After Worst Week of Year, Market Awaits Price Data
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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 Monday, March 10th.

Licking their wounds after the worst week of the year, investors await key inflation data Wednesday and Thursday. The Consumer Price Index, or CPI, and Producer Price Index, or PPI, could help set the tone, though economic growth concerns seem to have replaced inflation as the market's prime concern.

The earnings calendar flags quite appreciably in coming days, but Oracle's results are due this afternoon and will be the latest read on a slumping tech sector after Broadcom reported solid results late last week.

It was steady as she goes for U.S. jobs in February, with employment rising 151,000 to almost match the average estimate of 159,000. Gains picked up from 125,000 in January, and unemployment climbed a notch to 4.1% from 4%.

This was a boring report, but that's a good thing, said Colin Martin, director of fixed income strategy at the Schwab Center for Financial Research. There were very few surprises. This report shouldn't change the Fed's thinking over the next few meetings, as it would need to see more weakness to consider a near-term rate cut.

There were a couple of interesting nuggets in the jobs report. Unemployment rose slightly, and not for good reasons, given that the decline in the number of employed individuals was larger than the decline in the labor force. Federal government payrolls fell by 10,000.

President Trump said on Thursday that he would offer a one-month exemption from tariffs for imports from Mexico and Canada that trade under the rules of the U.S.-Mexico-Canada agreement, the trade pact he signed back in his first term. The exemption lasts until April 2nd. This exemption covers about 50% of Mexican imports and about 38% of Canadian ones, CNBC reported.

The tariff delay, benign remarks from Federal Reserve Chairman Jerome Powell, had a relatively undramatic jobs report appeared to give slumping stocks a boost Friday, but it was still the worst week since September. Volatility fell but remained elevated, suggesting more uncertainty ahead.

A potential growth slowdown is still top of mind for investors, and the data will continue to be under higher scrutiny, especially given the still elevated valuation level in stocks, said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. Powell said in a speech Friday that uncertain trade policy is making the Fed hesitant to adjust policy, Bloomberg reported. Despite elevated levels of uncertainty, the U.S. economy continues to be in a good place, Powell said.

We do not need to be in a hurry and are well positioned to wait for greater clarity. Still, he added, the U.S. economy is in a good place. His remarks appeared to reassure investors as stocks rose in the immediate aftermath.

Following the jobs report and Powell's remarks, the CME FedWatch tool put 97% odds on a rate pause at the Fed's meeting next week. Odds of a May rate cut fell to 35% from close to 50%, but the market still builds in an 82% chance of at least one 25 basis point cut by June. The Fed soon enters its quiet period ahead of the meeting, so Fed speakers are away from the microphones most of this week.

However, Treasury auctions the next few days could help set the tone for yields, with a three-year Treasury auction tomorrow and a 10-year auction on Wednesday. If these see enthusiastic buying, it could mean investors are less worried about inflation and more concerned about economic growth. Washington, D.C. becomes a focus point this week as legislators work to avoid a possible government shutdown. Funding for government operations expires Friday, March 14th.

The House was expecting a vote tomorrow, but that's subject to change. The Republicans have only a narrow margin in the House. From a technical perspective, Friday's midday bullish reversal moved the S&P 500 index back above its 200-day simple moving average, which could help stabilize investor confidence near term.

While I don't think that we are done with volatility for the month of March, Friday's price action appears to be an encouraging development, if only from a near-term trading perspective, Peterson said. Sector-wise, almost everything was green Friday as energy and utilities led the way. Utilities possibly got a lift from recent lower treasury yields and a surging chip sector Friday after Broadcom's results reinforced ideas the strong AI demand might boost energy needs.

Crude oil seemed to find support at the nearly two-year midweek low below $66 per barrel, and jobs growth that didn't fall apart in February might have helped energy stocks as well.

Financial shares continued to struggle despite JPMorgan Chase and Bank of America getting upgraded by Robert W. Baird. Financials are a cyclical sector that tend to perform better in a growing economy, so growth fears weighed heavily on banks and other financial stocks last week.

Market breadth eased last week to 52-week lows on the S&P 500, the Nasdaq Composite, and the Russell 2000. Less than 50% of S&P 500 stocks now trade above their respective 200-day moving averages. Typically, broader participation suggests healthy investor sentiment and supportive technicals.

The 10-year Treasury note yield added three basis points Friday to 4.32%, finishing the week up nine basis points after hitting the lowest levels since late last year, and now holds a 32-point premium to the two-year yield, which also represents a nine-basis point weekly gain and could reflect hopes for economic growth.

The S&P 500 index rose 31.68 points Friday or 0.55% to 5,770.20 and fell 3.1% for the week.

The Dow Jones Industrial Average climbed 222.64 points or 0.52% to 42,801.72 but was down 2.37% on the week. And the Nasdaq Composite added 126.97 points or 0.70% to 18,196.22 down 3.45% for the week. This has been the Schwab Market Update Podcast.

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