After Broadcom's Beat, Investors Await Jobs Data

0:00Welcome to the Schwab Market Update Podcast, where we prepare you for each trading day with a recap of recent news and look at what's ahead. I'm Keith Lansford, and here is Schwab's early look at the markets for Thursday, September 3rd. The countdown is on for Friday's critical August non-farm payrolls report, but first investors examined earnings from Broadcom while awaiting an important hint on inflation. Broadcom, the AI Chip Giant, reported late Wednesday and failed to initially impress the market. Earnings per share of $3.32 topped the consensus of $3.22 and revenue of $29.59 billion dollars also surpassed expectations. Guidance also was higher than expected. However, investors might have been expecting even better and shares tumbled 6% in early

1:01post-market action. Today brings weekly initial jobless claims before the open with analysts expecting a relatively light 205,000 according to briefing.com. Later this morning, Wall Street gets a look at the August ISM Services Index with a headline expected to show 54.1% equal to July, anything above 50 signals expansion. Deeper in the report, the price's paid category might provide an inflation clue. This index hits 70.3 in July above 60% for the 20th month in row. Any increase is likely to be noted by the Federal Reserve as it prepares for its mid-month meeting. More importantly, Friday's 8.30am Eastern Time Non-Farm Payrolls report is one of two final milestones scheduled between now and September 16th when the Fed makes its decision. Analysts expect August jobs growth of around 45,000, an improvement from the 23,000 decline

2:04in July that surprised Wall Street. July's report also included downward revisions of more than 100,000 combined for the May and June data. Other revisions remain an important part of Friday's report to check. Unemployment is expected to get a slight bump to 4.2% in August from 4.1% in July. A soft jobs report might temporarily reduce odds of a September Fed rate hike, but next week's August consumer price index or CPI represents another hill for the Fed to climb. The 80P August employment report yesterday came in at 38,000 below the consensus of 46,000, however, this report doesn't typically correlate with the official government number. The Fed's Beigewook showed a small bump in U.S. economic activity over the last two months to release term the economic outlook positive that noted a rise in price sensitivity. Manufacturing labor demand looked solid.

3:06John Williams, New York Fed President and an influential member of the Federal Open Market Committee, told CNBC Wednesday that higher yields reflect strength in the economy and there is strong investment demand. He added that inflation expectations, a key metric the Fed uses to monitor the chance of prices getting out of hand, remain well anchored and the labor market is solid. The comments by Williams, along with remarks by Treasury Secretary Scott Bessent this week downplaying yield concerns appeared to calm the Treasury market a bit. Chances of a rate hike at the Fed's September meeting reached 64% late Wednesday according to the CME Fed Watch tool up from 37% a week ago. Fresh skirmishes in the Gulf kept crude and yields near recent highs at midweek. U.S. crude oil stockpiles fell 4.5 million barrels last week but remain 1% above the five-year average.

4:06The Energy Information Administration said Wednesday. Gasoline use over the last four weeks averaged more than 100,000 barrels a day below year-a-go levels so high prices may be cooling demand. Monday's Labor Day holiday represents the traditional end of summer driving season in the U.S. and initiates a second period when oil stocks tend to get rebuilt. The government's strategic stockpiles are down to their lowest levels in more than 40 years providing little cushion. In corporate news, today brings results from Athletica Parallel Company Lululemon. Shares of Lululemon recently were near $118 down from peaks above $500 in late 2023. Most time out, the company cut its annual outlook. It blamed negative media reports and disappointing product launches, CNBC reported then. Well turned to Wednesday's market action in a moment, but if you'd like to receive market

5:11news and insights from Schwab's experts every morning, sign up for the Schwab Market Update newsletter at Schwab.com-slash-dailyupdate. Major indexes and into three sessions skid Wednesday in parts because Treasury yields cooled slightly, though earlier the 10-year note yield reached its highest level since November of 2023 at above 4.8%. Yields eased even though crude remained hot, finishing up 1% at above $90 per barrel for WTI futures and near five-week highs. From a sector perspective, things looked healthier Wednesday as 10 of 11 SMP 500 sectors rose, led by materials. Rising metals prices and a leap in steel shares helped that sector, while slumping communication services got a lift as alphabet arrested its slide and met a platform gain more than 2%. InfoTech got a lift from Dell's earnings.

6:14Technically, there was relief that recent selling didn't send the SMP 500 index below long-term support near 7,620, or beneath that at the 50-day moving average. The SMP 500 appears somewhat range-bound between 7,607,800 and may not have much traction either way before the jobs and inflation data barring news developments. Checking individual moveers Wednesday, Dell climbed 16% as earnings in guidance topped consensus expectations. Several Wall Street firms raised their price targets for shares. Snowflake surged 17% initially in post-market action Wednesday after its quarter beat analysts' expectations and the cloud firm provided guidance that impressed. Snowflake projected fiscal third quarter revenue growth at 37% to 38% annually. Palo Alto Networks turned around early sharp gains to fall 9%, despite earnings in

7:15guidance late Tuesday topping analyst expectations. Shares had rallied sharply into earnings, possibly leading to, by the rumors, sell the fact trading. Other software stocks also saw selling Wednesday. Palantir, CrowdStrike, ServiceNow, and Adobe were all in the red. Financials, especially banks, posted gains Wednesday helped by economic data and rising yields. Cleveland Cliff, San Newcore, added 7% and 4% respectively, both benefiting from the recent breakdown in trade talks with Canada. This might raise demand for domestic steel. MongoDB plunged 14% despite results that beat consensus views. Several Wall Street firms raised their price targets on shares of the company, citing continued strength in the quarter. But others lowered their targets as apparently the quarter's business mix disappointed some. Hula Packard Enterprise rose to 0.6%, climbing in conjunction with a strong quarter from

8:18its competitor, Dow, and ahead of its own earnings. GitLab sawed almost 12% following a better than expected earnings report from the software firm that included guidance for 15% to 16% annual revenue growth in the current quarter. In video, climb 3% as Bloomberg reported the company is in talks to acquire AI firm hugging face for $14 billion. And Uber rose almost 2% as the company plans to cut about 10% of its workforce, according to Bloomberg. So Dow Jones industrial average added 295.07 points or 0.56% Wednesday to 53,061.95. The S&P 500 index climbed 35.13 points or 0.46% to 7666.60, and the NASDAQ composite gained 118.05 points or 0.45% to 262.17.83.

9:24This has been the Schwab Market Update podcast. To stay informed, visit www.swab.com slash Market Update or follow us for free in your favorite podcasting app. And if you like what you've heard, please consider leaving us a rating or a review. It really helps new listeners find the show. Join us for another update tomorrow. For important dislosures, see the show notes and Schwab.com slash Market Update podcast.