I'm Colette Auclair, and here is Schwab's early look at the markets for Friday, September 4.
Today's nonfarm payrolls report, due at 8:30 a.m. ET, stands head and shoulders above any other developments even after Thursday's impressive rebound that positioned major indexes for another positive week.
The report comes a day after yields retreated slightly on dovish Federal Reserve remarks and with assistance from Japan, where the yen rose versus the dollar and helped cool global inflation concerns. There's growing belief that the Bank of Japan (BOJ) will raise rates at its meeting later this month, partially addressing inflation there.
At one point, the 10-year Treasury note yield fell to 4.75% from above 4.8% earlier this week, but it clawed back to 4.77% by the end of the day. Shorter-term yields more exposed to Fed policy forged steeper declines.
Crude oil remained strong, however, above $91 per barrel late Thursday, as progress toward a Middle East solution lagged. Still, the Trump administration said oil traffic through the Strait of Hormuz has improved. The round of tit-for-tat skirmishes earlier in the week died down a bit.
Analysts expect August payrolls growth of 45,000, following a decline of 23,000 in July. Unemployment is seen ticking up to 4.2% from 4.1%, still low. Wage growth will also be eyed after a very small July increase.
Jobs data heading into the report, including job openings, job cuts, private sector employment, and weekly initial jobless claims didn't send clear signals. None showed dramatic changes, and all were snapshots, for that matter.
So is today's report, but potential revisions to past numbers potentially give it more heft. The July report slashed May and June jobs growth by more than 100,000. A repeat of that for June and July in today's report, though not necessarily in store, would likely give the Fed pause before its rate decision September 16.
On the other hand, if jobs growth returns to more normal levels or exceeds expectations, it might be another sign that the Fed can raise rates without hurting the economy too much. Next week's inflation data also looms large.
Digging deeper into the jobs report, keep in mind that weakness in leisure and hospitality jobs back in July might have reflected one-time developments related to jobs that ended after the World Cup. Government job cuts also played into the weaker reading.
"If you take those out, private payroll growth was still positive, and it was actually relatively steady," said Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research (SCFR).
Fed Governor Christopher Waller sounded slightly dovish in a Reuters interview Thursday, saying he leans toward keeping rates unchanged at the current 3.5% to 3.75%. A shift away from recent inflation progress, he added, could push him more toward a hike.
As of late Thursday, chances of a hike stood at almost exactly 50%, according to the CME FedWatch Tool, down from 63% Wednesday. Investors might want to give that tool another look after today's data to see if it moved.
Waller's remarks followed more hawkish views expressed last week by Fed Chairman Kevin Warsh in his Jackson Hole speech last week. After jobs data, the final arbiter might be the August Consumer Price Index, due a week from today.
"If inflation shows meaningful signs of improvement, the committee may hold," said Collin Martin, head of fixed income research and strategy at SCFR. "But the bar for a hike seems low given Warsh's comments last week. Any upside surprises will likely shift the needle for those who have favored a hold to instead favor a hike."
In data Thursday, initial weekly jobless claims of 206,000 held no surprises and second quarter productivity of 1.4% was unchanged from the government's first estimate. Labor costs fell slightly, which may also have helped the Treasury market.
The ISM Services PMI for August improved to 55.4% from 54.1% in July, above consensus. Any figure 50% or higher signals expansion. However, the report's prices-paid metric of 72.6% hit a four-year high thanks mostly to rising energy costs.
In corporate news, apparel maker lululemon reported after the close yesterday and shares quickly retreated 16% in post-market trading. Earnings per share beat estimates, but the company missed analysts' revenue consensus and lowered guidance. All of its guidance missed consensus.
Before that, Snowflake's solid earnings and guidance reinforced ideas that AI is helping, not hindering, software. The sector turned positive for the year after a dismal few months to begin 2026.
Major indexes had their best days in a month, up more than 1% almost across the board amid falling yields and the software rally. Though Nvidia rose, most of the chip sector sat out the gains, hurt in part by Broadcom's earnings.
Nine of 11 S&P 500 sectors rose, accelerating the turnaround in market breadth that began earlier this week after a dramatic narrowing last week and Monday. Only materials and energy lagged, with materials losing ground despite gold's 2% rise on the weaker dollar.
Growth sectors like consumer discretionary, communication services, and info tech were three of the four best-performers Thursday, all up 1% or more. Financials placed third, helped in part by the slightly wider yield curve.
Checking individual movers Thursday, Broadcom dropped 2.5%. Earnings per share of $3.32 topped consensus of $3.22, and revenue of $29.59 billion also surpassed expectations, but participants apparently hoped for an even more enthusiastic outlook.
Snowflake surged 17% after its quarter beat analysts' expectations and the cloud firm's guidance impressed. Snowflake projected fiscal third quarter revenue growth at 37% to 38% annually. Analysts saw the report as evidence that AI-driven acceleration continues.
Other software stocks rode up on Snowflake's coattails. Big gainers included Palantir, up 8%, ServiceNow, up almost 7%, and CrowdStrike, up more than 4%.
SpaceX climbed 7%, helped by recent strength in the AI space that potentially could lift demand for its infrastructure. It's up about 40% since the start of August after a choppy start following its Initial Public Offering (IPO) earlier this summer.
Tyson Foods plunged more than 7% after cutting its outlook amid pressure from the cattle shortage, Reuters reported.
Zscaler, a cloud security firm, climbed 3.3% ahead of its earnings report and on news of an expanded partnership with CrowdStrike.
Crypto-related stocks Circle Internet Group and Strategy climbed double digits, lifted by bitcoin's 5% rise to nearly four-month highs. Technically, bitcoin punched through its 200-day moving average two weeks ago, lending strength.
Meta Platforms climbed 3.5%, a move CNBC attributed to the rollout of Meta's AI model Muse Spark 1.3.
Tesla continued to surge, closing 6% higher, as investors anticipated yesterday's Cybercabs event.
Ciena plunged 11% despite strong earnings and guidance. Shares were up 51% year-to-date heading into earnings, so this may be a buy the rumor, sell the fact situation.
Campbell's Company shares cooled about 8% after the food and beverage firm's guidance disappointed for fiscal 2027, CNBC reported.
Ultragenyx Pharmaceutical plunged 44% on disappointing Phase 3 trial results for a drug to treat Angelman syndrome, a rare genetic neurodevelopmental disorder, CNBC reported.
Nvidia climbed 2% after confirming it plans to buy privately-held open AI development platform Hugging Face for just under $13 billion. The deal gives Nvidia a platform used to freely share for millions of different AI models, Barron's reported, extending its role beyond hardware.
The Dow Jones Industrial Average® ($DJI) gained 624.16 points (+1.18%) Thursday to 53,686.11; the S&P 500 Index ($SPX) added 81.11 points (1.06%) to 7,747.71, and the Nasdaq Composite® ($COMP) leapt 366.23 points (+1.40%) to 26,584.06.