Markets Ease Back Into Trading After New Dow High

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.

0:18I'm Colette O 'Claire, and here is Schwab's early look at the markets for Monday, July 6th. As Americans return to their desks after a long weekend celebrating the semi-quincentennial, today's market has little in the way of major earnings reports or economic data. One exception, the June ISM Services PMI, due shortly after the opening bell. Last month's reading of 54.5 percent marked the 23rd consecutive month above 50 percent, indicating expansion, though the employment sub-index contracted for the third time in a row, hitting 47.9 percent, while prices notched their highest reading since August 2022.

1:01On Wednesday afternoon, market watchers will get to pour over the minutes from the June 16th to 17th Federal Reserve meeting. Not only was this meeting when the dot plot swung from predicting at least one rate cut to leaning toward one potential hike, it will be the first FOMC minutes released since Kevin Warsh took the helm. Given the new chair's stated aversion to forward guidance, the tone may be a bit different. Investors can look for hints of division among voting members, update its perspective on inflation and the labor market, and any discussion of how tariffs may still be impacting prices below the surface.

1:41Thursday's softer-than-expected June jobs report may add a new wrinkle to the Fed's outlook, however. That reading offered a Goldilocks moment. While the headline number fell far short of expectations, it in turn wasn't a strong enough report to dash all lingering hopes for an eventual reduction or at least stabilization in interest straits. The reading showed that only 57 ,000 jobs were created, about half the number expected. This should allow the Fed to take a patient approach to any shift in its policy over the next few months, seeing how the incoming economic data comes in rather than rushing to a decision to hike, said Colin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research, or SCIFR.

2:30While fewer than expected jobs were added, the unemployment rate ticked down to 4.2 percent from 4.3 percent. A drop in the participation rate was largely responsible for this decline, Martin said, suggesting people were leaving the workforce. In response to the news, the futures market showed falling expectations for a Fed hike later this year. By Thursday afternoon, the CME FedWatch tool reflected a 53.4 percent chance of a hike in September, down from 62.8 percent before the release and a 77.7 percent chance by the end of the year, down slightly from 83.1 percent. Earnings season also glides in on Friday this week when Delta Airlines is the first major name to report.

3:19Next week, the season kicks off in earnest with several big banks, Netflix, and Taiwan Semiconductor sharing their results. Last Thursday's trading action was mixed on relatively light volume ahead of the holiday weekend. For the second consecutive day, losses were steep for the Philadelphia Semiconductor Index, which remains up more than 70 percent year-to-date, despite last week's pullback. KLA Corporation, Marvell Technology, and Lamb Research all lost about 10 percent or more on the day, and the index closed down 5.4 percent. The Nasdaq composite underperformed as a result, while the S &P 500 index failed once again to retake the 7 ,500 level and finished virtually unchanged.

4:06The Dow Jones Industrial Average, on the other hand, jumped nearly 600 points to tag a new record intraday high. In line with these index finishes, advancers outpaced decliners on the New York Stock Exchange, but decliners took a modest lead on the Nasdaq exchange. Factory orders declined 1.3 percent in May, falling just shy of estimates, but were up 1.9 percent when excluding transportation. Additionally, April's numbers were revised higher, suggesting orders remain relatively stable. Oil continued to drift lower to end the week as WTI crude futures inched down to close near$68.50 a barrel. This is less than 5 percent above the$65.55 mark, where futures settled the last trading day before the start of the Iran war.

4:58From their early April peak of roughly$109, crude has given back roughly 37 percent, much of which has happened since the beginning of June. The average per-gallon price of gasoline has dropped slightly more than 10 percent over the last month, according to AAA. Despite weak finishes in two headline indexes, eight of the 11 S &P 500 sectors closed in positive territory on Thursday. Healthcare and consumer staples were notably strong, while information technology, dragged lower by chip stocks, dropped to last place. Among individual movers Thursday, Alphabet edged lower after a European court upheld an antitrust fine of nearly$4.7 billion.

5:47Rivian Automotive upped its 226 delivery guidance, citing strong demand for its electric vehicles. The shares closed nearly 8.5 percent higher. Fellow EV named Tesla reported strong vehicle delivery and production numbers for the second quarter. Results far exceeded analysts' expectations and reflected year-over-year growth of 25 percent. Still, shares sank on the day, closing off 7.5%. Microsoft outperformed several of its Magnificent Seven rivals on Thursday, gaining about 1.6 % on news that it was dedicating$2.5 billion and 6 ,000 employees to a new AI venture. Bitcoin advanced farther off the key$60 ,000 level, which has sporadically acted as support for much of this year.

6:40The currency has risen close to 3 % in the last five days. The Dow Jones Industrial Average rose 594.83 points, or 1.14%, Thursday to 52 ,900.07. The S &P 500 indexed up 0.01, or 0.00%, to 7 ,483.24, and the Nasdaq Composite lost 207.36 points, or 0.80%, to 25 ,832.67. For the week, the Dow Jones Industrial Average gained around 2%, The S &P 500 rose roughly 1.8%, and the tech-focused NASDAQ rose about 2.1%, despite weakness in the latter half of the week. This has been the Schwab Market Update podcast. To stay informed, visit schwab.com slash market update, or follow for free in your favorite podcasting app.

7:46And if you like what you've heard, please consider leaving us a rating or review. It really helps new listeners find the show. Join us for another update tomorrow.

8:01For important disclosures, see the show notes and schwab.com slash marketupdatepodcast.