Here is Schwab's early look at the markets for Tuesday, June 3:
Labor data dominates the rest of the week, starting with job openings later this morning and building up to the keystone May nonfarm payrolls report Friday expected to show jobs growth of 130,000, down from April's 177,000. At the same time, trade policy remains front and center awaiting new developments, including what the White House said yesterday is a planned phone call this week between leaders of the U.S. and China.
So-called "hard data" like jobs and retail sales haven't felt much impact so far from tariff tensions, though last week's personal spending report for April came in a bit weak considering a large jump in personal income. The Citigroup Economic Surprise Index recently plowed into firmly positive territory for the first time in a while even though many survey figures, including one yesterday on manufacturing, fail to impress.
This week offers a major test of the hard data theme starting today with the April Job Openings and Labor Turnover Survey (JOLTS). The data parade continues tomorrow with the May ADP private sector jobs report and Thursday with May layoff numbers from Challenger, Gray & Christmas.
Job openings arrive at 10 a.m. ET today after sliding to 7.19 million in March. Analysts expect something in the same neighborhood. That's well above average pre-pandemic levels but down from the post-COVID highs. The "quit" rate is another metric to watch, giving a sense of how easy it is for people to find new jobs. Higher quits usually mean employees feel they have decent options when looking around.
The question is whether any cracks develop in hard data, with jobs the lynchpin. In one sense, bullish investors might welcome a miss on Friday's jobs report, as that presumably would increase pressure on the Federal Reserve to lower rates for the first time since last December. The market now projects the highest odds of two rate cuts this year, up slightly from a week ago thanks in part to last Friday's benign inflation data.
Fed Chairman Jerome Powell's remarks yesterday didn't address monetary policy, but other Fed officials have said they could imagine rate cuts if the labor market starts to flounder. Tariff-induced inflation is the wild card, however. Fed Governor Lisa Cook speaks on the economic outlook at 1 p.m. ET today.
As of late Monday, futures trading built in a 4% chance of a June rate cut and 24% for July, according to the CME FedWatch tool.
May's ISM Manufacturing Index on Monday came in "weaker than expected, with stagflationary undertones," said Liz Ann Sonders, chief investment strategist at Schwab. The headline of 48.5 was below the Briefing.com consensus of 49.0 and down from 48.7 in April. Anything under 50 signifies contraction. Also, prices paid fell but remained at elevated levels. Tariff uncertainty continues to chip away at manufacturing strength, though steel stocks rallied Monday on President Trump's promise to raise steel and aluminum tariffs to 50% from 25%.
Though protectionist policy might help U.S. steel companies, the industry employs fewer Americans than it once did and tariffs that protect remaining jobs in the sector might raise prices, hurting margins, for many other U.S. companies using steel. Shares of General Motors and Ford – two major steel users – declined sharply Monday.
Despite the light read on manufacturing yesterday and another on construction spending, Treasuries went back on the defensive and the 30-year yield climbed back to 5%, a long-term resistance mark. Weakness in Treasuries and the dollar to start the week, accompanied by rising gold, might have reflected concerns over geopolitical developments like weekend escalation in the Russia-Ukraine conflict and media reports of Iran building up its near weapons-grade uranium even though it's in nuclear talks with the U.S.
At other times, news like this might have lifted the dollar and Treasuries in an investor flight to perceived safety. But with tariff stress and an unsettled U.S. budget process that economists think could spark inflation and rising debt, investors seemed to shy from U.S. assets, at least on Monday. Instead, gold found buyers, as did the energy complex. The 10-year note yield didn't move out of its recent trading range, rising four basis points to 4.46% Monday in part on the firm ISM prices-paid data and the higher steel and aluminum tariffs.
Crude oil (/CL) climbed 3% Monday amid rising tensions in the Ukraine-Russia war. The rally came despite OPEC and its allies announcing Saturday that the cartel will raise oil production by 411,000 barrels a day in July. This is to punish countries that over-produce oil and to win market share from U.S. shale drillers, MarketWatch reported. However, it was in the realm of analyst expectations. Crude oil prices remain not far off four-year lows, but gasoline prices remain above $3 per gallon across the U.S., according to AAA, keeping gas costs relatively high and limiting any tailwind for consumers.
A trade-related deadline looms this Thursday when The U.S. Court of International Trade—which ruled the tariffs unconstitutional last week—must respond to the Trump administration's appeal that allowed tariffs to stay on the books. Some of the market's resilience yesterday might have reflected hope for talks between President Trump and President Xi, which the White House floated in media hits Monday. There was no confirmation from China, CNBC reported.
"Clarity could help turn the market higher, but back-and forth tit-for-tat talk could bring bursts of volatility," Schwab's Sonders said. "Tensions between the U.S. and Europe are also elevated given Trump's announcement of doubling steel tariffs to 50%."
This is a quieter week for earnings, but one highlight is semiconductor giant Broadcom on Thursday. This afternoon brings results from CrowdStrike after the cybersecurity firm disappointed investors the last time it reported in March with guidance below Wall Street's expectations. Earnings come after the company announced yesterday it's collaborating with Microsoft (MSFT) to coordinate on identifying and tracking cyber threats.
The S&P 500 tech sector rebounded yesterday along with communication services after showing signs of fatigue late last week as investors flocked toward defensive sectors like utilities and staples. But rising Treasury yields Monday might have tempered enthusiasm for staples and utilities stocks known for their dividends, and the S&P 500 dividend rate of 1.4% is well below the benchmark 10-year Treasury yield of nearly 4.5%. "Magnificent Seven" names like Meta Platforms and Nvidia flexed their muscles Monday after Nvidia's earnings last week and a report in the Wall Street Journal about Meta's plans to use AI to automate advertising.
Technically, yesterday's session enjoyed a firm finish that might translate into sentiment as the new day begins. However, volume was relatively light yesterday, potentially raising questions about how much conviction was behind the rally.
The Dow Jones Industrial Average® ($DJI) added 35.41 points Monday (+0.08%) to 42,305.48; the S&P 500 index (SPX) gained 24.25 points (+0.41%) to 5,935.94, and the Nasdaq Composite® ($COMP) rose 128.85 points (+0.67%) to 19,242.61.
