I'm Colette Auclair, and here is Schwab's early look at the markets for Friday, October 2:
The long wait is almost over. September's nonfarm payrolls report is due at 8:30 a.m. ET today and follows solid economic numbers so far this week.
A firm jobs report could give the Federal Reserve more cover to fight inflation by raising rates, and the bond market evidently expects that, judging by the sharp rally in Treasury yields that only slowed a bit yesterday.
Consensus for September jobs growth is 84,000. That's roughly half of August's surprisingly firm 162,000, but revisions to August might be enlightening. Unemployment is seen unchanged at 4.1% while wages are expected to rise 0.3% month-over-month, according to consensus from Briefing.com.
Though 84,000 isn't large historically, it would outpace the three-month average of 71,000. That number is worth remembering, because monthly totals have varied dramatically and revisions frequently change the picture. Investors tend to hover over the headline when some of the key data is farther down.
Besides revisions and the three-month average, investors might want to check where job growth originated. August's strength reflected growth in education positions at the start of the school year. Food and drinking establishments also popped in August, when vacation demand often helps those industries. Both might be temporary.
Manufacturing jobs growth of 16,000 in August was seen as healthy and investors might see that continue based on recent data from that sector. AI is also a possible factor in the report after information jobs dropped in August.
The jobs won't likely have a large impact on rate policy unless numbers are dramatically above or below consensus. Inflation is the Fed's focus, judging from recent policymaker remarks, though if wages rise more than the 0.3% expected in today's data it could reinforce worries about a tighter labor market.
Chances of an October rate hike, which were 70% early this week, tracked near 26% late Thursday, according to the CME FedWatch Tool. Market participants still dial in 83% odds of a hike at some point before year-end, but it now looks more like December than October. Check again after the jobs report and September inflation data due later this month.
Crude oil surged again Thursday, this time as news media reported the U.S. sending another aircraft carrier toward the Persian Gulf. Separately, Bloomberg reported that Iran offered to restore access of nuclear inspectors if sanctions are eased.
All the same, Treasury yields slid across the curve Thursday, with the biggest losses in the rate-sensitive 2-year yield. The midday drop came after Fed Vice Chair Philip Jefferson said it might take more time to decide whether additional rate increases are needed after the Fed hiked last month for the first time since 2023. He said the Fed would have to closely examine data trends, Bloomberg reported.
It was the second time this week that midday Fed speaker remarks sent yields lower, but the previous drop ended in a blink. The benchmark 10-year note yield traded near 5.23% late Thursday, down from recent 24-year peaks above 5.3%.
Yesterday's ISM September Manufacturing PMI® index headline was 54.5%, below consensus of 55.2% but well above the 50% needed for expansion. The headline fell a fraction from August, meaning expansion slowed.
The report's prices metric, however, didn't relent, an indication of rising materials costs that might show up in the government's Producer Price Index (PPI).
Inflation is cooling, judging from the August Personal Consumption Expenditures (PCE) report, but long-term yields remain hot. This looks more like a term-premium story than a Fed story, leaving duration risk elevated even as near-term hike odds fade.
The yield curve is in what analysts call a "bear steepening" phase, with the front end barely moved but long yields rising. That points to term premium from oil, deficits, geopolitics, and competition for capital. Term premium refers to higher yields investors demand for holding onto longer-term debt.
Treasury auctions next week--including a 10-year note auction Wednesday--could provide insight into U.S. debt demand. Solid auction results might ease yields, but there's no guarantee. Data is light next week, but earnings accelerate with PepsiCo and Delta Air Lines.
In other data Thursday, September Challenger job cuts were well below expectations at approximately 43,000, feeding into the thesis of a muscular economy.
Micron stumbled early Thursday despite strong earnings but turned things around late to rise 3%. Tech stocks got a lift from Micron because there was nothing to indicate any decline in AI demand, and the initial decline in shares reflected Micron's guidance for a one-quarter gross margin hiccup.
The next AI barometer could be monthly revenue numbers from Taiwan Semiconductor Manufacturing, typically issued early each month from the world's largest chip manufacturer.
Tech stocks on the rise late yesterday included Lumentum, SK Hynix, ServiceNow, Sandisk, and Palantir.
Software, which spent much of this year flinching whenever chips rallied, kept pace. Salesforce rose 3%. Accenture's strong quarter and guidance cooled fears of possible AI disruption, Reuters reported, and helped software and IT services firms.
Today likely brings Tesla's third quarter delivery data, and analysts expect roughly 460,000. That's down from a year ago but it's a tough comparison considering last year's record amount. However, it's also expected to be down from 480,000 in the second quarter.
Meanwhile, Nike reported earnings late Thursday, beating consensus on earnings but falling just short on revenue and offering guidance well below analysts' expectations for fiscal 2027. Sales in China and Taiwan have been under pressure due partly to lower-cost high-tech shoes made by domestic firms, The Wall Street Journal reported. Shares of Nike initially dropped 6% in post-market trading after the quarterly results and are near 12-year lows.
On Wall Street yesterday, the broader market climbed about 0.2% as yields came down on hopes the Fed would delay a rate hike until December. Rate-sensitive small-caps outpaced their larger brethren.
Breadth widened slightly Thursday as five of 11 S&P 500 sectors went green, though energy led due to rising oil prices. Some cyclical areas under pressure from rising rates recently like financials and industrials found their way into the positive side of the ledger. Health care and communication services rounded out the bottom of the list.
Checking individual performers Thursday, IBM popped 2.6% after introducing an AI tool called Bob that allows enterprises to deploy AI software development and modernization capabilities within their own premises without moving code, data, or workflows outside their infrastructure.
Accenture soared almost 16% after earnings beat analysts' estimates and the consulting firm delivered a positive outlook.
General Motors gained 3% despite a sales drop in the third quarter. The so-called Detroit Three—GM, Ford, and Stellantis—could see their combined U.S. market share dip to 36% for the quarter, Reuters reported. Toyota continues to benefit from the popularity of hybrids.
Boeing ascended 3% after the company avoided a strike from its largest white-collar union, CNBC reported.
Walt Disney dropped 3% as the Wall Street Journal reported the company's reorganization could cause hundreds of layoffs.
Vicor ran up nearly 7% gains after raising guidance.
Synopsys soared almost 13% after the electronic design automation firm impressed investors with long-term earnings estimates.
McCormick & Co. fell nearly 5% despite a strong earnings report.
Alphabet turned around and fell 1.7% after rising early with the introduction of its newest AI model, called Gemini 4 Argon.
The Dow Jones Industrial Average® ($DJI) inched up 20.51 points (+0.04%) Thursday to 50,926.56; the S&P 500 Index ($SPX) added 14.91 points (+0.19%) to 7,666.45, and the Nasdaq Composite® ($COMP) gained 10.53 points (+0.04%) to 26,871.59.