After Sell Off, Investors Await Keystone Jobs Data
08:36 Share

Welcome 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 Colette O'Claire, and here is Schwab's early look at the markets for Friday, March 7th.

Today begins with all eyes focused on the 8.30 a.m. ET February non-farm payrolls report, which could give the Federal Reserve and investors new clarity amid emerging economic concerns. Tariff-related selling emerged again on Wall Street yesterday, despite pledges by the Trump administration to pull back some of the trading barriers imposed on goods from Mexico.

Tech stocks drove losses once again Thursday after Marvell's guidance disappointed investors and the broader market closed at four-month lows. Analysts expect today's report to show 159,000 jobs added, with unemployment steady at 4%. Job cuts associated with government layoffs aren't likely to show up.

Some economists have issued lowball estimates for jobs growth of under 100,000. Any major shortfall on jobs growth or uptick in unemployment might make investors even more nervous about the state of the economy, possibly weighing further on stocks and treasury yields.

Some relief arrived from the drumbeat of soft data earlier this week as ISM services data came in better than expected and initial weekly jobless claims yesterday fell to 221,000 from 242,000 the prior week. Continuing claims, however, which track how difficult it is to find a job once an employee is laid off, jumped to a nearly three-year high near 1.9 million.

Challenger job cuts data Thursday reinforced economic growth fears as February layoffs soared to 172,000, up from under 50,000 in January and the highest for February since 2009. This partly reflects cuts by the Department of Government Efficiency, according to the report.

Wednesday's February ADP employment change of 77,000 was well below the 143,000 briefing.com consensus, but those private sector numbers don't often correlate with the official government reading. And the Atlanta Fed's GDP Now meter stayed underwater for first quarter gross domestic product, or GDP, at minus 2.4 percent, up just nominally from minus 2.8 percent earlier this week.

President Trump said on Thursday that he would offer a one-month exemption from tariffs for imports from Mexico that trade under the rules of U.S.-Mexico-Canada agreement, the trade pact he signed in his first term. According to media reports, Mexican products have an exemption until April 2nd.

Investors might feel like they've bitten off all they could chew this week after the jobs data, but they likely can't relax for the weekend until hearing from Fed Chairman Jerome Powell. He's scheduled to make a speech on the economic outlook at 12.30 p.m. ET today.

The economic outlook seems to be improving overseas as data continues to surpass expectations in Europe and analysts raise profit estimates for European companies. Also, China pledged a 5% GDP target for the third year in a row, though that was driven by a sizable boost to the deficit.

Going into next week, Washington, D.C. becomes a focus point as legislators work to avoid a possible government shutdown. Funding for government operations expires a week from today. House Speaker Mike Johnson said that he would push for a clean, continuing resolution that simply extends government funding for the remainder of the fiscal year through September 30, 2025, said Michael Townsend, Managing Director, Legislative and Regulatory Affairs at Schwab.

But with a narrow 218 to 214 margin in the house, passing such an extension is likely to be tricky.

Rate cuts later this year still seem likely as the Fed Fund's futures market is now pricing in three cuts by year-end, but the Fed will probably be on hold the next few meetings. The CME FedWatch tool puts odds of another rate pause at around 90% for the Fed's meeting later this month, but projects roughly a 50/50 chance of a rate cut at the early May Fed meeting.

At least one cut by June is an 85% possibility, according to Futures Trading.

From a technical perspective, there are signs of the market approaching oversold conditions, said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. All the major indexes dropped to their 200-day moving averages, and the SIBO volatility index climbed above 25. It had been below 15 at its 2025 lows.

Also, the SPX Relative Strength Index, a momentum indicator, dropped below 34 yesterday, with 30 historically seen as oversold. But markets are sensitive to tariff headlines and soft economic data, so it's probably too early to call a near-term bottom, Schwab's Peterson said.

From a sector standpoint, Thursday was a sea of red. Only the S&P energy sector managed to post any gains by late in the session, as Infotech and Consumer Discretionary fell near the very bottom of the scorecard. Those are two of the worst sector performers the last month, with Consumer Discretionary down double digits on pressure mainly from Amazon and Tesla.

Weakness from NVIDIA, Broadcom, and other chip stocks crushed Infotech since early February, and they fell again Thursday on pressure from semiconductor firm Marvell. Shares of Marvell plunged 19 percent, despite the company topping analysts' earnings expectations, apparently because investors wanted even better guidance than Marvell delivered.

That echoed NVIDIA's earnings beat and market reaction last week when investors picked apart the outlook due to a small projected margin drop. High valuations often make investors picky about financials. Crude oil rebounded slightly Thursday from multi-year lows posted Wednesday below $66 per barrel. Still, worries that U.S. demand might slide in a slumping economy kept crude near the lowest level since mid-2023.

Falling crude and Treasury yields reflect slowdown worries, but ultimately could provide an economic boost if they stay down. Homebuilder stocks were one of the few bright spots on Wall Street Thursday, helped by this week's sharp rise in the MBA Mortgage Applications Index. Home Depot and Lowe's both outperformed the SPX today as well. The 10-year Treasury note yield managed a slight rise to just below 4.3 percent yesterday amid hopes for tariff relief.

The SPX fell 104.11 points Thursday, or 1.78%, to 5,738.52. The Dow Jones Industrial Average dropped 427.51 points, or 0.99%, to 42,579.08, and 0.001%.

The Nasdaq Composite lost 483.48 points, or 2.61%, to 18,069.26. 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. And if you like what you've heard, please consider leaving us a rating or review. It really helps new listeners find the show.

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