With Tech in Retreat, Jobs Data and Amazon Awaited

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, February 5th. Still digesting Alphabet's results from late Wednesday, investors look ahead to Amazon after today's close after a tough stretch for many tech and tech-related names. And with Washington's latest shutdown resolved, it's time for some data starting at 10 a.m. Eastern Time today with the December Job Openings and Labor Turnover Survey, or JOLTS. It will be a longer wait for January non-farm payrolls, which had originally been due tomorrow, and now comes out at 8.30 a.m. Eastern Time next Wednesday. Analysts expect about 7 million openings, down slightly from December and among the lowest for any month post-pandemic.

1:04Another jobs number is due before the open as investors await the Challenger job cuts report. December featured 35 ,000 layoffs to cap a heavy 2025, and analysts expect more than 40 ,000 in January. While the bill reopening the government-approved Tuesday embraces almost every agency, a funding debate persists regarding the Department of Homeland Security after the recent shooting in Minneapolis. Congress has until February 13th to resolve this issue, or certain government departments, including the Transportation Security Administration, would have no funding. Shutdowns typically have impacted air travel because of sick-outs by air traffic controllers and TSA agents.

1:50Both groups are considered essential and must work without pay during shutdowns. Private data was a mixed bag Wednesday. The ADP employment change report for January came in light at 22 ,000, down from a revised 37 ,000 in December. Most growth was in services providing jobs, while manufacturing payrolls fell for the 32nd straight month. ISM Services PMI was a different story, exceeding consensus at 53.8 % and staying well above the 50 % needed for expansion. Analysts had expected 53.7 percent. Mortgage demand sagged in late January as applications fell 8.9 percent from the previous week, according to the MBA Mortgage Applications Index released Wednesday.

2:43Switching to earnings, a 10 percent decline in shares of advanced microdevices after it reported late Tuesday kept the pressure on tech yesterday. Earlier this week, software stocks got broadsided by release of a new legal tool from Anthropic that investors worried could pull more business away. The recent heavy selling in both AI and software has made the entire tech sector more volatile, with many market participants appearing to sell at the first sign of danger. The AMD results were a good example, as it was hard to find much in the report that wasn't positive. However, participants appeared to zero in on a small anticipated sequential decline in revenue contained in the firm's guidance.

3:27This caused shares to stumble, even though overall guidance topped consensus. Investors are also hyper-focused on margins and spending, as tech firms report. Still, the tech tumbles can distract from what's been a better-than-expected flow of company results to date. Earnings season is tracking a healthy path so far, but there has been some deterioration and less concentration within the S &P 500 index, alongside more improvement among smaller-cap companies, said Lizanne Saunders, chief investment strategist, and Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research.

4:06The blended earnings growth rate is around 11 percent, including companies reporting already and estimates of those to come. Leading sectors among earnings to date include materials, tech, industrials, and utilities. Alphabet took center stage late Wednesday and became the latest mega cap to get punished in initial post-market trading. Shares fell 4 % despite the company topping analysts' earnings and revenue expectations. Investors appeared skittish about the company's forecast for significantly more spending, with capital expenditures to be between$175 to$185 billion for 2026. Looking ahead to Amazon after the close, it's important to monitor whether the company remains committed to its aggressive AI infrastructure spending.

4:57That said, the spending must accompany signs of progress integrating AI and monetizing it as meta-platforms appeared to in its recent earnings. With Amazon, cloud growth might be under scrutiny after Microsoft's cloud business results slightly disappointed last week. Analysts expect Amazon earnings per share of$1.97 on revenue of$211.3 billion. That would translate to year-over-year gains of 6 % and 12.5%, respectively. One thing that might be a tough bar for Amazon is to match or exceed the rapid pace of Amazon Web Services growth it posted in the third quarter of 20%. That was the most since 2022.

