After Solid Rebound, Stocks Face Crucial Jobs Data

**Collette Eau Claire** (0:05)
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 Collette Eau Claire, and here is Schwab's Early Look at the Markets for Friday, June 5th. Everything is on hold early today, ahead of May non-farm payrolls. Though major indexes rebounded yesterday in a rotation out of chips and into sectors like health care and financials, one day isn't a trend, and today's report might reset the table. The data, due at 8:30 a.m. Eastern Time, is expected to show May jobs growth of 85,000, down from 115,000 in April. This isn't historically very strong, but in the current economy, jobs growth doesn't necessarily need to be so high to keep up with worker population trends. Unemployment is expected to remain at 4.3 percent, with wages up 0.3 percent from April, according to consensus from briefing.com. Weight growth is another key element, as recent data sent mixed signals.
First quarter labor costs rose less than expected, the government said yesterday, but the ADP Monthly Private Sector Jobs Report earlier this week showed more than 4 percent wage gains in May. Anything above 0.3 percent consensus in today's report might have inflation hawks worried. Other trends to follow in the payrolls report include whether AI is limiting jobs growth in certain industries, especially tech, and if the workforce participation number continues to edge down. In April, so-called U6 unemployment reached 8.2 percent, the highest since December, and well above 2023 lows below 7 percent. U6 tracks a wider number of people who are less attached to the labor force. The ADP report showed services jobs outpacing goods producing jobs last month, so non-farm payrolls might be watched for any reinforcement of that trend. In recent months, the Bureau of Labor Statistics, or BLS, has often downwardly revised the jobs growth of previous reports, meaning investors need to look beyond the headline number to see if March and April's decent growth held up on the second look. Today's report follows mixed jobs data earlier this week. ADP jobs growth was strong, while job openings in April also easily topped estimates. However, weekly initial jobless claims yesterday hit a three-month high of 225,000 and May layoffs rose to 97,000 from 83,000 in April. The Federal Reserve isn't expected to change rate policy at its mid-June meeting, but if today's jobs report shows solid progress, it might give policy makers a sense that the economy could handle rate hikes designed to slow inflation growth.
Next week brings key US inflation data for May, and the Fed meets the week after that. No rate move is expected then, and one jobs report won't likely be enough to change expectations for the June meeting. However, any numbers far removed from the average estimate today have a chance to influence futures market predictions for meetings later this year, especially if the data is much stronger than expected. Jobs growth has risen two months in a row through April for the first time in a year. A big number would likely raise odds of a rate hike looking out to the end of 2026 or beginning of 2027 Investors might want to keep an eye on the CME FedWatch tool soon after the numbers hit today. Any major rise in sentiment for a possible rate hike later this year could send treasury yields higher, possibly hurting rate-sensitive small cap and consumer stocks. As of late Thursday, the FedWatch tool predicted about 50% chances of a rate hike at some point this year, but no chance of one this month. Odds of a rate cut sometime in 2026 are below 2%.
Treasury yields slipped mildly Thursday, but remained near 4.5% for the 10-year note. Initially, yields were down more than four basis points, as oil sank on news of a ceasefire in Lebanon. A statement from Iran reported in the media later Thursday that little progress has been made in negotiations that appear to hurt treasuries and allow crude to come off its lows. However, President Trump posted that negotiations were in an advanced stage, the Wall Street Journal reported. In one other data point Thursday, first-order US nonfarm business sector labor productivity growth got downwardly revised to 0.3% from the prior 0.8%, well below consensus for 0.8%, and down from the previous quarter's 1.6%.
Turning to corporate news, this week's tech earnings had the opposite impact on the market of last week's. Broadcom toppled 12% Thursday after narrowly beating fiscal second-quarter earnings and revenue consensus compiled by Factset, but falling just short of the revenue consensus from LSEG. Guidance easily exceeded the Factset consensus, but apparently disappointed investors who had hoped for even loftier growth. In some, the quarter and guidance generally looked solid, but the bar was very high to meet enthusiasts on Wall Street. Crowd strike also lost ground, falling almost 4% after its results narrowly beat analysts' estimates, and guidance for second-quarter revenue was above estimates. Fiscal year guidance also topped consensus, and the company announced a four-for-one stock split. Sienna, another AI-exposed firm, fell sharply on earnings too, though results generally looked solid. More tech earnings loom next week, with Oracle due June 10th and Adobe on June 11th. Lululemon reported late Thursday, and shares immediately plunged 9% in post-market trading. Though quarterly results beat consensus, the company cut its annual guidance, citing headwinds.