Here is Schwab's early look at the markets for Tuesday, September 29:
The jobs parade starts today and runs all week, competing for attention with developments in the Middle East.
Crude and Treasury yields rebounded and kept stocks on defense Monday after peace hopes diminished over the weekend. Oil did pull back late yesterday on reports of some progress as indirect negotiations continue between the U.S. and Iran. They appear focused on Iran's nuclear ambitions, media reports said. Still, the 10-year U.S. Treasury note yield hit new 19-year highs.
The push past 5.25% for the 10-year note yield yesterday might sound sour, but there's nothing magical about psychological round numbers. More interesting would be a move above the 2007 high of 5.32% or the 2002 high of 5.47%.
While war is a constant drumbeat behind yield pressure, so is data. This week is packed, beginning soon after the open today with the August Job Openings and Labor Turnover Survey (JOLTS). Analysts expect little change from the 7.3 million openings in July, a relatively modest number compared with the average post-pandemic reading. A flat report could indicate the "low-hire, low-fire" job market persisted in August, though participants should keep in mind that unlike the rest of this week's labor reports, JOLTS is outdated by a full month.
Tomorrow features jobs data before the open as investors eye the ADP monthly employment change report for September. This report measures private sector jobs and is seen up 72,000. Results seldom track the official nonfarm data due Friday.
Nonfarm payrolls is the key report this week and analysts expect a large decline to around 85,000 from August's larger-than-expected 162,000. Unemployment is expected remain at 4.1%. Still, 85,000 would be above the 71,000 three-month average and almost certainly not a big enough drop to make the Fed worry about the labor market. It's focused for now on the prices aspect of its dual mandate.
Jobs dominate the picture, except for tomorrow morning's August Personal Consumption Expenditures (PCE) prices data. This report folds in parts of the producer and consumer inflation reports for August and is closely watched by the Federal Reserve.
Analysts expect core PCE, excluding food and energy, to rise 0.3% monthly and 3.4% annually. Anything above this would likely give Wall Street an unpleasant surprise, possibly affecting the Treasury market and Fed rate hike odds.
Fed speakers have said they'd like to see no more than 0.2% core monthly PCE growth as they try to meet the Fed's 2% annual inflation goal. Also, participants might want to look beneath the headlines to see how many components moved significantly. Fed Chair Kevin Warsh said he's focused on the percentage of prices rising 3% or more annually, and more prices climbing that much would suggest less progress.
Speaking of the Fed, it's a constant presence this week with around 20 policymakers speaking. Recent talk was almost all hawkish.
One important set of remarks today is by Fed Gov. Michael Barr, speaking on the economic outlook at 12:40 p.m. ET. Gov. Lisa Cook speaks tomorrow afternoon on the rural economy, and Fed Gov. Christopher Waller and Vice Chairman Philip N. Jefferson also speak tomorrow.
As of late Monday, odds of an October Fed rate hike stood at 70%, according to the CME FedWatch Tool. Futures trading dials in a 60% chance of another hike in December.
It's unclear how much impact rate hikes might have on heavy AI spending, though they do make loans more expensive for so-called "hyperscalers." Arguably, AI spending is a big factor driving the economy and pushing prices higher, so the Fed might have its hands full trying to slow down that train.
This morning also features the August S&P Cotality Case-Shiller U.S. National Home Price Index. Analysts expect a modest increase of 0.5%. But Redfin said one in five homes for sale saw its price reduced in August
Today's earnings calendar isn't heavy, but Micron looms tomorrow afternoon and results could affect the entire chip and AI infrastructure market.
Micron's importance is hard to exaggerate at a time when earnings are thin and AI focus is massive. That's probably why the options market expects a 9% move in one direction or the other in Micron shares after it reports. The rest of the AI market is likely to feel the impact.
Volatility—elevated for bonds and rising again Monday—ticked up for equities to start the week, too, and could remain there the next day or two. This isn't just a function of oil and yield concerns, though arguably those are the biggest influencers. End-of-the-quarter positioning might also play a role, with stocks like Meta, Apple, and Intel that tallied big gains recently running into apparent profit taking Monday.
Still, the Cboe Volatility Index stayed just above 16 on Monday, not showing signs of immense hedging demand in this rising yield climate.
Major indexes stumbled out of the gate Monday and couldn't find traction despite a short midday recovery. AI stocks lost ground on news that OpenAI had paused training of its most capable models and only will resume once OpenAI is "confident" that additional safeguards are in place. Some stocks feeling the pressure included Arm Holdings, Advanced Micro Devices, Qualcomm, Sandisk, Oracle, and Intel.
Only three of 11 S&P 500 sectors climbed Monday, a retreat from Friday's broader gains. Defensive staples and health care topped Monday's list, with energy also in the green. Communication services placed last, hurt by Meta. Discretionary stocks also fell on rising yields, while Boeing hurt the industrials.
Checking individual performers Monday, Boeing descended more than 6%. The Wall Street Journal reported that Boeing has a 737 MAX software glitch. The Federal Aviation Administration (FAA) is investigating.
Meta Platforms dropped more than 4.5% after last week's double-digit gains that reflected enthusiasm over its Muse AI agent. Some analysts praised the product but warned that competition from Apple and OpenAI may be on the way and questioned how Meta could monetize Muse.
Tesla dropped 4% amid general risk-off trading and as the company postponed a Roadster event until October 15 due to weather.
MongoDB sank 18% after Meta hired MongoDB's CEO, CNBC reported. MongoDB reaffirmed guidance following the news.
Nvidia bucked the lower AI trend, climbing around 1.7%. The company added $150 billion to its share repurchase authorization and launched an AI safety platform. It's the largest buyback in history.
SpaceX successfully launched its Starship to orbit Monday, but shares didn't reflect the good news, falling more than 2%.
Gap and American Eagle Outfitters climbed 5%, and 4%, respectively, going against Monday's discretionary softness. News was thin but both have been on the rise since early this month.
Gold fell more than 3.5% and other precious metals also sank as rate hike odds strengthened in the U.S. and overseas. Silver fell 5%. Mining shares dropped.
The Dow Jones Industrial Average® ($DJI) plunged 347.11 points (-0.67%) Monday to 51,481.51; the S&P 500 Index ($SPX) gave back 59.72 points (-0.77%) to 7,683.69, and the Nasdaq Composite® ($COMP) fell 248.34 points (-0.92%) to 26,820.38.