All Eyes on Jobs Report After Thursday's Rebound

0:00Welcome 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'Clair and here is Schwab's early look at the markets for Friday, September 4. The days non-farm payrolls report, due at 8.30 a.m. Eastern Time, stands head and shoulders above any other developments, even after Thursday's impressive rebound that positioned major indexes for another positive week. The report comes a day after yields retreated slightly on Dovish Federal Reserve remarks and with assistance from Japan, where the Yen rose versus the dollar and helped cool global inflation concerns. Members growing believe that the Bank of Japan or B.O.J. will raise rates at its meeting later this month, partially addressing inflation there.

1:00At one point, the Tenure Treasury note yield fell to 4.75% from above 4.8% earlier this week, but it clawed back to 4.77% by the end of the day. Shorter term yields, more exposed to Fed policy forged steeper declines. Crude oil remains strong, however, above $91 per barrel late Thursday, as progress toward a Middle East solution lagged. Still, the Trump administration said oil traffic through the Strait of Hormuz has improved. The round of tit-for-tat skirmishes earlier in the week died down a bit. Analysts expect August payrolls growth of 45,000, following a decline of 23,000 in July. An employment is seen ticking up to 4.2% from 4.1% still low. Wage growth will also be eyed after a very small July increase. Jobs data heading into the report, including job openings, job cuts, private sector employment,

2:05and weekly initial jobless claims, didn't send clear signals, none showed dramatic changes, and all were snapshots for that matter. Although is today's report, by potential revisions to pass numbers potentially give it more heft, the July report slashed May and June jobs growth by more than 100,000. A repeat of that for June and July in today's report, though not necessarily in store, would likely give the Fed pause before its rate decision September 16. On the other hand, if jobs growth returns to more normal levels or exceeds expectations, it might be another sign that the Fed can raise rates without hurting the economy too much. Next week's inflation data also looms large. Digging deeper into the jobs report, keep in mind that weakness in leisure and hospitality jobs back in July might have reflected one-time developments related to jobs that ended after the World Cup. Government job cuts also played into a weaker reading.

3:08If you take those out, private payroll growth was still positive, and it was actually relatively steady. Set Kevin Gordon, head of macroresearch and strategy at the Schwab Center for Financial Research or Skiffer. Fed Governor Christopher Waller sounded slightly dovish in a Reuters interview Thursday, saying he leans toward keeping rates unchanged at the current 3.5% to 3.75%. A shift away from recent inflation progress he added could push him more toward a hike. As of late Thursday, chances of a hike stood at almost exactly 50%, according to the CME Fed Watch tool, down from 63% Wednesday. Investors might want to give that tool another look after today's data to see if it moved. Waller's remarks followed more Huckish views expressed last week by Fed Chairman Kevin Warsh in his Jackson Hole speech last week. After jobs data, the final arbiter might be the August consumer price index due a week

4:10from today. If inflation shows meaningful signs of improvement, the committee may hold, said Colin Martin, head of fixed income research and strategy at Schiffer. But the bar for a hike seems low, given Warsh's comments last week, any upside surprises will likely shift the needle for those who have favored a hold to instead favor a hike. In data Thursday, initial weekly jobless claims of 206,000 held no surprises and second-quarter productivity of 1.4% was unchanged from the government's first estimate. Labor costs fell slightly, which may also have helped the Treasury market. The ISM Services PMI for August improved to 55.4% from 54.1% in July above consensus. Any figure 50% or higher signals expansion. However, the report's prices paid metric of 72.6% hit a four-year high mark, thanks mostly

5:11to rising energy costs. In corporate news, a peril-maker Lululemon reported after the close yesterday and shares quickly retreated 16% in post-market trading. Earnings per share beat estimates, but the company missed analyst's revenue consensus and lowered guidance. All of its guidance missed consensus. Before that, snowflake solid earnings and guidance reinforced ideas that AI is helping not hindering software. The sector turned positive for the year after a dismal few months to begin 2026. Major indexes had their best day in a month, up more than 1%, almost across the board, amid falling yields and the software rally, though in video rows, most of the chip sectors sat out the gains hurt in part by broadcom's earnings. Nine of 11 S&P 500 sectors rose, accelerating the turnaround in market-bred that began earlier this week after a dramatic narrowing last week in Monday.

6:15The materials and energy lagged with materials losing ground despite gold's 2% rise on the weaker dollar. Growth sectors like consumer discretionary, communication services, and infotech were three of the four best performers Thursday, all up 1% or more. Financials placed third helped in part by the slightly wider yield curve. Checking individual moveers Thursday, broadcom dropped 2.5%. Earnings per share of $3.32 topped consensus of $3.22, and revenue of $29.59 billion also surpassed expectations, but participants apparently hoped for an even more enthusiastic outlook. Snowflake surged 17% after its quarter beat analyst expectations and the cloud firms guidance impressed. Snowflake projected fiscal third quarter revenue growth at 37% to 38% annually. Analysts saw the report as evidence that AI-driven acceleration continues.

7:19Other software stocks rode up on Snowflake's co-tails. Beginners included Palantir, Up 8%, Service Now, Up Almost 7% and CrowdStrike, up more than 4%. SpaceX climbed 7%, helped by recent strength in the AI space that potentially could lift demand for its infrastructure. It's up about 40% since the start of August, after a choppy start following its initial public offering or IPO earlier this summer. Tyson Foods plunged more than 7%, after cutting its outlook amid pressure from the cattle shortage, Reuters reported. Zscaler, a cloud security firm, climbed 3.3% ahead of its earnings report, and on news of an expanded partnership with CrowdStrike. Crypto-related stocks, Circle Internet Group and Strategy, climbed double digits, lifted by Bitcoin's 5% rise to nearly four month highs. Technically, Bitcoin punched through its 200-day moving average two weeks ago, lending a

8:22strength. Meta-platforms climbed 3.5%, a move CNBC attributed to the rollout of Meta's AI model Muse Spark 1.3. Tesla continued to surge, closing 6% higher, as investors anticipated yesterday's cybercabs event. CN aplunged 11% despite strong earnings and guidance. Shares were up 51% year-to-date heading into earnings, so this may be a buy-the-rumor self-effect situation. Reuters company shares cooled about 8%, after the food and beverage firms guidance disappointed for fiscal 2027, CNBC reported. Altrogenics pharmaceutical plunged 44%, and disappointing phase 3 trial results for a drug to treat Angelman syndrome, a rare genetic neurodevelopmental disorder, CNBC reported.

9:22Nvidia climbed 2% after confirming it plans to buy privately-held, open AI development platform hugging-face for just under $13 billion. The deal gives Nvidia platform used to freely share from millions of different AI models Barons reported, extending its role beyond hardware. The Dow Jones industrial average gained 624.16 points or 1.18% Thursday to 53,686.11. The S&P 500 index added 81.11 points or 1.06% to 7,747.71. The NASDAQ composite leapt 366.23 points or 1.40% to 26,584.06. This has been the Schwab Market Update podcast.

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