Mulling Tech Earnings, Investors Watch Oil, Yields

**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 Wednesday, September 2nd. Yields around the world surged along with crude oil yesterday, even before the latest US strikes in Iran, keeping stocks at bay and setting the market up for a look at critical US jobs data today through Friday. Broadcom reports later today, offering more insight into AI demand. The 10-year Treasury Note yields rally Tuesday took it to its highest level since late 2023 at an intraday high of 4.8%, though it finished a bit below that. The 30-year Treasury Yield has spent 55 days above 5% so far this year, the most in any year since 2006 As yields climbed, stocks retreated from August highs. Macro repricing is the main story. This is less about one stock or one sector and more about oil and yields moving higher together, tightening financial conditions and pressuring valuations after a strong August. The market is essentially rethinking how much investors should pay for earnings when inflation and rates are both moving the wrong way. The market outlook remains cautious, with near-term bias likely to stay defensive unless crude or yields stabilize. In some ways, the rise to near 4.8% is doing the Fed's work for it by raising discount rates and weighing the most on long-duration growth and mega-cap areas like technology. If yields keep rising, investors might demand lower multiples even if earnings expectations remain intact. Gold fell more than 2% Tuesday as yields rose. Overseas, Japan's 10-year yield hit 3% for the first time since 1996 The Bank of Japan meets later this month with analysts expecting a hike and Eurozone August annual inflation growth of 3.3% reinforced ideas that the European Central Bank might raise rates when it meets next week. The Federal Reserve meets the week after next. Chances of a rate hike at the Fed's September meeting reached 68% late Tuesday, according to the CME FedWatch tool, up from 40% a week ago. Rising oil, which hit $90 per barrel Tuesday, and heavy global debt both drive rate hike odds. Fresh attacks on the Strait of Hormuz shipping early this week led oil higher Tuesday after a surge over the weekend when Iran and the US traded attacks. Renewed US strikes Tuesday added to pressure on stocks and treasuries, which moved the opposite direction of yields. Today brings Weekly Energy Information Administration, or EIA, crude oil inventories, a delicate subject with reserves heavily relied on since fighting began.
July's job openings in Labor Turnover Survey, or JOLTS, reached 7.27 million. Panelists had expected 7.3 million, so the number was a bit lower, and June's openings got revised downward. The quits rate, a closely watched metric that gives insight into how much competition there is for workers, wasn't changed much from June at 3.1 million, the Bureau of Labor Statistics said. In Friday's critical August Non-Farm Payrolls Report, analysts look for around 45,000 new jobs, up from a decline of 23,000 in July. Today brings August ADP jobs data at 8:15 a.m. Eastern time, and analysts look for a gain of 47,000, up from 44,000 in July, briefing.com notes. In other data Tuesday, the August ISM Manufacturing PMI headline figure of 54.6% fell from July and came in short of consensus for 55.3%. Still, anything above 50% indicates expansion. New orders, an important metric, declined.
Tech earnings dominated Tuesday afternoon's news cycle as investors mulled results from server maker Dell and cybersecurity company Palo Alto Networks. Dell climbed almost 10% in initial post-market reaction to earnings that topped expectations. Palo Alto climbed 3.5% on strong earnings. Both firms also surpassed consensus on guidance. However, shares of MongoDB capsized 11% despite a better-than-expected quarter. For Dell, server and networking storage revenue was key. Analysts had expected a 95% annual rise in that category. It came in at 122%.
Palo Alto followed last week's solid outing from competitor CrowdStrike, and its positive outing could strengthen growing investor confidence in the software sector. This afternoon features Broadcom, a signal post for the chip industry, and a possible gut check on recent solid NVIDIA results. A follow-up from Broadcom that mirrors those NVIDIA games might ease some remaining concern about AI demand growth. NVIDIA forecast a much higher revenue growth than expected, lifting spirits temporarily intact before this week's yield rally dampened sentiment. Snowflake also reports later today putting focus on cloud performance. Today also features the Fed's Beige Book, a ground-level view of the US economy drawn from all 12 Fed districts that comes out about two weeks before each Fed meeting, and details how changes to economic factors like inflation, consumer spending, fiscal policy, or even natural disasters impact local economies.