Here is Schwab's early look at the markets for Wednesday, September 2:
Yields around the world surged along with crude oil yesterday even before the latest U.S. strikes on Iran, keeping stocks at bay and setting the market up for a look at critical U.S. jobs data today through Friday. Broadcom reports later today, offering more insight into AI demand.
The 10-year Treasury note yield's rally Tuesday took it to its highest level since late 2023 at an intraday high of 4.8%, though it finished a bit below that.
The 30-year Treasury yield has spent 55 days above 5% so far this year, the most in any year since 2006.
As yields climbed, stocks retreated from August highs. Macro repricing is the main story. This is less about one stock or one sector and more about oil and yields moving higher together, tightening financial conditions and pressuring valuations after a strong August. The market is essentially rethinking how much investors should pay for earnings when inflation and rates are both moving the wrong way.
The market outlook remains cautious, with near-term bias likely to stay defensive unless crude or yields stabilize. In some ways, the rise to near 4.8% is doing the Fed's work for it by raising discount rates and weighing the most on long-duration growth and mega-cap areas like technology. If yields keep rising, investors might demand lower multiples even if earnings expectations remain intact.
Gold fell more than 2% Tuesday as yields rose. Overseas, Japan's 10-year yield, hit 3% for the first time since 1996. The Bank of Japan meets later this month with analysts expecting a hike. And Eurozone August annual inflation growth of 3.3% reinforced ideas that the European Central Bank might raise rates when it meets next week.
The Federal Reserve meets the week after next. Chances of a rate hike at the Fed's September meeting reached 68% late Tuesday, according to the CME FedWatch Tool, up from 40% a week ago. Rising oil—which hit $90 per barrel Tuesday--and heavy global debt both drive rate hike odds.
Fresh attacks on Strait of Hormuz shipping early this week led oil higher Tuesday after a surge over the weekend when Iran and the U.S. traded attacks. Renewed U.S. strikes Tuesday added to pressure on stocks and Treasuries, which move the opposite direction of yields. Today brings weekly Energy Information Administration (EIA) crude oil inventories, a delicate subject with reserves heavily relied on since fighting began.
July's Job Openings and Labor Turnover Survey (JOLTS) reached 7.27 million. Analysts had expected 7.3 million, so the number was a bit lower, and June's openings got revised downward.
The quits rate—a closely watched metric that gives insight into how much competition there is for workers—wasn't changed much from June at 3.1 million, the Bureau of Labor Statistics said.
In Friday's critical August nonfarm payrolls report, analysts look for around 45,000 new jobs, up from a decline of 23,000 in July. Today brings August ADP jobs data at 8:15 a.m. ET, and analysts look for a gain of 47,000, up from 44,000 in July, Briefing.com notes.
In other data Tuesday, the August ISM Manufacturing PMI® headline figure of 54.6% fell from July and came in short of consensus for 55.3%. Still, anything above 50% indicates expansion. New orders—an important metric—declined.
Tech earnings dominated Tuesday afternoon's news cycle as investors mulled results from server maker Dell and cybersecurity company Palo Alto Networks.
Dell climbed almost 10% in initial post-market reaction to earnings that topped expectations. Palo Alto climbed 3.5% on strong earnings. Both firms also surpassed consensus on guidance. However, shares of Mongodb capsized 11% despite a better-than-expected quarter.
For Dell, server and networking storage revenue is key. Analysts had expected a 95% annual rise in that category. It came in at 122%.
Palo Alto followed last week's solid outing from competitor CrowdStrike, and its positive outing could strengthen growing investor confidence in the software sector.
This afternoon features Broadcom, a signal post for the chip industry and a possible gut check on recent solid Nvidia results. A follow-up from Broadcom that mirrors those Nvidia gains might ease some remaining concern about AI demand growth. Nvidia forecast much higher revenue growth than expected, lifting spirits temporarily in tech before this week's yield rally dampened sentiment.
Snowflake also reports later today, putting focus on cloud performance.
Today also features the Fed's Beige Book a ground-level view of the U.S. economy, drawn from all 12 Fed districts that comes out about two weeks before each Fed meeting and details how changes to economic factors like inflation, consumer spending, fiscal policy, or even natural disasters impact local economies.
Major indexes got clipped Tuesday by yields and oil, though the S&P 500 Index had a constructive finish by staying above technical support near 7,620 and still well above its 50-day moving average. Tech stocks weakened almost across the board as investors appeared cautious amid rate fears.
Four of 11 S&P 500 sectors managed gains Tuesday, better than the two that did on Monday. Energy led thanks to oil, a common theme recently. Defensive areas like utilities and health care also did well. Cyclical sectors and those related to AI did worst, with consumer discretionary punished.
From a breadth perspective, only 46% of S&P 500 stocks trade above their 50-day moving average, down from more than 70% at the August highs. Weakness in many of the rate-sensitive sectors is a major part of this retreat.
Checking individual movers Tuesday, Medtronic added around 1.5% after topping analysts' quarterly earnings and revenue estimates and raising fiscal 2027 guidance. The cardiovascular division grew 18.9% year over year.
Bitcoin fell more than 2%, dragging crypto-related stocks like Coinbase and Strategy.
Novartis climbed 6% on positive late-stage trial results for its oral multiple sclerosis drug.
Moderna added 9% despite lack of news after the stock's sharp August rally.
Nvidia dropped 1.5% after The Wall Street Journal reported Anthropic signed a $35 billion cloud deal backed by Nvidia, with Nvidia holding the lease on the data center. This is the latest such deal Nvidia has made, leaving some analysts concerned about possible "circular" deals in which Nvidia helps other companies buy its products.
Apple climbed 2.6% Tuesday, the first day as CEO for John Ternus, who replaces Tim Cook. The company's market capitalization rose 1,000% under Cook, who became CEO in 2011 and stays as executive chair. Apple sometimes rises amid weakness in the markets, helped by perceptions that it has a strong financial position.
Other mega-cap stocks, including Amazon and Tesla, retreated Tuesday, putting pressure on the indexes. Higher yields appeared to be the culprit.
The Dow Jones Industrial Average® ($DJI) dropped 419.02 points (-0.79%) Tuesday to 52,766.88; the S&P 500 Index ($SPX) fell 54.67 points (-0.71%) to 7,631.47, and the Nasdaq Composite® ($COMP) plunged 271.11 points (-1.03%) to 26,099.77.
