Here is Schwab's early look at the markets for Monday, December 15.
Investors won't truly get away for the holidays before pushing through a cornucopia of data, earnings, and central bank meetings this week. Tomorrow's U.S. jobs report and Friday's expected rate hike from the Bank of Japanare highlights, and the Supreme Court will also be under scrutiny for a possible decision on the tariff case.
Tech and yields also remain in focus. The tech sell-off that began Thursday after Oracle's earnings and accelerated Friday after Broadcom's results accompanied a sharp rise in Treasury yields that appeared to spook the market. The benchmark 10-year note yield neared three-month highs Friday after Chicago Fed President Austan Goolsbee expressed worries about inflation. The path of yields will likely help determine where the market heads today and maybe the rest of this week. The 10-year yield climbed five basis points last week to 4.19%.
More Fed speakers loom, including Governor Stephen Miran later this morning and Governor Christopher Waller Wednesday morning.
"We’re already seeing the dispersion of views, as Philly Fed President Paulson said she’s more concerned with the labor market than inflation, but Chicago Fed President Goolsbee said some of the recent inflation data was concerning," said Collin Martin, head of fixed income research and strategy, Schwab Center for Financial Research, or SCFR. "We share Goolsbee’s view. With inflation above target for four and a half years now, we think a wait and see approach is prudent. We’re generally in-line with the market expectations—we expect one or two more cuts unless the labor market begins to materially weaken, which would likely result in more cuts."
Odds of a rate cut next month stood at 24% as of late Friday, according to the CME FedWatch Tool.
Though the tech-heavy Nasdaq suffered the bulk of Friday's selling, other major indexes followed suit and pulled back from all-time high closes posted Thursday that followed the Fed's 25-basis point rate cut. Major indexes other than the Dow Jones Industrial Average all fell 1% or more Friday.
Last week's disappointing finish doesn't rule out seasonal strength returning.
"The technicals registered some bullish signals this week with the S&P 500 Equal Weight Index, the Dow Jones Industrial Average, and the Russell 2000 all hitting fresh all-time highs," said Nathan Peterson, director of derivatives research and strategy, SCFR. "And bullish historical seasonality plus the potential for performance chasing by fund managers also lean in the bulls' favor. There are several potential market-moving catalysts on deck."
At 8:30 a.m. tomorrow, investors get November nonfarm payrolls, probably the most significant data of the month. Later this week come rate decisions from the European Central Bank and Bank of Japan, along with U.S. inflation data. Earnings also get in ahead of the holidays this week with chip maker Micron late Wednesday and Nike late Thursday.
Today's a light day for data and earnings, then things get more exciting with tomorrow's November nonfarm payrolls report due at 8:30 a.m. ET. The report will include whatever data the government was able to cobble together for October, as well as the November numbers, but won't have October household data. That means no unemployment reading for the month and none to come, as the government says it won't revisit October's data.
For November, the month where readings might be more accurate thanks to the shutdown ending, analysts anticipate jobs growth of a lackluster 30,000, according to Briefing.com consensus. The unemployment rate is seen at 4.4%, equal to the prior month. The last reading on nonfarm payrolls is for September, when jobs growth topped expectations at 119,000.
Fed projections released last week show little concern about unemployment, pegging it to stay at 4.4% next year. Last week's job openings report offered a rare ray of sunshine, coming in well above expectations, and recent weekly initial jobless claims have been light.
The Fed controls short term rates but has less influence on long-term ones. Continued pressure on the long end of the yield curve could be a drag on rate-sensitive stocks like small caps and real estate, as well as home builders, car makers, and other firms dependent on consumer borrowing. The 2-year yield fell last week even as the 10-year yield advanced.
Banks, mining shares, industrials, and retail, were at the heart of last Thursday's rally to record closing highs for the Dow Jones Industrial Average and S&P 500 index. This reflected a growing shift out of tech and into cyclical areas perceived as more likely to do well in a growing economy where rates are falling and expected to drop further.
Small-caps also had an excellent week with the Russell 2000 index hitting new record highs and seeing expanding breadth. If the index remain above 2,540 this week, the technicals remain bullish, Peterson said.
Long-term yields are up in part due to inflation and U.S. debt worries but also on concerns about rising rates abroad.
"Central banks in the rest of the world are leaning more hawkish, while the Fed rate cutting cycle isn’t over," said Michelle Gibley, director of international equity research and strategy, SCFR. "The Bank of Japan is expected to hike rates this week. Fed policy is in contrast to fewer rate cuts elsewhere, which could weaken the dollar and boost international stock returns."
The Bank of Japan, or BOJ, decision comes early Friday, Tokyo time, and could affect U.S. trading that day. Though investors broadly anticipate a hike, any sign of more to come in the Bank of Japan's commentary might have a negative impact on U.S. Treasuries, which move the opposite direction of yields.
Investors get the latest reading on consumer prices this Thursday with the November Consumer Price Index (CPI). And there's some housing data on the way, as well.
Tomorrow also brings some manufacturing data from around the globe and monthly U.S. retail sales for November. Analysts expect a slight rise of around 0.3% month over month and 2.7% year over year. Control group retail sales, used to calculate gross domestic product, or GDP, is a reading worth watching.
Stocks dove Friday to wrap up a losing week for the S&P 500 index. Technically, Friday's low just above 6,800 nearly matched the low for December and may serve as a psychological support level this week. Below that, the 50-day moving average of 6,761 is possibly a point to watch.
The S&P 500 Equal Weight Index, which weighs all components equally rather than by market weight, fell about half as much as the S&P 500 index on Friday, a sign that investors continue to gravitate away from mega caps.
In another sign of increasing interest beyond the top few names, the percentage of S&P 500 stocks trading above their 50-day moving averages soared above 57% by Friday from Tuesday's 47%. The fact that this happened even as the index fell for the week demonstrates how the biggest names being under pressure. Generally, it's healthy to see this sort of broadening, and the S&P 500 Equal Weight Index is more reflective of what the other 490 stocks are doing outside of the "Magnificent Seven" and a few other giants like Broadcom.
Speaking of which, Broadcom toppled 11% Friday despite releasing results that met or exceeded expectations all around. Analysts on the company's call appeared skeptical about Broadcom's forecasts, Barron's reported. Broadcom's performance following Oracle's plunge after earnings on Thursday fit into theories that investors are shifting their focus beyond tech amid growing AI spending worries. Broadcom's terrible day dragged down other chip- and AI-related names as well.
Nvidia fell more than 3% Friday while CoreWeave lost 10%.
Some of the tech pressure came after Bloomberg reported that that Oracle has pushed back the completion dates for some of the data centers its developing for OpenAI to 2028 from 2027. Oracle subsequently denied the story.
In other individual moves Friday, Tilray Brands spiked 44% and other marijuana-related names including Cronos Group also climbed after the Washington Post reported that President Trump plans to reclassify marijuana as a Schedule III drug, similar to some common prescription painkillers.
Bitcoin futures fell 1.7% Friday to close just above $90,000, barely up for the week.
The Dow Jones Industrial Average® ($DJI) plunged 245.96 points Friday (-0.51%) to 48,458.05; the S&P 500 index (SPX) shed 73.59 points (-1.07%) to 6,827.41, and the Nasdaq Composite® ($COMP) gave back 398.69 points (-1.69%) to 23,195.17.
For the week, the DJIA rose 1.05%, the S&P 500 fell 0.63% and the Nasdaq lost 1.62%. The small-cap Russell 2000 (RUT) led all major indexes last week with a 1.19% rise.