Market Awaits Jobs Report

Major U.S. stock indexes ended with modest gains Thursday as traders waited for Friday's March employment report, which is expected to mirror data released earlier this week showing erosion in the labor market. Sentiment is building that a recession may be at hand.

Thursday brought more signs that the Federal Reserve's sharp rate-tightening clip over the past year is taking an increasing toll on the labor force, as outplacement firm Challenger, Gray & Christmas reported 89,703 layoffs at U.S. companies in March. That figure is up 15% from February and quadruples the number from a year ago. Weekly U.S. jobless claims also rose more than expected.

U.S. equity markets will be closed for the Good Friday holiday, but the Labor Department will still release its monthly Employment Report, which is expected to show nonfarm payrolls rose by about 240,000 in March, less than half the pace in January. Monthly payroll growth has often topped expectations over the past year, so traders will be watching closely for any possible turn in that pattern, says Collin Martin, director of fixed income strategy at the Schwab Center for Financial Research.

"All eyes are on the payroll numbers tomorrow," Collin says. "More cracks are showing in the labor market, though nonfarm payrolls have been an exception over recent months. How strong or weak the numbers are will be one key to market direction next week." Here's how the major indexes performed Thursday:

•The S&P 500® Index rose 14.64 points (0.4%) to 4105.02; the Dow Jones industrial average was little changed at 33,485.29; the Nasdaq Composite rose 91.09 (0.8%) to 12,087.96. •The 10-year Treasury yield rose about 2 basis points to 3.305%. •Cboe's Volatility Index was down 0.68 at 18.40.

After jumping 7% in the first quarter, the S&P 500 Index started out the second quarter posting a slight drop for the week. Tech stocks were generally firm, and communication services led gainers among S&P 500 sectors, while energy stocks led to declines.

WTI crude futures were little changed but remained above $80 a barrel and near two-month highs. Gold futures extended Wednesday's declines from 13-month highs.

Large scale layoffs continue

The Challenger, Gray & Christmas layoffs report followed a weaker-than-expected payroll figure released Wednesday by ADP, Inc., and soft manufacturing data out early this week. Also Thursday, the Labor Department said initial weekly jobless claims totaled 228,000 and upwardly revised the prior week's claims to 246,000. Analysts had expected 203,000 new claims last week, according to Briefing.com.

The tech sector has led all industries in terms of recent layoffs, accounting for about 38% of cuts, according to Challenger, Gray & Christmas. While the economy is still creating jobs, "with rate hikes continuing and companies reining in costs, the large-scale layoffs we are seeing will likely continue," Andrew Challenger, Senior Vice President of Challenger, Gray & Christmas, said in a statement.

Recent labor market weakness has stoked conviction that the Fed may pull back on its tightening pace after boosting its benchmark funds rate nine times over the past year. Late Thursday, the CME FedWatch tool reflected roughly 50-50 odds that the central bank will keep rates unchanged at its May policy meeting and 46% odds that it will drop its funds rate at least 25 basis points by July.

Still, despite some expectations for the Fed to lower interest rates as soon as this summer, any such move is unlikely sooner than that, says Liz Ann Sonders, chief investment strategist at Schwab. "It's certainly possible the Fed will make a fairly quick pivot to rate cuts in the future, but only if the banking situation turns into a true crisis and/or the labor market or economy worsens significantly from here," she says.

Among individual stocks, shares of Walmart (WMT) rose modestly after the country's largest retailer reiterated previous guidance at its investor meeting Wednesday. One Walmart executive recently hinted that consumers are focused on saving money, noting a higher demand for private label products (sometimes called "generics") over name brands.

In another retail development, Costco (COST) shares fell more than 2% after the company reported a 0.9% gain in March comparable sales—the lowest since April 2020, according to Bloomberg, and the second month of deceleration.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market or economic conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed. Supporting documentation for any claims or statistical information is available upon request.

Past performance is no guarantee of future results, and the opinions presented cannot be viewed as an indicator of future performance.

Investing involves risk, including loss of principal.

Diversification strategies do not ensure a profit and do not protect against losses in declining markets.

The policy analysis provided by Charles Schwab & Co., Inc. does not constitute and should not be interpreted as an endorsement of any political party.

Fixed-income securities are subject to increased loss of principal during periods of rising interest rates. Fixed-income investments are subject to various other risks, including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors. Lower-rated securities are subject to greater credit risk, default risk, and liquidity risk.

---

Not all products, services, or investments are available in all countries. Nothing on this website is intended for residents of a particular country, nor is the information provided an offer to sell or a solicitation of an offer to buy securities, products or services, by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation.

Investing in U.S. securities is not without risk. Investment returns will fluctuate and are subject to market volatility so that an investor’s shares, when redeemed or sold, may be worth more or less than their original cost.

The Charles Schwab Corporation provides a full range of brokerage, banking, and financial advisory services through its operating subsidiaries. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. ("Schwab")(Member SIPC), is registered by the Securities and Exchange Commission ("SEC") in the United States of America and offers investment services and products, including Schwab brokerage accounts, governed by U.S. state law. Schwab is not registered in any other jurisdiction. Neither Schwab nor the products and services it offers may be registered in your jurisdiction. Its banking subsidiary, Charles Schwab Bank, SSB (member FDIC and an Equal Housing Lender), provides deposit and lending services and products. Access to Electronic Services may be limited or unavailable during periods of peak demand, market volatility, systems upgrade, maintenance, or for other reasons.

© 2023 Charles Schwab & Co., Inc. All rights reserved. Member SIPC. Unauthorized access is prohibited. Usage will be monitored.