Alphabet, Tesla Earnings Awaited After Close

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 Wednesday, July 22nd. Alphabet and Tesla report after today's close in a market concerned on the one hand about heavy spending by hyperscalers, and on the other that AI spending might fall as companies look for cheaper alternatives. It's a conundrum, and one potential reason the market hasn't been able to break out of a tight trading range for more than a month. That reflects a heavy weighting of the S &P 500 index towards chips, which were down 20 percent from late June highs heading into this week. Chips rebounded Monday and Tuesday, helped by a recovery in South Korean stocks and growing anticipation of hyperscaler earnings starting today.

1:06Investors eagerly await to hear Alphabet's commitment to AI spending in coming quarters, even as it got a share boost Monday by announcing it's working on a more efficient AI chip of its own. Analysts expect Alphabet to report earnings per share up 25 percent from a year ago at$2.89 on revenue of$116.9 billion, up 21 percent annually, according to estimates collected by Schwab. As often is the case, guidance could have more impact than results on the share price. When Alphabet last reported, the company raised its 2026 capital expenditure estimates to as much as$190 billion and said it expects to significantly increase that in 2027.

1:51Any changes to that guidance would likely get noticed. Another metric is Alphabet's cloud business. In the first quarter, revenue there topped analysts' expectations by nearly$2 billion, rising 63 % annually. Investors likely want to see a repeat, though the law of large numbers makes those percentage gains hard to maintain. Tesla's impact might be less because it already reported quarterly deliveries. That number easily surpassed estimates, but shares weakened to near the low end of their recent range. Soft consumer sentiment and the end of EV tax credits pose challenges. Earnings impressed on Tuesday as General Motors and 3M topped expectations and issued upbeat guidance, while not every company reporting yesterday rallied most to surpassed consensus.

2:45Earnings overall are strong so far, but pay attention to companies that beat sell-side consensus but underperform buy-side expectations, said Lizanne Saunders, chief investment strategist at the Schwab Center for Financial Research. Buy-side expectations are quote-unquote whisper numbers that often echo around Wall Street prior to results and are typically higher than sell-side analyst estimates. That's probably the case with Alphabet and Tesla, meaning even if they surpass consensus, it might not satisfy the market. Though much of the focus is on this afternoon's results, A full slate of companies' reports before the open, including Philip Morris, GE Vernova, and AT &T.

3:29IBM also reports this afternoon, but pre-announced soft results last week. Intel reports Thursday afternoon.

3:41Pulling back from the crowded earnings calendar, crude oil climbed early this week after 10 days of U.S. strikes against Iran, helping send Treasury note yields up with short-term yields outpacing longer-term ones. The 10-year Treasury yield topped 4.63 percent, a smidgen below the year's 4.68 percent peak, raising concerns that borrowing costs could stay high. The global price of crude topped$90 per barrel as President Trump sounded less interested in negotiations, media reports said. The yield rise also reflected Trump's imposition of new tariffs on Canada and a Financial Times report saying he might impose tariffs on dozens of countries.

4:26Tariffs raise prices for the country imposing them as businesses pay more to import goods and materials. Tariffs can be inflationary, something the Federal Reserve might take into account. It meets next Wednesday and is widely expected to keep rates unchanged. The European Central Bank makes a decision tomorrow and is also unlikely to raise rates, Reuters said, citing analysts. Major indexes showed resilience yesterday despite rising crude in yields helped by earnings and hopes for peace negotiations. Volume remained light. The S &P 500 index snapped a three-day losing streak and clawed back above what had been technical support until recently at the 50-day moving average near 7 ,469.

5:14Topping that level could be considered constructive. After peaking near the end of the second quarter, the AI complex got oversold by the July Standard Options expiration on July 17, said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research. Investors' sentiment around chips and the AI infrastructure cohort became too pessimistic or stretched to the downside, and it seems dip buyers are looking to get in before the first hyperscale reports since increased capex guidance could be a potential catalyst. The rebound in this cohort appears to be lifting market-wide sentiment.

5:56Another thing to remember is that AI infrastructure names rallied sharply in April and May when oil prices were higher than they are now. Six of 11 S &P 500 sectors climbed Tuesday, led by a 2.3 percent gain for Infotech. Energy climbed almost 1 percent thanks to rising crude prices. Defensive and rate-sensitive sectors, including real estate, utilities and staples, slumped in response to rising treasury yields, which compete for investor demand with dividends.

6:33Among individual movers Tuesday, General Motors climbed nearly 5 percent after earnings and revenue topped expectations, and the company raised fiscal year 2026 guidance. Premium truck pricing and cost cuts helped boost results last quarter, Bloomberg reported. Chip and AI infrastructure stocks led gains for the second day in a row. SanDisk, SK Hynix, Western Digital, and Micron all rose double digits ahead of Alphabet's report. Intel climbed nearly 9 percent, and the PHLX Semiconductor Index rose 5 percent. Danaher fell almost 12 percent, despite beating earnings expectations and raising guidance.

7:16Softness apparently stemmed from a narrower fiscal 2026 core revenue outlook and a more conservative bioprocessing view, Briefing.com noted. MBS surged 19 % after NVIDIA increased its stake. 3M surged 7%, lifted by strong earnings and a rise in fiscal year guidance to levels above consensus. 3M cited continued momentum. Crypto-related stocks rose again as Treasury Secretary Scott Besson told Fox News the Clarity Act is close to passage in the Senate. The bill would establish a more precise regulatory framework for digitally traded assets. Software stocks fell after Morgan Stanley downgraded shares of Salesforce and Adobe, and consumer-related stocks again fell on worries about rising energy and borrowing costs.

8:13The Dow Jones Industrial Average climbed 385.38 points, or 0.74 percent, Tuesday, to 52 ,224.64. The S &P 500 index added 65.92 points, or 0.89%, to 7 ,509.20, and the Nasdaq Composite rose 329.13 points, or 1.29%, to 25 ,837.21. 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. It really helps new listeners find the show. Join us for another update tomorrow.

9:13For important disclosures, see the show notes and schwab.com slash market update podcast.