Alphabet, Tesla Results Mulled as Intel Awaited

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, July 23rd. Still mulling earnings from Alphabet and Tesla, investors turn their focus to chip giant Intel this afternoon and continue fretting about inflation as oil reached new one-month highs. Alphabet and Tesla results clashed late Wednesday. Alphabet trounced analysts' earnings per share estimates, and Tesla fell short. Alphabet shares pivoted near unchanged initially in post-market trading. Tesla initially fell nearly 3%. Alphabet's second quarter earnings surged nearly 300 % annually to$9.11 per share, partly reflecting equity investment gains, while revenue rose 24.2 % to$119.8 billion.

1:12Analysts had expected earnings per share of$2.89 on revenue of$116.9 billion. Alphabet's capital expenditures last quarter were nearly$45 billion, in line with expectations and closely watched due to nerves around AI spending. Alphabet had a solid beat on revenue and cloud growth of 82 % was stellar, said Nathan Peterson, director of derivative research and strategy at the Schwab Center for Financial Research. That was sequentially better than cloud's impressive 63 % first quarter growth and may have bullish implications for Microsoft and Amazon when they report, assuming Google Cloud didn't take share from them.

1:55One possible wrinkle was Alphabet's search business, which rose 17 % to slightly miss expectations in a category that normally delivers a solid beat. When Alphabet last reported, the company raised its 2026 capital expenditure estimate to as much as$190 billion and said it expects to significantly increase that in 2027. The press release didn't say anything about this metric, so as of this riding, investors awaited the call. Tesla stock fell in early after-hours trading after the company topped analysts' consensus revenue forecasts but missed earnings-per-share estimates. The EV giant earned$0.33 a share on revenues of$28.2 billion in the quarter versus the expected$0.51 per share on revenues of$25.1 billion.

2:47Gross margins also came in well below estimates at 16.8 % versus the expected 19.4%. Active full self-driving subscriptions were a bright spot, surging 56 % from a year ago to$1.48 million. Texas Instruments and IBM also reported late Wednesday with a solid consensus beat for Texas Instruments and better-than-expected guidance. IBM pre-announced disappointing results last week, but the shares rose more than 3 % in after-hours trading after the company reported earnings of$2.93 a share. Intel reports later today keeping focus on chipmakers. The sector has taken some punches lately amid worries that AI spending could level off.

3:34Investors will likely want to carefully check Intel's guidance and listen for tone on the earnings call. Three more Megacaps report next week. As Hyperscalers report, investors look for return on investment from AI that shows spending is paying off with revenue growth, user adoption, or other measurable returns.

3:59Beyond mega-cap results, lack of progress resolving the war, and new threats to oil shipping sent crude prices to fresh one-month highs Wednesday and putting a cloud over Wall Street. More expensive crude doesn't only show up in gas prices that again topped$4 a gallon nationwide this week. It's also an element of rising treasury yields that make borrowing more expensive. Both short - and longer-term U.S. Treasury yields have risen relentlessly, both to near-annual highs. Though it's possible some of the strength reflects solid economic data, inflation worries also play a major part. The European Central Bank, or ECB, meets today and isn't expected to raise rates, though a hike appears more likely in September, Reuters reported.

4:48The Federal Reserve gathers next Tuesday and makes its rate decision Wednesday, but won't issue new economic or rate estimates. Chances of a hike next week have been all over the map, rising to 33 % by late Wednesday from 11 % a week ago, according to the CME FedWatch tool. Rate hike chances appear to be tracking oil prices. Oil climbed relentlessly this week and is now above$86 per barrel as Middle East clashes and threats continued Looking ahead, traders see much higher chances of a September Fed rate hike and peg chances of at least one hike before year-end at 90 % The Fed will likely stay on hold next week at 3.5 % to 3.75 % Volatility is in check, too, with the SIBO Volatility Index, or VIX, under 17 by late Wednesday, despite the war's impact.

5:45Any move towards 20 might draw attention, as that's traditionally a level reached when uncertainty ramps up. Futures trading shows VIX topping 20 by October. Though VIX stayed in its lane, it's not so smooth below the surface. A rotational market is ongoing with historically high dispersion and historically low correlations, said Lizanne Saunders, chief investment strategist at the Schwab Center for Financial Research. Only the energy sector has more than 50 percent of its stocks trading at four-week highs. All this shows churn as investors seem uncertain where to focus. Earnings season, the Fed meeting, and the July jobs report loom, perhaps contributing to the sense of dysregulation.

6:34The two-year note yield hit a new 2026 high on Tuesday, and the 10-year yield is just two basis points below its 2026 high at 4.66%, up more than 25 basis points in just a few weeks. The cycle high on the 10-year is roughly 5%, but a move above 4.8 % increases the likelihood of a volatility event, Peterson said. Major indexes closed mixed Wednesday in a quiet session awaiting earnings and remained not far from peaks posted last month. Small caps fell as yields rose, while software firms Tesla and Amazon weighed on the Nasdaq. Volume stayed low, and decliners outpaced advancers through midday. Six of 11 S &P 500 sectors climbed Wednesday, the second day in a row with that result.

7:28Some of the players shifted positions, however, with more defensive areas like utilities and staples advancing after falling Tuesday. The utilities' strength appeared to reflect ideas that power demand is growing due to AI.

7:47Among individual movers Wednesday, Supermicrocomputer surged nearly 20 % after it said late Tuesday it expects gross margin to nearly double thanks to a favorable customer and product mix. Other server firms also rose, including Dell and Hewlett-Packard Enterprise. GE Vernova tumbled 8 % after the company missed consensus on earnings per share. Revenues topped analyst estimates, however, and the company raised its fiscal 2026 revenue guidance and free cash flow. AT &T climbed 3 % as earnings per share topped consensus, and revenues came in as expected. The company reaffirmed annual guidance. Chip and AI infrastructure stocks kept rising ahead of hyperscaler earnings.

8:36Memory chip firms rose less than some of the AI chip makers like NVIDIA and Advanced Microdevices. After the Wall Street Journal reported AMD signed a major deal with Anthropic. Software firms went the opposite direction of chips, seeing more weakness for ServiceNow, Palantir, Salesforce, and Adobe. ServiceNow shares rebounded initially in post-market trading after it beat consensus and raised subscription guidance. And restaurants including Chipotle, Sweetgreen and Wendy's lost ground as concerns about food safety appeared to hurt business across the industry.

9:17The Dow Jones Industrial Average slipped 6.10 points or 0.01 % lower Wednesday to 52 ,218.58. The S &P 500 Index lost 10.24 points, or 0.14%, to 7 ,498.96. And the NASDAQ Composite shed 146.30 points, or 0.57%, to 25 ,690.90. 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.

10:17For important disclosures, see the show notes and schwab.com slash market update podcast.