed's June summary of economic projections that showed a long-run rate of 3%. The current Fed target range is between 4.25 % and 4.5%. After rising throughout the week to briefly touch 5 % early Wednesday morning, the U.S. 30-year U.S. Treasury yield fell seven basis points yesterday amid fresh concerns over labor market softening. Treasury yields had spiked early in the week after the U.S.

4:01Court of Appeals struck down President Trump's tariffs last Friday. The move had fueled fiscal worries over the potential of more than$200 billion in tariff refund payments. But a narrative change came after Wednesday's weak jolts. Job openings fell to 7.18 million in July from a revised 7.4 million in June, the lowest level in 10 months. Layoffs also rose to 1.8 million, the highest level since last September. June's layoff figures were revised sharply higher as well, from 1.6 million to 1.8 million. Combined, the jolts data reflects a softening labor market, according to Kathy Jones, Chief Fixed Income Strategist at Schwab.

4:45The report should solidify the expectations for a rate cut later this month and increase the odds of another cut this year, said Jones. However, the drop in bond yields may be limited by the elevated level of inflation and the overall solid pace of GDP growth. As of late Wednesday, the odds of a 25 basis point rate cut at the Fed's mid-September meeting stood at 95.6 percent, according to the CME FedWatch tool, up from 89 percent a week ago. Rising rate cut expectations helped lift the rate-sensitive tech stocks in the Nasdaq composite and S &P 500 on Wednesday, but the Dow Jones was weighed down by economic worries.

5:27A few key mega caps also helped revive the Nasdaq after Tuesday's weak outing, as Alphabet climbed nearly 9 % on a positive court decision that also lifted shares of Apple. A federal court ruled that Google can keep its Chrome browser but can't forge exclusive contracts and must-share search data. Many had expected Google to lose Chrome after the judge earlier ruled it held an illegal search monopoly, so this news removes a dark cloud that long shadowed the tech giant. In other macro data Wednesday, factory orders fell 1.3 % month-over-month in July, with weakness in commercial airline bookings weighing on results.

6:08This follows a 4.8 % month-over-month plunge in factory orders in June. The Fed's Beige Book, a survey of economic trends in regional U.S. economies, painted a less-than-rosy picture as well, with business owners worried about tariffs and afraid to raise prices for fear of losing price-sensitive customers. This ultimately could cause margin pressure for companies, which can lead to layoffs. Stock market breadth, meanwhile, showed signs of waning as well. Just 54 % of S &P 500 stocks traded above their 50-day moving average on Wednesday, compared to 61 % on August 19th. Software giant Salesforce initially fell in after-hours trading, despite beating analysts' earnings and revenue forecasts after the close, mixed guidance and what may have been a buy-the-rumor-sell-the-news reaction from investors weighed on shares.

7:05Dollar Tree shares also fell more than 8 percent despite earnings that beat expectations. The discount retailer was hurt after offering a downbeat outlook for the current quarter and warning that tariffs would squeeze margins. On the other hand, shares of Macy's surged more than 20 % after the retailer's results beat analysts' earnings and revenue expectations, and it guided for revenue above consensus in fiscal 2026. And Campbell's stock popped more than 7 % after the food and beverage makers' earnings exceeded analysts' expectations. Campbell's CEO said in prepared remarks that the company was benefiting from cautious consumers that are looking for value by cooking at home.

7:48Just three of 11 S &P 500 sectors rose on Wednesday. Communication services spiked more than 3 percent amid Alphabet's rise, while the consumer discretionary and information technology sectors both rose modestly. Industrials, health care, and energy lagged, with the latter falling nearly 2.5 percent. The energy sector was hurt by a more than 2.5 percent drop in U.S. crude oil futures on Wednesday, which came after Reuters reported that this weekend's OPEC meeting could include a crude output hike.

8:24The Dow Jones Industrial Average fell 24.58 points Wednesday, or 0.05%, to 45 ,271.23. The S &P 500 index rose 32.72 points, or 0.51%, to 6 ,448.26. and the Nasdaq Composite jumped 218.1 points or 1.03 % to 21 ,497.73. 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. It really helps new listeners find the show. Join us for another update tomorrow.

9:22For important disclosures, see the show notes and schwab.com slash market update podcast.