Payrolls Data Next As Investors Mull Apple, Amazon
09:47 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 Coletta Clare, and here is Schwab's early look at the markets for Friday, May 2nd. Investors digest earnings from Apple and Amazon while awaiting this morning's critical April non-farm payrolls report. The jobs data arrive as several recent numbers suggest slower economic growth.

For example, Thursday's initial weekly jobless claims jumped to 241,000, the highest in many weeks and well above the Briefing.com consensus of 225,000. Continuing jobless claims reached a new three-year high of 1.916 million. This suggests it's harder for those laid off to find new work.

The ISM manufacturing PMI for April was slightly better than expected at 48.7, but down from 49 in March and below the 50 level that marks the dividing line between contraction and expansion.

April layoffs fell to 105,441 from 275,240 in March, according to Thursday's Challenger Job Cuts report, but were the highest for that particular month since 2020 and up 63 percent from last April.

Wednesday's fourth quarter gross domestic product, or GDP, reports annualized slide, unnerved investors, and any sign of weakness in the jobs report could highlight concerns that the trade war is starting to bite the real economy.

The ADP jobs report and job openings data were also softer than expected this week, and the Atlanta Fed's GDP Now forecast for second quarter gross domestic product growth fell to 1.1 percent from the previous 2.4 percent.

Despite the soft data, the S&P 500 index enters today on an eight-session win streak that's brought it nearly back to levels it last saw a month ago on Tariff Liberation Day. Investors seem less worried about the data and more optimistic about possible progress on trade negotiations.

Today's payrolls report, due at 8.30 a.m. ET, is expected to show a pullback in job growth to around 130,000 from 228,000 in March, with unemployment staying at 4.2%. Wage growth is also worth watching, as any tension around tariffs might keep companies from handing out raises.

The Briefing.com consensus is for another 0.3% monthly gain in average hourly earnings, however. Also watch the average workweek, which was a steady 34.2 hours in March. Any pullback there would possibly indicate companies getting more production out of the workforces they have, making it more feasible to lay off employees if the economy slows or tariff-related problems develop in their supply chains.

If shipments of goods don't come to stores due to the trade war, fewer employees would be needed to drive trucks, stock shelves, or load railway cars, for instance. Energy man could fall too, hurting job and pay in the oil and gas sectors.

All this soft data had Treasury yields under pressure earlier this week, but yields climbed across the curve Thursday, perhaps in anticipation of $125 billion in Treasury auctions on tap next week for 3-year, 10-year, and 30-year maturities.

There's been some curve steepening lately as concerns grow about possible tariff-related inflation and heavy bond supplies, even as odds rise in the futures market for as many as three to four Fed rate cuts later this year. Higher rate cut odds would tend to weigh on yields of shorter-term treasuries more closely linked to near-term Fed policy. ♪

Before the data deluge, investors studied results out late yesterday from Apple and Amazon, following a strong showing Wednesday from Microsoft and Meta Platforms. Apple and Amazon reported after the close Thursday, and first reaction wasn't as positive for Amazon as it had been for its competitors the day before. Shares sank in initial post-market action.

Amazon did beat earnings and revenue consensus and delivered second quarter revenue guidance roughly in line with the fact-set average expectation range. But Amazon Web Services' growth of 16.9% year-over-year fell just short of Wall Street's thinking and was down sequentially from 19% in the fourth quarter.

By comparison, Microsoft's Azure cloud revenue rose 33% year-over-year, up sequentially from 31% the prior quarter. This suggests loss of share for Amazon in that important market and continues a string of slower growth in competitors. Amazon's ad revenue exceeded expectations, however.

Amazon expects second quarter net sales growth of between 7% and 11%, a wide range. Amazon said the outlook is subject to substantial uncertainty for many reasons, including tariffs. Revenue guidance didn't look bad, so the weakness in shares is likely tied to underwhelming AWS growth, said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research.

Investors might want to check Amazon's earnings call to see what executives said about the supply chain amid reports that stores are worried about product availability this holiday season if the trade war persists.

Apple, meanwhile, beat analysts' estimates on most major fronts, including revenue, earnings per share, and iPhone revenue. But shares backtracked initially in post-market trading because services, one of the key profit drivers there, came in shy of the market's expectations. Sales in China also dipped.

The earnings schedule lightens today as the weekend approaches. The largest firms reporting are ExxonMobil and Chevron. Data also gets quieter after nonfarm payrolls, but Monday features ISM services for April and earnings from Palantir, Ford, Clorox, and others. Next week is thin on major data, but does include a Federal Reserve meeting.

The Fed is in its quiet period, with no speakers ahead of next week's meeting. Futures trading reveals less than a 5% chance of a May rate cut after numerous Fed policymakers made clear they're not ready to adjust rates, with possible inflation from tariffs still unclear. Odds of a June rate cut have been slipping and fell to around 58% late Thursday, according to the CME FedWatch tool.

In trading yesterday, Infotech and Communication Services took their old positions back at the top of the sector chart thanks to gains from MegaCaps, Microsoft, and MetaPlatforms after their earnings the day before.

Other technology stocks climbed in the wake of those, too, carried along by hopes of strong cloud, chip, AI, and server demand. Consumer discretionary, industrials, and energy also rallied Thursday amid growing hopes for trade progress. These are cyclical sectors that tend to perform better in an improving economy.

From a technical angle, the S&P 500 index couldn't close a chart gap yesterday that extends to the April 2nd finish of just below 5,671. That was the price minutes before President Trump announced his tariff policies that afternoon, upending the market. But key resistance could be the 200-day moving average of 5,746.

The technicals have undergone some much-needed healing over the past couple weeks, said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research.

The Dow Jones Industrial Average rose 83.60 points Thursday, or 0.21%, to 40,752.96. The S&P 500 Index added 35.08 points, or 0.63%, to 5,604.14. And the Nasdaq Composite climbed 264.40 points,

or 1.52% to 17,710.74. 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. Join us for another update Monday.

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