Jobs Set to Dominate Calendar

**Keith Lansford** (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 Keith Lansford, and here is Schwab's early look at the markets for Monday, June 29th. A shortened holiday week awaits investors licking their wounds after recent technology sector losses. With few earnings reports on the calendar, jobs data will take the spotlight on a series of reports that crescendo Thursday with June non-farm payrolls. That report, normally a Friday affair, comes out a day earlier than usual, as markets will be closed Friday for Independence Day. As a result, the release calendar will be compressed into a three-day window that opens tomorrow with the May Job Openings and Labor Turnover Survey, or JOLDS. Jobs numbers aren't the only data on the near horizon. The ISM US. Manufacturing Purchasing Managers Index, or PMI Report for June, is due Wednesday, and will reveal whether the expansion in manufacturing activity that kicked off at the start of the year kept pace through the first half of the year. This recovery in manufacturing activity has filtered through to the market, supporting sectors beyond those heavily exposed to tack.
Before digging into some forecasts for the coming data releases and what they could mean for Federal Reserve's interest rate policy in the latter half of the year, it's worth noting that last week's relatively disappointing action among the benchmark stock indexes masked a couple of encouraging trends. Market breadth, an important indicator of Wall Street's underlying health and investor sentiment, improved over the course of June. By late Friday, roughly 63 percent of S&P 500 stocks traded above their 50-day moving averages, up from 50 percent a month ago. Six of 11 S&P 500 sectors have risen over the last month, led by industrials, with financials and materials also in the mix. These sectors are cyclical, meaning they tend to do better when the economy does better. This contrasts with a more than 10 percent dive in communication services since late May, where magnificent 7 stocks like Alphabet and Metaplatforms have faltered. NVIDIA, Microsoft, Apple and other tech stocks also have been fairly weak, but the tech sector is down only around 5 percent over the same period thanks to the relative strength of chip stocks. The market appears concerned about AI costs and returns on investment, and Apple and Microsoft announced price increases last week that suggest both could be grappling with margin issues. Those able to look past Magnificent 7 and AI concerns might also be focused on falling oil prices and the easing in treasury yields over the last few weeks. That said, yields could leap back up if the ceasefire in the Gulf starts coming apart, driving oil prices up in turn. Still, for the moment, these trends could support consumer stocks, though the consumer discretionary sector has been a bit of a laggard in recent weeks, due in part to poor showings from names like Amazon, Tesla and Nike. Nike is expected to report earnings late tomorrow. Turning back to economic data, last week's Personal Consumption Expenditures, or PCE Price Report, showed headline inflation up 4.1% in May from a year earlier, the fastest pace since 2023 Falling crude oil prices and yields suggest inflation may be pausing slightly, a positive sign which could take pressure off a Federal Reserve concerned about resurgent price increases.
This week's jobs data will surely be of interest to Fed watchers. Tomorrow brings the May Joltz Release just after the opening bell. The April reading came in at 7.6 million, well above expectations, and May's is expected to be in that area as well. These are the highest levels in more than a year, suggesting companies may have started to emerge from the no-hire-no-fire conditions that have prevailed. It's too early to save for sure, but the US economy did add jobs each month from March to May. Analysts expect more gains for June, if not at the pace of previous months. Analysts consensus forecast is for a 114,000 increase in June, down from 172,000 in May.
Closing out last week, the University of Michigan's Final Consumer Sentiment Report for June showed a solid improvement after recently plumbing all-time lows, with the index rising to 49.5, just below the cutoff separating optimism and pessimism from 44.8 in May. Analysts had expected a headline figure of 48.9, briefing.com said, unchanged from the initial estimate. Here ahead, inflation expectations eased slightly to 4.6% from 4.8% in May, though they are still sharply higher than 3.4% inflation seen in February's report before the start of the conflict in Iran. Data took a back seat to AI concerns last week, despite MemoryChip giant Micron's robust earnings and guidance. Good news for Micron isn't necessarily great for tech in general. Micron and its competitors keep improving their results thanks to the rising cost of the memory chips used in products from phones to laptops to automobiles. As briefing.com noted Thursday, this could potentially reinforce a growing wedge in the tech sector with memory chip companies like Micron far surpassing gains of hyperscaler stocks like Microsoft, Amazon and Alphabet. The latter three spend heavily on chips and face rising costs as they try to grow their AI data centers. Those high costs are seen persisting through 2027 and perhaps into 2028, analysts say, driven by increasing data center demand and by NVIDIA's rapid introduction of updated AI chips with each new cycle requiring more memory.