Stocks Dive Amid Tech Sell-Off, Inflation 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.

0:17I'm Keith Lansford, and here is Schwab's early look at the markets for Monday, June 8th. All three major market indexes plunged Friday as key chip stocks sold off and Treasury yields rose after a stronger-than-expected jobs report. With investors now pricing in more than 70 % odds of a rate hike by year-end, according to the CME FedWatch tool, inflation data will be in the spotlight this week. The May Consumer Price Index, or CPI, due early Wednesday, and the Producer Price Index, or PPI, due early Thursday, will serve as critical benchmarks leading into next week's Federal Reserve meeting. Both inflation gauges have edged up over the last two months, thanks to the conflict in the Middle East and high oil prices, with PPI advancing sharply in April.

1:06The focus today is Apple, which kicks off its annual Worldwide Developers Conference with a keynote speech at 10 a.m. Pacific time this morning. There's growing expectation that the company will unveil a wide number of advances in its AI program, including a revamp of Siri. The updated virtual assistant is built on Alphabet's Gemini technology and could look more like a ChatGPT competitor, Wall Street Journal reported, noting that it may offer an improved search experience. Data today is on the light side, highlighted by the New York Federal Reserve's survey of consumer expectations due soon after the open.

1:46U.S. consumers expected inflation to rise by 3.6 percent over the next year in April, the highest level in a year and a slight increase from the 3.4 percent seen in March.

2:01Investors enter the week still chatting about Friday's non-farm payrolls report, which showed jobs growth surging to 172 ,000 in May. The release also featured a combined 93 ,000 new jobs added to the Bureau of Labor Statistics March and April reports. A two-month upward revision was the highest since January of 2025, and the three-month average of non-farm payroll gains is now at its highest level since March of 2024. This was a massive upside surprise, said Cooper Howard, director of fixed income research and strategy at the Schwab Center for Financial Research. The headline number was good, but the revisions were also positive.

2:44Reaction on Wall Street was a quick thumbs down, triggered by a rapid rise in treasury yields after the data. The 10-year note quickly jumped above 4.5%. Economic resilience, seen not just in the jobs report, but in smaller employment updates earlier in the week, and decent retail sales, suggests heavy inflation is not yet having a major impact on economic growth. This means that if the Fed wants to focus on taming inflation, perhaps with a rate hike later this year, it may be able to do so without hurting consumers. I think it gives them more runway to wait to see what happens with inflation, Howard said, referring to Fed policymakers.

3:27While there's no expectation of the Fed making any rate moves at its June 16th and 17th meeting, the combined weight of Friday's jobs data and this week's inflation reports give the Fed a possible roadmap as it plans ahead for the rest of the year. Investors will be left to ponder the central bank's next move without any insights from Fed officials, however, with policymakers set to go silent this week as the quiet period begins before their June meeting. With Treasury yields rising across the curve on Friday, Treasury auctions may draw extra attention moving forward. This week features a three-year note auction on Tuesday and a 10-year note auction Wednesday, both of which could come under close scrutiny after recent auctions found tepid demand.

4:15Weak demand for U.S. Treasuries threatens to send yields even higher. Another potential catalyst for higher yields is the European Central Bank's rate decision Thursday morning. Analysts expect the ECB to raise rates as it tries to fend off inflation, Reuters reported. Shifts in European interest rate expectations can potentially impact U.S. bond yields as global fixed-income markets are closely interconnected. Turning to corporate news, it's relatively quiet this week beyond the Apple conference. One highlight is earnings from Oracle expected after the close Wednesday. With many key chip stocks under pressure of late, investors will be hoping for a strong performance to potentially help counteract the sector's recent decline.

5:03Software giant Adobe and the home builder Lennar will also report after the close on Thursday. The warm and oil prices remain trigger points for the markets, of course, but at least by late Friday it appeared there was a bit of a lull in development surrounding the conflict in the Middle East. The Strait of Hormuz remains blocked, though news reports said some ships are getting through, and negotiations haven't shown much signs of advancing. The market may be skeptical of any news on negotiations, having been led to believe there was progress lately with few tangible results. Looking at major market indexes, the S &P 500 dropped more than 2.5 % Friday, while the Dow Jones sank over 1.3%, and the Nasdaq Composite plunged 4.2%, its biggest daily drop since April of 2025.

5:57Beyond the threat of higher rates, weakness in the Nasdaq late last week possibly reflected overbought conditions, as the Relative Strength Index, or RSI, popped to nearly 75 early this month. Anything more than 70 indicates an overbought market, though a high RSI doesn't necessarily mean stocks have to go down. The RSI was elevated most of last week for the PHLX Semiconductor Index as well, hitting 80 for the first time since late April before dropping the mid-Fridays sell-off. Market breadth, somewhat counterintuitively, remained relatively orderly on Friday despite the tech-led sell-off. Some 54 % of S &P 500 stocks traded above their 50-day moving averages, while 58 % are traded above their 200-day moving average.

6:47Volatility surged, however, with the SIBO Volatility Index ending the day up 28%. Chip and AI-related stocks led the market lower on Friday, following Thursday's sharp losses for the PHLX Semiconductor Index and disappointing earnings from Broadcom last week. Six of 11 S &P 500 sectors ended Friday in the red, with investors rotating out of tech and into more defensive and inflation-resistant sectors. Infotech was by far the biggest loser amid the rotation, dropping more than 5.8%, while consumer staples rose 1.8%. Among individual movers Friday, Lululemon plunged 8.6%. Though quarterly results narrowly beat Faxet's consensus estimates, guidance disappointed as the company reduced its full-year outlook, citing headwinds.

7:41Micron technology also fell more than 13.2%, while arm holdings slid more than 12.8%. A few more sessions of weak chip stock performance and advancing healthcare and consumer staples moves might add credence to the idea that a durable rotation is underway, but for now, it's too early to say. SanDisk sank more than 11.3 % on Friday as well, with investors likely taking profit in the high-flying memory maker amid the dark day on Wall Street after it saw record gains over the past year. Meanwhile, Eli Lilly climbed 0.5%, adding to Thursday's gains. Shares recently hit record highs, driven partly by last month's decision by CVS Health to cover Lilly's new weight loss pill and resume covering their ZEP-bound injectable.

8:32Bitcoin futures had dropped another 5.5 % by Friday afternoon, putting pressure on crypto-related stocks, including Strategy and Coinbase Global. The cryptocurrency was able to find some support around$60 ,000, however, a level which roughly coincides with the cost of production for efficient miners and the 200-week moving average. The Dow Jones Industrial Average dropped 695.15 points Friday, or 1.35%, to 50 ,866.78. The S &P 500 index sank 200.57 points, or 2.64%, to 7 ,383.74. and the Nasdaq Composite plunged 1 ,121.53 points, or 4.18%, to 25 ,709.43. For the week, the Dow Jones Industrial Average fell 0.32%, the S &P 500 dropped 2.59%, and the Nasdaq cratered 4.68%.

9:40This 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.

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