Jobs Week Rolls on as Market Awaits Trade News
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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's Schwab's early look at the markets for Wednesday, June 4th.

There's no break from jobs data this week, with ADP private sector jobs out this morning and layoffs data tomorrow. It all leads up to nonfarm payrolls Friday, expected to show May jobs growth of 130,000 down from April's 177,000.

Even with all the data uncertainty, major indexes began the week with solid gains that continued Tuesday to three-month highs amid semiconductor strength as NVIDIA and Broadcom led the way up. Tuesday's April job openings and labor turnover survey, or JOLTS, offered a mixed message. Hiring came in above expectations at $7.39 million, up from $7.2 million in March. Analysts had expected something in line with the March reading.

There was a big upside surprise in April job openings, said Kevin Gordon, director and senior investment strategist at Schwab. Quits were down, layoffs were up, and hires were up. Layoffs rose to 1.786 million from 1.59 million the prior month, the highest since October. The data could suggest companies are getting more comfortable cutting jobs, even though they struggled to find workers in the post-pandemic period.

Still, layoffs aren't showing up in weekly jobless claims data so far. The lower quits rate suggests workers are less willing to leave old jobs, either worried about finding new work or not seeing new opportunities. Of course, it's only one month, so it's hard to draw firm conclusions.

In other data Tuesday, April factory orders fell 3.7% from a month earlier and orders excluding transportation fell 0.5%. While that pointed the other direction compared with strong job openings, the Atlanta Fed's fresh GDP Now estimate for second quarter gross domestic product growth keeps climbing up to 4.6% yesterday from 3.8% at the end of May.

The Fed's Beige Book, offering insights into regional economic activity around the U.S., comes out later today in a release that's gained significance since the start of the trade war. It might be interesting to see what the report says about activity in West Coast areas where port traffic comprises an important part of the economy.

The Fed has made clear they are on hold until the data suggests otherwise, said Cooper Howard, director of fixed income strategy at the Schwab Center for Financial Research. We expect their next move to be a cut in rates, and it will depend on how the labor market develops. Friday's nonfarm payrolls will be the big event.

As of late Tuesday, futures trading built in a 4% chance of a June rate cut by the Fed and 24% for July, according to the CME FedWatch tool. Fed speakers yesterday sounded cautious and suggested rates may not move anytime soon. Treasury trading had a light day Tuesday with little change across the curve. The 10-year yield ended unchanged at 4.46%, and the 30-year yield stayed just below 5%.

Stay tuned early tomorrow for initial weekly jobless claims after the previous week spiked to 240,000, slightly above the near-term range of 220,000 to 230,000. One week was a novelty, but two weeks in a row of higher claims might get more attention as investors fret about possible hitches in the labor market. In other monetary policy news, the Bank of Canada meets today and is expected to keep rates paused, said Jeffrey Kleintop, chief global investment strategist at Schwab.

A trade-related deadline looms tomorrow when the U.S. Court of International Trade, which ruled the tariffs unconstitutional last week, must respond to the Trump administration's appeal that allowed tariffs to stay on the books. Also, the White House keeps hinting that President Trump could soon talk to President Xi about trade relations between the U.S. and China.

Both sides have accused each other of violating their interim agreement that postponed the August tariffs 90 days last month, and the administration further postponed some product tariffs on China to August 31, Bloomberg reported. Economic concerns accelerated Tuesday following a surprisingly sharp drop in China's May manufacturing activity amid export weakness. Additionally, an international organization cut its global growth forecast, citing tariffs and trade policies.

The Organization for Economic Cooperation and Development, or OECD, now sees 2025 growth at 2.9%, down from 3.1%, and pegs U.S. growth at 1.6%, a sharp decline from the previous 2.2%.

This is a quieter week for earnings, but one highlight is semiconductor giant Broadcom on Thursday. Shares of the company hit one-year highs after AI chip giant NVIDIA reported strong demand last week in its quarterly report. Cybersecurity firm CrowdStrike reported late Tuesday, keeping the focus on tech, but several small retailers had better-than-expected results early Tuesday.

Their numbers indicated no slowdown in consumer spending, matching what many large retailers said this quarter. The real test could come later this year because some buying likely got pulled forward as consumers fretted over possible tariff-related inflation.

Speaking of consumers, investors got a read on May automobile sales yesterday. Ford reported a 16.3% U.S. sales increase in total vehicle sales from a year earlier, led by a 25% jump in SUV sales. An employee pricing promotion aided sales at Ford, CNBC said, which helped get cars off the lot but can weigh on margins.

Sales at Hyundai also grew in May, with Reuters reporting that shoppers tried to get ahead of tariffs. Technically, Wall Street appears to remain in wait-and-see mode, consolidating near-recent highs ahead of trade and U.S. budget-related developments. The Momentum Indicating Relative Strength Index, or RSI, is now at 65 for the S&P 500 index, down from 71 when the index traded at current levels back in mid-May.

That's a divergence that could suggest less bullish force and conviction. The market might need a major trade deal to take the next leg up and test all-time highs posted in February, and there's about a month until the 90-day extension of tariffs expires. Volatility might strengthen as that gets closer.

Meanwhile, market breadth, a useful indicator of sentiment, remains relatively solid, with 70% of S&P 500 stocks trading above their 50-day moving averages. Sectors with the best breadth include infotech, industrials, and communication services. The S&P 500 index closed at a three-month high yesterday, eclipsing the mid-May closing high by seven points, but still making no serious test of 6,000.

It has been above that since an intraday move on February 26th. Infotech was among the leading sectors yesterday, and energy, materials, and consumer discretionary stocks also made the top five. The rally was broad, with eight of 11 sectors up. Solid retail earnings helped discretionary, while materials possibly got a lift from President Trump's decision to raise steel and aluminum tariffs.

Infotech got a boost from the chip names, with participants awaiting earnings from Broadcom on Thursday and enthused by NVIDIA's results last week. Energy rose along with oil as a U.S.-Iran nuclear deal looks less likely, Reuters reported. Small caps had a strong Tuesday as well.

The Dow Jones Industrial Average rose 214.16 points Tuesday, or 0.51%, to 42,519.64. The S&P 500 Index climbed 34.43 points, or 0.58%, to 5,970.37, and the Nasdaq Composite added 156.34 points, or 0.81%, to 19,398.96.

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