Jobs Data, Disney Awaited After New Record Highs

Welcome to the Schwab Market Update podcast, where we prepare you for each trading day with a recap of recent news and a look at what's ahead. I'm Colette O'Claire, and here is Schwab's early look at the markets for Wednesday, May 6th. With the tenuous ceasefire still in place, Wall Street's attention today turns to earnings from Walt Disney and the ADP monthly tally of April's private sector jobs growth. This follows fresh record highs Tuesday, thanks in part to falling crude oil prices. Investors also examined yesterday afternoon's results from Advanced Micro Devices, a key AI chipmaker that competes with Nvidia. The bullish momentum still appears to be intact for the AI and AI-adjacent trade, said Nathan Peterson, director of Derivatives Research and Strategy at the Schwab Center for Financial Research, or SCIFR. Are we overbought in tech and chips? Yes, but in the near term, it doesn't seem to matter. It's tough to slow momentum when stocks and the Philadelphia Semiconductor Index are breaking out into all-time high territory. It suggests that Price Discovery is still searching for equilibrium and hasn't found it yet. Tuesday's March job openings and labor turnover survey or jolts showed 6.87 million openings, off slightly from 6.9 million in February, but slightly above expectations. The quits rate, which tracks how many people left their jobs and can be a barometer of how much job availability there is, was 2 percent, barely changed from February and still relatively low historically. ADP jobs growth consensus is 99,000, relatively strong and up from 62,000 in March. However, the ADP data seldom correlates closely with non-farm payrolls due Friday. Tomorrow brings more jobs data with the Challenger monthly layoff report and weekly initial jobless claims. Last week, claims fell to their lowest weekly level in decades. analysts debate if this is the result of a strong jobs market or simply fewer workers. Little of this week's data have the impact of Friday's non-farm payrolls report. Estimates for April jobs growth have been falling and are now around 60,000, well below the 178,000 jobs created in March. With multiple batches of jobs data out this week, one thing analysts will be looking for is signs that AI is driving layoffs or a lack of hiring. So far, AI's impact on jobs has been limited mostly to the tech sector, according to Goldman Sachs researchers In other cases layoffs could be simply a reallocation of resources to AI infrastructure spending Turning to earnings Advanced Micro Devices or AMD reported better results and guidance late yesterday. Revenue rose nearly 38 percent year-over-year, led by a 57 percent jump in data center segment revenue. Shares popped 3 percent in initial post-market trading. Supermicro Computer, meanwhile, another closely followed tech stock, surged 15% after it reported earnings late Tuesday Earnings topped expectations, though revenues missed Guidance was stronger than expected Walt Disney reports early today, providing insight into consumer demand when travelers appear to be pulling back due to high oil prices and the war Norwegian Cruise Line said Monday it's seen bookings lag, especially to Europe. Disney also has a cruise line. Last time out, Disney topped expectations, led by its Experiences Division that includes theme parks and cruise lines. Guidance could be key, but Disney, like everyone else, has no insight into how long the war will last or when oil will fall. And some companies have predicated their guidance on expectations for lower oil, saying they could adjust their outlook if the conflict lasts much longer. Still, the drumbeat of earnings over the last month has kept oil from being the primary factor the way it was in March. The focus, maybe rightly so, has been on earnings season, which has been quite strong, said Lizanne Saunders, chief investment strategist at Skiffer, in a CNBC appearance Tuesday. That shifted a little of the direct intraday correlation with what oil prices were doing. We've seen a very strong beat rate so far. The only rub with earnings is that three stocks represent about 70% of the dollar-based growth, Alphabet, Amazon, and Meta. That's something to be mindful of looking ahead. With more than 60% of S&P 500 firms reporting, about 84% have beaten analysts' expectations. Another 20 percent of S&P 500 firms report this week, though most of the largest are now in the books. The key earnings ahead include retailers like Walmart and Home Depot later this month, as well as NVIDIA. As earnings for the first quarter come in above expectations, analysts have begun to raise their estimates for coming quarters, Peterson noted. Economic data has been