Schwab Market Update

Published as of: March 7, 2025, 9:25 a.m. ET

(Friday market open) It was steady as she goes for U.S. jobs in February, with employment rising 151,000 to almost match the average estimate of 159,000. Gains picked up from 125,000 in January, and unemployment climbed a notch to 4.1% from 4%.

"This was a boring report, but that's a good thing," said Collin Martin, director, fixed income strategy at the Schwab Center for Financial Research. "There were very few surprises. This report shouldn't change the Fed's thinking over the next few meetings as it would need to see more weakness to consider a near-term rate cut."

Wall Street initially seemed relieved after the report following yesterday's sell off, with stocks edging up ahead of the open while Treasury yields remained slightly lower. Investors might feel like they've bitten off all they could chew this week amid on-and-off tariffs, but Fed Chairman Jerome Powell addresses the economic outlook at midday. Odds of a rate pause this month stayed at 91% after the jobs data, according to the CME FedWatch tool.

1. Jobs report deeper dive: Drilling into the data, health care led gains with 52,000 positions added in February, while employment in financial activities rose 21,000 and transportation and warehousing employment edged up. Average hourly wage growth of 0.3% month over month met analysts' expectations, and the average work week was unchanged at 34.1 hours. Unemployment rose slightly, and not for good reasons given that the decline in the number of employed individuals was larger than the decline in the labor force. Revisions to the last two reports made very little overall difference to overall job gains. "Federal government payrolls fell by 10,000, but that wasn't a major decline relative to what has been expected," said Kevin Gordon, director, senior investment strategist at Schwab. "If layoff announcements continue, then it wouldn't be a surprise to see that figure worsen."
    
2. Fed at crossroads: Yields are down from peaks earlier this year, but inflation expectations remain high. "Government policies that impose trade barriers and limit immigration have the potential to raise inflation in the short run and slow growth in the long run," said Kathy Jones, chief fixed income strategist at Schwab. "It looks like the bond market has decided to bypass short-term inflation concerns and focus on the long-term prospects." The Fed can't necessarily ignore rising inflation expectations, which can be self-fulfilling. The current 4.25% to 4.5% range, which the Fed feels is "meaningfully restrictive," might keep inflation at bay by tempering demand and possibly countering any price effect from tariffs. "Inflation is too high and the outlook too uncertain for easing policy, but slower growth longer term could warrant it," Jones said. "With so many factors at odds, all the Fed can do is wait to see what happens next."
    
3. Shutdown around corner? Washington, D.C., takes center stage next week as legislators work to avoid a possible government shutdown. Funding for government operations expires a week from today. "House Speaker Mike Johnson (R-LA) said that he would push for a clean "continuing resolution" that simply extends government funding for the remainder of the fiscal year, through September 30, 2025," said Michael Townsend, managing director, legislative and regulatory affairs at Schwab. "But with a narrow 218–214 margin in the House, passing such an extension is likely to be tricky." The House eyes a vote Tuesday. Speaking of Washington, President Trump's announcement that imports from Canada and Mexico that comply with the North American trade agreement will be exempt from tariffs until April 2 cover about 50% of Mexican imports and 38% of Canadian ones, CNBC reported, citing a White House official.

• Broadcom (AVGO) shares popped 10.3% in pre-market trading after earnings per share and revenue beat analysts' estimates and the semiconductor firm offered upbeat guidance yesterday afternoon. In its release, Broadcom said quarterly strength reflected "both AI semiconductor solutions and infrastructure software." The company said it expects continued AI semiconductor strength in Q2 amid hyperscaler spending.
   
• Nvidia (NVDA) rose nearly 1% ahead of the open after falling nearly 6% yesterday as the chip sector skidded following mixed guidance from Marvell (MRVL). Robust earnings from Broadcom could help the sector today, but demand for Broadcom's chips also represents a competitive challenge for Nvidia.
   
• Costco (COST) fell 1.9% after reporting earnings late Thursday. Revenue topped analysts' average estimates but earning per share fell short. Quarterly revenue rose 9% year over year as investors sought bargains.
   
• Walgreens Boots Alliance (WBA) rose 6% after the company announced it's in a definitive agreement to be acquired by Sycamore for $11.45 per share in cash, a transaction valued at $23.7 billion.
   
• Gap (GAP) soared nearly 16% in pre-market trading after the retailer's results surpassed Wall Street's expectations. Guidance was mixed. The company's comparable holiday quarter sales rose 3%, well ahead of analysts' thinking for stores open a year or more.
   
• Hewlitt Packard Enterprise (HPE) plunged more than 19% ahead of the open after the company issued a weak outlook and announced it's cutting 2,500 jobs. Earnings per share just missed the average analyst estimate and revenue slightly topped estimates, but guidance for the second quarter fell short on both metrics. One challenge to the server business was a higher-than-normal AI inventory because of the transition to Nvidia's new Blackwell graphic processing unit (GPU), HPE's CEO told Barron's.
   
• Wayfair (W) jumped 3% in pre-market trading after getting an upgrade from Jefferies to Buy from Hold. The analyst cited Wayfair's discount to peers and market share gains, among other metrics.
   
• The SPX dipped briefly below key technical support yesterday at its 200-day moving average. The 200-day line now stands at 5,730, and a close above or below that could help set the tone for next week.
   
• The SPX Relative Strength Index (RSI)—a momentum indicator—dropped below 34 yesterday, with 30 historically seen as oversold. "But markets are sensitive to tariff headlines and soft economic data so it's probably too early to call a near-term bottom," said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research.
   
• Odds of a Federal Reserve 25-basis point trim in May remained near 50% early Friday after the jobs data, and odds of at least one cut by June reached nearly 90%.

Investor Q&A: The latest Schwab OnInvesting podcast features Chief Investment Strategist Liz Ann Sonders and Chief Fixed Income Strategist Kathy Jones taking questions from investors on topics like tariffs, bond yields, and the Fed.

A few weeks ago, investors might have noticed the Cboe Volatility Index (VIX—candlesticks) futures complex in contango, meaning future contracts were higher than the spot price. That's played out as the market expected thanks in part to tariff-related uncertainty on Wall Street that helped send the tech-heavy Nasdaq-100® (NDX—purple line) nearly into correction territory almost 10% off its recent highs.

Check out the Investors' Calendar for a summary of the top economic events and earnings reports on tap this week.

March 10: Expected earnings from Oracle (ORCL).
March 11: January Job Openings and Labor Turnover Survey (JOLTS) and expected earnings from Dick's Sporting Goods (DKS) and Kohl's (KSS). 
March 12: February Consumer Price Index (CPI) and core CPI and expected earnings from Adobe (ADBE).
March 13: February Producer Price Index (PPI) and core PPI, and expected earnings from Dollar General (DG) and Ulta Beauty (ULTA).
March 14: University of Michigan Preliminary March Consumer Sentiment.