5:43At the time, Amazon said it continued to see strong demand in AI and core infrastructure, and that it was focusing on accelerating capacity. Pulling back for a broader earnings view, the earnings beat rate for the S &P 500 for the fourth quarter of 2025 has slipped to 76.5%, down from 83.1 % in the third quarter. Even sharper has been the drop in the revenue beat rate from 77.8 % to 66.3%. These levels are still fairly high relative to history, but a more material rolling over would likely be a warning sign for the market, Gordon said. Weakness in both top and bottom line beat rates has been consistent with corrections and at times bear markets, most recently in 2022.

6:35Turning back to market action on Wednesday, the softness in tech continued haunting major indexes, especially the Nasdaq. The Dow Jones Industrial Average managed to finish green, but the broader market kept heading lower. The S &P 500 Index spent time Wednesday below its 50-day moving average of 6 ,877 and managed to close just above that. The second day this week, it flirted with the 50-day before clawing back. It hasn't finished beneath that key support level since January 20th, and before that, December 17th. Focusing on the S &P 500, however, means one might miss general strength underneath.

7:16The S &P 500 Equal Weight Index, which weighs all components the same and not by market capitalization, performed well Wednesday with gains of nearly 1%. Investors might want to keep an eye on this index rather than the S &P 500 so long as tech remains under a rain cloud. The weak tech pattern can distort broader market action. Furthermore, 7 of 11 S &P 500 sectors ended Wednesday in the green. Three of the four sectors that fell yesterday included all the magnificent seven names. And despite the recent S &P 500 retreat, the index is less than 2 % below recent all-time highs. Energy, materials and real estate led the sector scorecard Wednesday, with energy fueled by growing tension between Iran and the U.S.

8:07The rotation trade continues, which is helping mask the weakness in tech at the index level, and investors appear to be reallocating away from tech towards AI infrastructure, said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research. This includes heavy machinery firms with Caterpillar and Deere at all-time highs, chips, memory, power, and materials. Transport's hit all-time highs as well, which speaks to the rotation trade. In Individual Trading Wednesday, advanced microdevices dropped more than 16 percent despite earnings and guidance exceeding expectations.

8:50Weakness could be linked to profit-taking after AMD's parabolic rally since last April. Eli Lilly jumped more than 10 percent after earnings per share easily surpassed the average Wall Street expectation and the pharma firm guided for fiscal 2026 earnings per share and revenue above analysts' consensus. In the fourth quarter, revenue for Lilly's anti-diabetic drug Munjaro increased 110 % to$7.4 billion. Weight loss drug ZepBound saw sales rise 122 % from the same quarter a year earlier. Supermicrocomputer enjoyed 14 % gains after exceeding analysts' earnings and revenue consensus and issuing better-than-expected guidance.

9:37Shares are off sharply from last year's peaks after the company reported weak first-quarter earnings and issued a mixed outlook last time out, Barron's noted. NVIDIA slipped almost 3 % to six-week lows just above$175, down from peaks above$190 last week as shares got hit by AMD weakness and general shakiness in the AI space as investors continue to rotate into cyclical stocks and away from tech. Stocks like Walmart and PepsiCo have easily outpaced NVIDIA and other AI names this week. News was thin, but Bloomberg reported NVIDIA might invest$20 billion in open AI. With NVIDIA and AMD down so sharply, along with Micron and Broadcom, the PHLX Semiconductor Index had its worst day in a while, down more than 5%.

10:35Palantir shares turned tail Wednesday after Tuesday's earnings-related rally, falling nearly 12 % amid general tech sector weakness. As a whole, tech stocks are down about 4 % so far this year. And Uber skidded 5 % as earnings per share for the quarter came in under analysts' consensus. Revenue did rise 19 % year-over-year and gross bookings climbed 22%. Guidance is for 17 % to 21 % year-over-year gross bookings growth in the first quarter. Revenue got boosted by Uber's delivery business last quarter. The Dow Jones Industrial Average added 260.31 points Wednesday, or 0.53%, to 49 ,501.30. The S &P 500 Index dropped 35.09 points, or 0.51%, to 6 ,882.72.

11:35and the NASDAQ Composite gave back 350.60 points or 1.51 % to 22 ,904.58. 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.

12:15For important disclosures, see the show notes and schwab.com slash market update podcast.