supportive of the notion that higher oil prices are not derailing this AI-powered economic expansion, Peterson said. Treasury yields eased slightly Tuesday but remained above 4 for the 10 note and near one highs Oil prices continue to drive yields higher especially on the shorter end of the curve The long end is elevated too with the 30 yield hitting 5 this week for the first time since mid-2025. Not a positive sign for mortgage borrowers. Climbing yields can put pressure on stocks and increasingly reflect lower odds of any Federal Reserve rate cuts in the current inflationary climate. There's still hope out there that the Fed has impetus to cut, but the only reason the Fed would cut would be a significant deterioration in the labor market, Saunders told CNBC. The only reason the Fed would hike, she added, would be a significant acceleration in the inflation rate. Most likely they stay on hold for the bulk of the year, Saunders said. As of late Tuesday, the CNE FedWatch tool put odds of a rate cut this year at just 7% and increasingly bakes in higher odds of a rate hike. Chances that rates will end the year higher than their current 3.5% to 3.75% range jumped to nearly 30% this week, likely due to worries about war-driven inflation. Major indexes easily recovered Tuesday after a lackluster start to the week, hitting new record highs for the S&P 500 index and the Nasdaq composite, in a rally that was broader than others of recent days. For the first time in weeks, every S&P 500 sector rose Tuesday, though financials, real estate, and communication services lagged. Infotech, up 1.7%, was only the second-best of 11 sectors, outpaced by materials. A rise in gold and copper prices gave the materials sector a boost. And small caps climbed more than their larger brethren, with the Russell 2000 index reaching new highs as it jumped 1.75 percent. The Russell 2000 is up 14 percent year-to-date, helped in part by ideas that U.S. rates may stay paused while international rates could rise. Checking Tuesday's individual movers, Intel led the tech pack, rising more than 12 percent on a Bloomberg report that Apple held talks with Intel about possibly producing some of the chips for Apple's devices. Apple has been relying on Taiwan semiconductor manufacturing, shares of which fell nearly 2 percent Tuesday. Apple rallied 2.6 percent and is approaching the all-time highs it posted last fall. Intel has soared from $40 to $108 per share in just over a month. Memory chip stocks continued their ascent, with SanDisk, Micron, and Western Digital leading the pack Other chip makers and chip equipment makers including Qualcomm and ASML also soared The Philadelphia Semiconductor Index rose more than 4 and is up 53 from its March 30th low Last week mega earnings appeared to reinforce ideas that memory demand will remain solid, at least for now. AI leader NVIDIA, however, fell 1% and has missed the latest leg of the rally, hurt by ideas it could face more competition as hyperscalers develop their own chips. Palantir slipped 6.8 percent, even though earnings topped analyst estimates. Revenue rose nearly 85 percent from a year ago, and the company raised guidance for the full year to levels that surpassed FactSet consensus. Palantir shares have long traded at a high price-to-earnings or P.E. ratio, which could help explain failure to find traction from strong earnings. Airline shares rolled up gains Tuesday as oil prices fell, including Delta, United, and Southwest. Pfizer ticked up 1%, even though profit fell from a year ago amid higher research and development spending, according to the Wall Street Journal. Investors appeared to forgive a 12% rise in R&D spending for cancer and obesity products. Quarterly revenue beat expectations. Shopify plunged 15% following its earnings report after operating profit missed consensus even though revenue climbed 34% from a year earlier. Shopify shares have tumbled this year, hurt by worries of AI competition. PayPal fell 8.3% despite earnings and revenue that beat expectations. Guidance for the second quarter came in below expectations, but the company reiterated full-year guidance. The Dow Jones Industrial Average added 356.35 points Tuesday, or 0.73%, to 49,298.25. The S&P 500 Index climbed 58.47 points, or 0.81%, to 7,259.22. and the NASDAQ composite gained 258.32 points or 1.03% to 25,326.12. This has been the Schwab Market Update podcast. To stay informed, visit schwab.com slash market update or follow for free in your favorite podcasting app. And if you like what you've heard, please consider leaving us a rating or review. It really helps new listeners find the show. Join us for another update tomorrow. 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