Wall Street Tracks Oil, Jobs Data Before Holiday

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 Thursday, April 2nd. But first, an important note. U.S. markets are closed Friday, April 3rd, an observance of Good Friday. The Schwab Market Update podcast will return on Monday, April 6th. We will be covering tomorrow morning's non-farm payrolls news in the Schwab Market Update newsletter, available at schwab.com slash learn. The government throws a data party tomorrow, but didn't invite Wall Street. March non-farm payrolls, arguably the most important economic number of the month, is due at 8 30 a.m. Eastern time Friday, the day markets are closed for the Good Friday holiday.

1:04But not everything is closed tomorrow, with bonds trading ahead of an early close. Still, stock futures will be the best way investors can read initial market reaction to the data. Sunday night's trading and Monday's open could be eventful with more volatility than usual. As far as numbers, analysts expect jobs growth of just over 50 ,000, well above the negative 92 ,000 reading from February. As always, revisions to old reports will likely get a close look. The government has been downwardly revising old numbers much of last year. Unemployment is expected to be stable at 4.4 percent, and the March report is the first to reflect data collected during the Iran war, and that conflict remains front and center today.

1:53Stocks rebounded Tuesday for their biggest rally in almost a year and built on those gains Wednesday as both the U.S. and Iran signaled they might be ready to end the fighting. Crude oil prices stayed elevated, however, and Treasury yields didn't fall much after their initial tumble from Friday and Monday. These two signals are probably worth a close watch today for insight into sentiment about the conflict. Falling yields and a dropping CBO volatility index, or VIX, might say as much about the direction of war as headlines from Washington. The VIX finished just below 25 on Wednesday, a key level.

2:32Anything above 20 reflects heightened market volatility.

2:39Before tomorrow's job reports firework, investors continue digesting a generally healthy batch of economic data from yesterday and contemplating today's initial weekly jobless claims report due before the open. There's not much earnings news this week, but Nike tumbled yesterday as investors blanched from its guidance for lower sales. Data yesterday included March ADP employment and February retail sales. Both reports exceeded analysts' expectations, though February retail sales growth of 0.6 percent month-over-month reflected the time before the war began. Digging deeper, control group retail sales, which factor into the government's gross domestic product or GDP calculation, climbed a solid 0.5 % in February.

3:29Overall retail sales growth was the best in seven months, lifted by sales of clothing, personal care, and spending at department stores. Auspiciously, spending at gas stations rose 0.9 % from February. The March ADP showed solid private sector job growth of 62 ,000, well above the expected 42 ,000, but down from 66 ,000 the month before. Growth was about evenly divided between services and goods-producing positions, ADP said. In less positive data yesterday, weekly mortgage applications fell 10.4 percent from the week before, according to the MBA Mortgage Applications Index. And to wrap up the busy April 1st data calendar, ISM's March manufacturing PMI looked strong from a headline point of view at 52.7 percent above the 50 percent needed to show expansion.

4:27The fly in the ointment was its prices component, which surged to 78.3 percent from 70.5 percent in February, and now is the highest level since June of 2022. While one number isn't the entire story, it doesn't bode well for the inflation picture and could help explain why Treasury yields held up well on Wednesday. The 10-year yield rose two basis points to 4.33 % late in the session. The longer the energy supply shock lasts and energy prices stay elevated, the greater the chance the price of a broad range of inputs rises and feeds into inflation expectations and wages, said Michelle Gibley, Director of International Equity Research and Strategy at the Schwab Center for Financial Research.

5:16Inflation expectations remain anchored, but manufacturers are already raising prices with memories of 2022 fresh in their minds. While Wall Street's gains this week reflect a hopeful vibe about the war, crude oil continues to set the pace and remains right around$100 per barrel, up sharply from around$65 before the war started. Even if conflict ended soon, repairs would likely take some time and crude oil and natural gas production can't be easily restarted. Also, many countries this week received their final shipments of oil that left the Middle East before the war. These nations now face the prospect of fewer shipments to replenish stocks.

