After Whipsaw Start to Week, PCE and Intel 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.

0:17I'm Keith Lansford, and here is Schwab's early look at the markets for Thursday, January 22nd. Tech earnings kick off this afternoon with quarterly results from Intel after Wednesday's fierce tariff relief comeback. This precedes a string of tech reports the next two weeks, though the early part of reporting season has been overshadowed by geopolitics. That was the case again Wednesday as political drama took place on both sides of the Atlantic. President Trump arrived in Europe and quickly pledged not to use armed forces in Greenland and rescinded his threats of tariffs on NATO countries. Back home, the Supreme Court heard arguments over the administration's attempt to fire Federal Reserve Governor Lisa Cook.

1:06Based on their questioning, justices sounded skeptical of the government's arguments, media reports said. The court's decision has major implications for Fed independence, and some of yesterday's late strength in stocks and bonds might have reflected easing worries about the case. Despite the good cheer, major indexes stayed below recent all-time peaks, and volatility didn't return to lows from earlier this month. Investors have grown used to whipsaw market moves based on geopolitical headlines, and that could continue. Historically, geopolitics don't often have major lasting market implications, but that doesn't mean that they can't cause near-term volatility.

1:52Perhaps with that in mind, gold climbed again Wednesday, a sign of possible investor caution. Along with yields and volatility, gold remains a key metric of market psychology during these volatile days. Additionally, the SIBO Volatility Index, or VIX, could hold more upside potential from here as many institutions bought downside protection against perceived volatility earlier this week. Treasury yields, which had traded in a tight range between 4 % and 4.2%, broke out of that in a big way Tuesday as the 10-year yield topped 4.3 % for the first time in around five months. Any persistent yield strength or a move toward 4.5 % could threaten stocks.

2:38Even with Wednesday's slight pullback, the 10-year yield remained above its near-term range at 4.25%. Higher term premium, geopolitical concerns and elevated inflation are all reasons that the 10-year yield may continue to remain elevated, said Cooper Howard, director of fixed income research and strategy at the Schwab Center for Financial Research. Wednesday's positive developments might have temporarily eased concerns that additional European investors might follow the footsteps of Danish pension operator Akademiker Pension, which on Tuesday revealed plans to exit its roughly$100 million Treasury position.

3:18The move underscores concerns about demand for U.S. debt amid rising trade tensions. Next week features several major U.S. Treasury note auctions that might get a closer look than normal for hints of demand. Earnings stood shyly on the sidelines most of this week amid all the moving pieces on the international chessboard. This could change soon, especially next week when big tech firms like Microsoft and Apple report. Today features results from Intel, along with GE Aerospace, Freeport-McMoran, Procter & Gamble, and Abbott Laboratories. Of those, Intel could attract the most attention due to its sharp recent gains after the U.S.

4:00government took a 10 % stake in the semiconductor company. Last time it reported, Intel exceeded Wall Street's revenue estimates and said it expected fourth-quarter revenue of$13.3 billion. dollars. Freeport-McMoran shares have also been on a tear lately, climbing 52 percent over the last year as metal prices soar amid growing industrial demand due to AI and investors snapping up gold as a counterweight to perceived volatile stocks and bonds. The company beat analysts' estimates last time out. GE Aerospace is a useful barometer of demand for commercial and military aircraft engines. Defense industry stocks have done well amid the recent international volatility.

4:45There's also data on tap early today, notably U.S. gross domestic product, or GDP, and inflation. Analysts expect the government's final estimate for third-quarter GDP to remain 4.3 percent on a seasonally adjusted annual basis, while October personal consumption expenditures, or PCE, prices are expected to rise a modest 0.2 percent, with the same for core PCE that strips out food and energy. Personal income and spending will also be out before the open, providing insight on consumer trends. The Fed closely monitors PCE data, and it meets next week. These PCE readings are relatively old and may not be fully reflective of actual conditions at the time due to the government shutdown, meaning policymakers might discount them to some extent.

5:35Heading into next Wednesday's Fed rate announcement, market participants widely expect policymakers to hold steady. Chances of a rate cut are just 5 percent, according to the CME FedWatch tool. That follows three consecutive cuts between September and December. Initial weekly jobless claims also loom before the open and are expected to be around 200 ,000, according to Briefing.com. That's up from 198 ,000 the prior week and well below levels that might indicate trouble. Initial claims would likely have to climb above 240 ,000 for several weeks to raise concerns. That said, hiring remains light according to recent monthly jobs reports.

6:17This could keep continuing claims elevated as they were at 1.88 million the prior week. In data yesterday, December pending home sales fell 9.3 percent from a month earlier, well below the estimate for a 0.3 percent decline and the largest monthly drop since April of 2020. On the brighter side of the housing coin, mortgage applications jumped 14.1 percent last week after a 28.5 percent climb the week before. Many homebuilder and home improvement stocks rose 3 % or more Wednesday, possibly reacting to the second week in a row of climbing mortgage demand along with falling treasury yields. Wall Street seesawed Wednesday as geopolitical headlines rolled in.

7:03At one point, advancing shares outpaced declining ones by a 4-to-1 margin at the New York Stock Exchange. When headlines arrived of Trump lifting his tariff threat, the S &P 500 index climbed briefly above$6 ,900 before pulling back to finish up moderately for the session. The small-cap Russell 2000 index, meanwhile, outpaced the S &P 500 index for the 13th straight session, the longest stretch since June of 2008. Strength in small caps can reflect positive investor sentiment about the domestic economy. The S &P 500 index fell under its 50-day moving average of 6 ,829 early this week, the first dip below that since mid-December, before clawing back Wednesday to close above it.

7:50From a chart perspective, that may be positive. Technicals remain bullish, but we did see the largest one-day drop since October, so sentiment is likely a little rattled, said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research, will monitor the 100-day simple moving average on the S &P 500 index should the pullback extend further in the coming days. The 100-day moving average is near 6 ,750 and hasn't been tested much the last two months. Tuesday's intraday low did bring the marker within shouting distance, however. Meanwhile, the U.S. dollar index, which dropped sharply Tuesday on concerns that the U.S.

8:33economy might be hurt by tariffs, hustled back Wednesday and remains in the near-term range between 98.5 and 99.5. The dollar is another key indicator to watch if international news again turns sour. As far as individual market movers Wednesday, Intel rose more than 11.7 percent a day ahead of earnings and posted its highest levels in four years. This didn't appear to reflect any company-related news. Strength spilled over into other tech names late in the session, including advanced microdevices, Western Digital and NVIDIA. The PHLX Semiconductor Index climbed 3%. Netflix struggled Wednesday after its guidance disappointed investors, falling more than 2%.

9:20Oracle also floundered. Every S &P 500 sector rose, with defensive ones like real estate, consumer staples and utilities finishing at the bottom of the pack, and cyclicals like materials, industrials, and discretionary performing well. These are sectors that tend to do better when the economy is solid. The Dow Jones Industrial Average added 588.64 points Wednesday, or 1.21%, to 49 ,077.23. The S &P 500 index advanced 78.76 points, or 1.16%, to 6 ,875.62. And the Nasdaq Composite gained 270.50 points, or 1.18%, to 23 ,224.82. 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.

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