Here is Schwab's early look at the markets for Monday, June 2:
Summer is unofficially underway, but there's no break for investors who face a packed week of jobs data even while anxiously watching what feels like constantly changing metrics in the trade war. This week features job openings, layoffs, and Friday's May nonfarm payrolls.
The Federal Reserve has made clear it has no plans to change rate policy anytime soon, and one week of jobs data isn't likely to change that. Still, any signs of weakness could have investors wondering if plans might change sooner rather than later.
When it comes to Fed policy, "the labor market really holds the key," said Liz Ann Sonders, chief investment strategist at Schwab. And Schwab Chief Fixed Income Strategist Kathy Jones explained the potential impact of a weaker labor climate, noting that "consumers are good until they lose their jobs, and that's when they stop spending."
Still, analysts don't expect this week's jobs data to show any major tremors in the labor market. The data start tomorrow with the April Job Openings and Labor Turnover Survey, or JOLTS, report. One aspect to watch is job openings versus the percentage of people looking for work. A narrowing there could mean it's getting tougher for unemployed people to get new positions. Job openings fell to 7.19 million in March, and analysts expect something in that neighborhood for April.
Trading could be cautious this week ahead of the nonfarm payrolls report. Analysts expect jobs growth of around 130,000, down from 177,000 in April, and steady unemployment of 4.2%. "In my view, the potential for a negative surprise seems greater than a positive surprise," said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research.
Though May was a strong month for the stock market, Friday's trading was mixed as the Trump administration turned up the volume on complaints about China and China struck back with words of its own.
"Rhetoric about trade negotiations with China have created doubts about getting a deal any time soon," Schwab's Jones said. "Consequently, the prospect of higher prices on imported goods from China are limiting the potential for a bond market rally. But tariffs also can slow growth. The market is still discounting one to two rate cuts this year, but the Fed is on hold for the foreseeable future."
Even before the new war of words with China, tariff policy grew more uncertain amid last week's legal battle between the White House and courts. The Supreme Court may ultimately have to decide if the "reciprocal" tariffs Trump wants to impose are constitutional, as the U.S. Court of International Trade ruled last Wednesday.
"If reciprocal tariffs are not enacted using the emergency authority of the International Emergency Economic Powers Act (IEEPA), the Trump administration is likely to come up with other means to increase tariffs, although they may be less arbitrary, limited in size and scope, or may take time to implement," said Schwab's Chief Global Investment Strategist Jeffrey Kleintop and Schwab Center for Financial Research's Director of International Research Michelle Gibley.
"Trade negotiations likely will become more difficult and there may be less urgency for countries to cut deals now, particularly for those with less exposure to targeted sectors," Kleintop and Gibley added. "There may be some relief that tariffs may be less arbitrary and reduced in severity or duration, but the next steps are complicated and likely to extend uncertainty for businesses and the economic outlook."
Fed Chairman Jerome Powell gives opening comments at a conference at 1 p.m. ET today, and it's unclear if he'll discuss the economy. Still, investors might want to watch their screens around that time. Over the weekend, investors heard from Fed Governor Christopher Waller. As of late Friday, futures trading built in an 5% chance of a June rate cut and 27% for July, according to the CME FedWatch tool. The market builds in roughly two rate cuts in 2025, with about 73% odds of the first occurring at the Fed's September meeting.
Looking back at Friday's data, final University of Michigan consumer sentiment for May of 52.2 was a bit better than the average analyst estimate of 50.8, and inflation expectations for the year ahead fell slightly from the early-May level back below 7%.
The April Personal Consumption Expenditures (PCE) price index Friday showed both headline and core PCE up 0.1%, as analysts had expected, while annual headline inflation rose 2.1%. Core excludes volatile food and energy prices.
"Overall, it was good news on inflation, as it continues to move lower," said Cooper Howard, director, fixed income strategy at the Schwab Center for Financial Research.
Investors await today's 10 a.m. ET May ISM Manufacturing Index. Analysts see the May headline at 48.7, below the 50 needed for expansion and unchanged from April, according to Trading Economics.
This is a quieter week for earnings, but one highlight is semiconductor giant Broadcom on Thursday. Retailers continue reporting including lululemon, Dollar General, and Dollar Tree. Still, with Nvidia's earnings now behind, there may be fewer corporate-related catalysts ahead this week.
The S&P 500 index finished May with 6.1% gains, while the Nasdaq Composite ($COMP) rose more than 9.5%. For the S&P 500 index, May was the first positive month since January and its best May since 1990.
Treasury yields fell last week as inflation data eased pricing worries, Treasury auctions saw solid demand, and investors worried about a worsening trade war with China. The 10-year Treasury yield dropped to 4.42% Friday, after topping 4.6% a week earlier. There are scattered auctions this week but not of the same magnitude or visibility as the ones last week. Instead, jobs data could help determine the path of Treasury yields in coming days, and stocks remain highly sensitive to borrowing costs.
The late-week yield retreat helped certain aspects of the stock market, notably dividend-paying sectors like staples and utilities. Those two topped Wall Street's scorecard Friday but almost all sectors made slight gains in a late comeback.
Despite the late week shift toward defensive names, a few major communication services and tech companies had strong days Friday, including Palantir, AppLovin, Netflix, and Oracle. Most of the Magnificent Seven, however, huddled near unchanged while Nvidia pulled back sharply from Thursday's earnings-related gains. Tesla also struggled Friday. Overall, the market lacked direction Friday but had a strong week.
The Dow Jones Industrial Average® ($DJI) gained 54.34 points Friday (+0.13%) to 42,270.07; the S&P 500 index (SPX) fell 0.48 points (-0.01%) to 5,911.69, and the Nasdaq Composite® ($COMP) dropped 62.11 points (-0.32%) to 19,113.77.
For the week, the SPX rose 1.88%, the DJI rose 1.6% and the COMP rose 2.01%.