6:03Though the earnings calendar is in a lull, it's worth thinking about today as Faxet issues its updated weekly report one day early due to the holiday. Last week, it pegged first-quarter S &P 500 earnings per share growth at a healthy 13 percent. That's below the five-year average of 15.9 percent. On a positive note, 9 of 11 sectors are seen reporting year-over-year growth led by technology. Also looking ahead, the Atlanta Fed's GDP Now metric fell to 1.9 % for GDP growth from the previous 2%. Corporate news wasn't at the top of headlines Wednesday, with the exception of a company that's not even traded yet, SpaceX.

6:48The tech firm run by Elon Musk has filed confidentially for an initial public offering or IPO ahead of its AI rivals, Bloomberg reported. The filing puts the company on track for a June IPO ahead of expected offerings from OpenAI and Anthropic PBC. Checking the technical picture, longer-term support remains near 6 ,175 for the S &P 500 index if things turn lower. Any follow-through from this rally will be measured by how quickly and sustainably the S &P 500 index approaches and takes out the 200-day moving average, now near 6 ,640. The index didn't make a concerted effort to approach that level, peaking just above 6 ,600 on Wednesday.

7:38One way to check if markets have more chance to get there is by monitoring breadth. The wider breadth becomes, the better chance of clawing back above resistance. As of late Wednesday, the breadth remained well below average, with just 27 % of S &P 500 stocks trading above their 50-day moving averages. That was up from below 20 % last week at the low, but down from more than 70 % during the broad-based rally earlier this year. The number of stocks above their 200-day moving average remained below 50 % late Wednesday. Another thing to follow is advancing shares versus decliners. Advancers far outpaced decliners again Tuesday, possibly a sign of positive momentum if it continues.

8:27The Relative Strength Index, or RSI, a momentum indicator, jumped to 42 on Wednesday from 28 on Monday, a nice rebound as markets began predicting a possible off-ramp for the war. Nine of 11 S &P sectors finished flat or higher Wednesday. Major Wall Street indexes were led again by cyclical sectors like industrials, communication services, and technology that tend to perform better when the economy is growing. The gains came ahead of President Trump's speech on the war Wednesday night. The exception to Wednesday's rally was energy, which pulled back sharply on ideas the war might be winding down.

9:08With equities closed for the holiday tomorrow, trading today could be more like a Friday. This might mean caution among some participants facing a long weekend full of possible war news following a strong rally and President Trump's speech. Profit-taking pressure can't be ruled out. In individual trading Wednesday, memory chip stocks dominated the leaderboard again. Micron, Western Digital, and SanDisk all posted 9 % or better gains. Western Digital benefited from an upgrade by Bernstein, but chip sector news was thin. The rally in these names appears to reflect dip buying after memory names crashed late last month on fears of AI competition.

9:56Nike cratered more than 15 percent despite earnings beating Wall Street's consensus. Revenue growth was in line with expectations. However, weak guidance for sales to drop this quarter proved to be the dagger as Nike expects its struggles in China to continue even as North American growth improves. Dave & Buster's Entertainment climbed 16 percent despite disappointing quarterly results. Investors appeared focused on upbeat guidance. RH plummeted 19 % after the home furnishings company offered lower-than-expected annual guidance. Gold and silver rose again, helping mining stocks. Boeing climbed 4 % as Wells Fargo initiated coverage with an overweight rating.

10:40And Eli Lilly climbed nearly 4 % after the U.S. Food and Drug Administration approved the company's weight loss pill. The Dow Jones Industrial Average gained 224.23 points Wednesday, or 0.48%, to 46 ,565.74. The S &P 500 Index added 46.80 points, or 0.72%, to 6 ,575.32. And the NASDAQ Composite rose 250.32 points or 1.16 % to 21 ,840.95. 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.

11:42Join us for another update tomorrow.

11:50For important disclosures, see the show notes and schwab.com slash market update podcast.