Inflation Data, Bond Auctions, Apple Meeting Ahead
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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 Colette O'Clare, and here is Schwab's early look at the markets for Monday, June 9th.

With key jobs data in the rearview mirror, investors will monitor inflation readings and treasury auctions this week. Budget negotiations on Capitol Hill are another point of focus, along with Apple's Worldwide Developers Conference. Trade remains top of mind, too, as U.S. and Chinese representatives meet in London.

Other than Apple, there's not a ton of corporate news on tap, though Oracle earnings Wednesday afternoon stand out. The market enters the week still buzzing over last Friday's U.S. May nonfarm payrolls report, which showed jobs growth of 139,000 and unemployment unchanged at 4.2%. That was close to expectations on Wall Street.

Another relatively solid jobs report, despite fears of a lingering slowdown, said Colin Martin, director of fixed income strategy at the Schwab Center for Financial Research.

Non-farm payroll gains have held in a very tight range lately, and while the monthly growth has slowed, it's still positive. While the payroll gains have slowed, that's natural given how strong they were in 2022. The weakness that many on Wall Street have been expecting still hasn't really shown up in the data yet.

Strength in the health care and leisure sectors provided many of the new positions, even as sectors associated with trade and manufacturing saw little growth in what may reflect tariff concerns.

On a less rosy note, however, job gains in March and April both got revised down, removing 95,000 positions that the government previously reported. This means growth over the last three months averaged 135,000, well below levels most of last year and possibly more evidence that the jobs engine is slowing slightly. That said, historically, 135,000 isn't far from average.

Treasury yields rose on the jobs news, with the Federal Reserve likely on hold for the time being. Giving pause, however, was that among the sectors experiencing an increase in jobs last month, education and health services, leisure and hospitality, and local government, excluding energy, contributed about 80%.

Investors typically like to see better performance in areas like trade, construction and manufacturing that often indicate accelerating economic growth and tend to pay more, which can buttress consumer spending. However, wages rose 0.4% in May, above the 0.3% consensus.

We believe the Fed will cut between one and two times this year, depending on how the labor market continues to develop, said Cooper Howard, director of fixed income strategy at the Schwab Center for Financial Research.

Futures trading as of late Friday worked in no chance of a June rate cut and less than 17% of one in July, according to the CME FedWatch tool. Odds are near 60% for September, down from around 75% before the jobs report. Focus returns to Treasuries this week with fresh government auctions and May inflation data. Recent auctions drew solid demand, helping ease yields and giving equities a boost.

Fresh government Treasury auctions are straight ahead, and yield gains after Friday's solid U.S. May jobs report means the government's costs might rise as investors reach for the higher payments. There's a 3-year note auction Tuesday, a 10-year note auction Wednesday, and a 30-year auction Thursday.

Recent auctions drew solid demand, which helped bring yields down from their late May highs. Yields had fallen earlier last week on some soft economic news, but the jobs report showed few cracks, signaling that the economy may remain in relatively decent shape. The jobs report also showed May hourly wages up 0.4%, which is higher than expected and could keep inflation sticky.

Speaking of which, investors get a look at the U.S. May Consumer Price Index, or CPI, Wednesday morning. CPI rose just 0.2% in April, and the Fed's favored Personal Consumption Expenditures, or PCE, price index rose 2.1% year-over-year in May. If inflation remains cool in CPI and Thursday's May Producer Price Index, or PPI, it might keep yields in check.

Apple's Worldwide Developers Conference starts today. Analysts expect more details about Apple's partnerships, AI expansion, possible new AirPod features and interface, Behrens reported, and Bloomberg said to look for the possible introduction of a new gaming app. Additionally, this week, consider watching developments in the budget debate on Capitol Hill. Fresh news could move the market, with investors closely focused on the possible deficit impact.

The key thing to watch over the next few weeks is how much the Senate changes the bill, said Mike Townsend, managing director of Schwab's Office of Legislative and Regulatory Affairs.

On Friday, the stock market went on a tear amid hopes of U.S. economic strength as job creation remained solid. Enthusiasm showed up in sectors making the biggest upward moves like energy, communication services, consumer discretionary and financials, many of which typically do better in an advancing economy.

Defensive sectors like utilities, real estate, and staples finished near the bottom. All 11 sectors traded higher, however, with leadership from some of the magnificent seven names like Alphabet, Tesla, and Meta Platforms. However, volume through midday was below average, Briefing.com reported, sometimes an indicator of lacking conviction.

Tesla rebounded Friday after falling sharply on Thursday as CEO Elon Musk feuded with President Trump. That dust-up could be a factor this week if it flares again, with potential ramifications not only for Tesla, but for companies that compete with Musk's SpaceX.

As long as the job market remains strong and the potential economic disruptions from trade and tariffs remain in check, it appears that the S&P 500 wants to test the all-time high of 6,144 at some point over the next month, said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research.

accompanying stocks higher were Treasury yields, as the 10-year note yield again climbed to 4.5%. This yield rally isn't necessarily negative for stocks. Friday's rise across the term structure is being driven by the better-than-expected jobs report, and investors are more comfortable if yields are rising because of improving longer-term growth expectations rather than concerns over deficits and fiscal sustainability, Peterson said.

Though stocks rose last week, market breadth was stable. The percentage of S&P 500 stocks trading above their 200-day moving average fell to 48.8% Friday from 50% a week earlier. In the Nasdaq Composite, it's now 34.7% versus 34.4% a week ago.

Market breadth attempts to capture individual stock participation within an overall index, which can help convey underlying strength or weakness of a move or trend. Meanwhile, the Relative Strength Index, or RSI, for the S&P 500 moved up to 66 last week, still shy of the nearly 70 level it touched in mid-May. Anything above 70 is typically considered overbought.

Technically, the S&P 500 index's close just a whisker above 6,000 may be constructive, though that was below the intraday highs. It was another three-month high and came after the index bumped its head against 6,000 and fell on Thursday, a technically weak move. Further closes above this level would likely be needed to confirm technical strength.

For those counting, it was the first close above 6,000 since February 21st. The Dow Jones Industrial Average climbed 443.13 points Friday, or 1.05%, to 42,762.87. The S&P 500 Index added 61.06 points, or 1.03%, to 6,000.36%,

And the Nasdaq Composite rose 231.50 points, or 1.20%, to 19,529.95. For the week, the Dow Jones Industrial Average rose 1.17%, the S&P 500 rose 1.5%, and the Nasdaq rose 2.18%. This has been the Schwab Market Update Podcast.

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