After Starting Week Up, Market Awaits Auctions
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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 Keith Lansford, and here is Schwab's early look at the markets for Tuesday, January 7th.

This week is packed with U.S. government treasury auctions, including one today for 10-year notes and another for 30-year bonds. Demand is likely to help determine the path of yields, which in turn could have an impact on stocks when auction results emerge later this afternoon. Solid demand for treasury auctions late last month, however, didn't do much to slow the relentless climb in yields, but a three-year note auction yesterday saw relatively light buying interest.

Before those results, investors get their first look at this week's labor data lineup at 10 a.m. Eastern Time when the government releases its November Job Openings and Labor Turnover Survey, or JOLTS. Analysts expect the report to show job openings growth of 7.7 million, according to Trading Economics, about even with 7.69 million in October and still historically heavy.

Job openings are off sharply from post-pandemic highs above 10 million, but not back to pre-pandemic norms of 5 million to 6 million, indicating employers still might have to fight for workers. Higher demand for employees can cause pay to rise, potentially underpinning inflation.

A major miss in today's JOLTS reading might knock yields off their pedestal, but a larger-than-expected increase could support yields and perhaps raise estimates for Friday's December nonfarm payrolls report. For now, analysts expect Friday's report to show jobs growth last month of around 150,000, with unemployment at 4.3%. The ratings in November were 227,000 and 4.2%.

If the report comes in near estimates, it might reinforce ideas that the labor market is slowing, something that might cause concern at the Federal Reserve. Sticking with yields, hopes for U.S. economic strength accompanied by worries about possible inflation have sent long-term rates up more than 40 basis points over the last month, reflecting an increase in the term premium investors seek in return for holding onto longer-term debt.

The 10-year Treasury note yield initially dropped Monday but then resumed its upward march to 4.61%, close to a seven-month high. Expectations are for the Fed to cut by 50 basis points this year, but that may be limited because the economy continues to perform okay, the labor market remains resilient, and proposed policies may be inflationary, said Colin Martin, director of fixed income strategy at the Schwab Center for Financial Research.

Minutes from the last Federal Open Market Committee, or FOMC, meeting are due tomorrow afternoon and could help investors understand policymakers' thinking on the rate path. As of late Monday, futures trading put odds of a January rate pause at 91 percent, according to the CME FedWatch tool. That rating has been steady now for about a week, though the next Fed meeting is still many weeks away at the end of this month.

Chances for any cut at all in the first quarter, which has been close to 50% last week, fell to 45% Monday. Stock trading is shut Thursday to observe a national day of mourning for President Jimmy Carter, and bonds close early that day.

Technically, the S&P 500 bent on Monday but didn't break. Early exuberance pushed it above 6,000, a level it couldn't hold. However, it did remain above the 50-day moving average of near 5,945, which may be a support region. The Nasdaq 100 also held above key support near 21,000.

The S&P 500 held short of its 20-day moving average up near 5,987, which may represent a resistance point. The market's failure Monday to hold early gains above that level might be viewed as a negative heading into trading today. From a sector standpoint, semiconductor stocks helped Infotech to hefty gains Monday, even as many cyclical and defensive parts of the market lagged.

The major indexes surged to start the session and then steadily backed up, burdened by weakness in some major shares including Tesla, Salesforce, and Palantir. Staples, real estate, and utilities brought up the rear on Monday's sector field, perhaps a sign that investors are embracing risk-on sectors.

NVIDIA had a hot start to the new week, hitting a new record intraday high above $150, thanks in part to a strong fourth-quarter earnings report from Taiwan's Foxconn, which cited solid AI server demand. Foxconn also gave a positive outlook. NVIDIA's Jensen Huang spoke last night at the annual Consumer Electronics Show, and anticipation ahead of his speech also helped lift shares yesterday.

Sectors like materials and tech received a lift from a Washington Post report yesterday, saying the incoming Trump administration's proposed tariffs could target imports critical to national or economic security rather than across the board. This report, which Trump later denied, also initially hurt the U.S. dollar, giving stocks a bit of a break from recent two-year highs in the greenback. Some of the stock market pressure later Monday might have reflected Trump's denial.

The S&P 500 index added 32.91 points or 0.55% to 5,975.38. The Dow Jones Industrial Average lost 25.57 points or 0.06% to 42,706.56. And the Nasdaq Composite gained 243.30 points or 1.24% to 19,864.98.

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