After Light Monday, Big Banks, CPI and Warsh Loom

0:05Welcome 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 Keith Lansford, and here is Schwab's early look at the markets for Monday, July 13th. Today is light on data and earnings, but it's a brief calm before a summer storm. Tomorrow features results from several of the largest U.S. banks, followed later this week by chip industry giants ASML and Taiwan Semiconductor Manufacturing. ASML reports Wednesday morning U.S. time and Taiwan Semiconductor is early Thursday. Results from this closely watched industry, along with inflation data tomorrow and congressional testimony from Federal Reserve Chairman Kevin Warsh, all could go a long way toward shaping the days ahead after the broader market advanced for the second week in a row.

1:02Second quarter S &P 500 earnings could climb almost 24 % annually, according to FactSet, led by Energy and Tech. Expectations are high, so any major misses or failure to raise guidance could cause tech stocks in particular to skid. Tomorrow's 8.30 a.m. Eastern Time June Consumer Price Index, or CPI, looms large, after the New York Federal Reserve reported last week that consumer inflation expectations reached nearly three-year highs, though other inflation sentiment indicators steadied or dipped recently. Monthly CPI is seen falling 0.1 percent thanks to lower gas prices, while core CPI that strips out food and energy is expected to rise 0.2 percent.

1:48The year-over-year core number is seen at a relatively benign 2.9 percent, still well above the Fed's 2 % goal. Is the peak of the recent inflationary impulse behind us? That's the question, said Colin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research. An upside surprise poses a risk to our Fed view, and stronger underlying inflation would likely increase the likelihood of a rate hike. As of late Friday, chances of a July rate hike were 31%, according to the CME FedWatch tool. Odds of a hike by September were 66%.

2:29Turning to earnings, major banks reporting early tomorrow include JPMorgan Chase, Citigroup, Bank of America, and Goldman Sachs. Strength in mergers and IPOs might provide a tailwind in the second quarter, but the Fed's a wild card as it grows more hawkish. If the recent M &A activity, trading volumes, and IPO markets continue to run as hot as they have, that is also likely a major positive for these names, said Alex Coffey, senior trading and derivative strategist at Schwab. Major indexes rose Friday ahead of the data and earnings barrage, lifted by MegaCaps, Meta, and NVIDIA, in a sign that perhaps tech is coming back after losing ground over the last month.

3:15In geopolitical news, it remains unclear if Iran and the U.S. will engage in further talks this week, with conflicting reports heading into the weekend. The Strait of Hormuz remained virtually closed as the old week ended, with insurance agencies signaling extreme danger for any ships pondering a transit. Treasury yields inched up Friday and closed the week near recent highs, with shorter-dated, more rate-sensitive yields outpacing longer-term yields. Treasury auctions generally went well last week, Martin said. That's a good sign, given all the supply we've seen lately, and not just with treasuries.

3:53The large supply of both treasuries and corporate bonds, along with some large initial public offerings on the calendar, means there's a lot of competition for capital. Rising oil prices over the course of last week likely kept yield supported, though crude didn't break out in any major way despite the Middle East turmoil. 10 of 11 S &P 500 sectors advanced Friday, continuing the broad rally that started Thursday. Volume remained below average, however, which might raise questions about conviction behind the rally. Only health care lagged, and above that, a mix of sectors in both cyclical and defensive areas strengthened.

4:33Materials, consumer staples, communication services, and industrials topped the list, with infotech a distant fifth. Still, tech led all sectors over the last week. Among individual movers Friday, Delta Airlines descended 1.7 percent despite earnings topping expectations. The company also issued guidance that looked strong versus consensus for the third quarter and reaffirmed full-year guidance. The company's CEO told CNBC this morning that travel demand is very healthy and making up for the rising cost of fuel. SK Hynix, which competes with Micron in the memory sector, was listed on the NASDAQ Friday with a$1 trillion market capitalization.

5:18It surged 13 % on its first day. Competing memory chip stocks subdued early Friday as attention turned to SK Hynix, recovered losses, lifting the PHLX Semiconductor Index slightly and giving it a slim gain for the week. Whirlpool, down sharply in recent trading after disappointing with earnings, bounced more than 7 % in what appeared to be a technical rally NVIDIA rose 4 % to its highest level in a month after a positive note from Morgan Stanley which said it gleaned high confidence in accelerating and diversifying growth after a meeting with NVIDIA's executive team Shares eclipsed their 50-day moving average of$209.13 cents.

6:06Circle Internet Group climbed 5 percent, bolstered by news that it has U.S. government approval to launch a crypto-focused bank, Circle National Trust. Other crypto-related stocks, including Coinbase Global and Strategy, gained as well, and Bitcoin ended the week with solid gains. And Meta Platforms continued its rally that began Wednesday climbing another 6 percent. Strength came as the company made announcements related to its AI capabilities and on a Reuters report that Meta plans to produce a new AI chip. Also, Bank of America maintained its buy rating.

6:46The Dow Jones Industrial Average rose 149.60 points or 0.29 % Friday to 52 ,637.01. the S &P 500 index added 31.75 points, or 0.42%, to 7 ,575.39, and the Nasdaq Composite gained 74.72 points, or 0.29%, to 26 ,281.60. For the week, the Dow Jones Industrial Average slipped 0.5%, the S &P 500 index advanced 1.23%, and the Nasdaq rose 1.74%. This ended a four-week winning streak for the Dow Jones Industrial Average. This has been the Schwab Market Update podcast. To stay informed, visit www.schwab.com slash market update or follow us for free in your favorite podcasting app. And if you like what you've heard, please consider leaving us a rating or a review.

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7:59For important disclosures, see the show notes and schwab.com slash market update podcast.