Banks, PPI Loom After Stocks Start Week on a Roll

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 Tuesday, April 14th. A host of Wall Street bank earnings, including from industry leader J.P. Morgan Chase, await investors this morning and could provide temporary distraction from war news. This comes a day after stocks staged an impressive rally to start the week in which the S &P 500 index wiped out its losses from the war. In addition, at 8.30 a.m. Eastern Time, the government releases its March Producer Price Index, or PPI, a look at wholesale prices that could provide clues into how oil affected the costs companies pay for goods before putting them on shelves.

1:00PPI can sometimes affect consumer prices down the road if companies pass along higher costs. Earnings and data compete with news from the Middle East after the Trump administration imposed a blockade on ships heading into and out of Iran through the Strait of Hormuz. This potentially could raise tensions despite the ceasefire that expires next week. Crude oil clawed back above$100 per barrel early Monday after easing last week on the temporary truce, a move that helped propel U.S. indexes to their best week since November. Despite rising oil prices, Wall Street staged a firm rally to start the week Monday, possibly a signal that participants are looking past the geopolitical instability and oil.

1:47For the first time since the war began, the stock market has tentatively divorced itself from crude the last few sessions, after the two were closely correlated for weeks. Not every rally in oil sets off selling inequities the way it did last month, but by the dip appeared to make a comeback in recent sessions. Crude did finish higher yesterday, but below$100 for spot futures as prices eased during the session. Wall Street's lesser emphasis on crude might reflect the CME futures curve, where contracts farther out like October and November trade below$80 per barrel. This means, for now, the futures market prices in at least some relief at the pump this year.

2:31Crude traded near$65 before the war. News reports that the Trump administration might be willing to talk again to Iran before the ceasefire ends after weekend talks accomplished little also gave stocks a lift Monday.

2:50If it weren't for the conflict, banks would likely have a courtside seat today. Analysts expect strong earnings growth from banks this quarter. The rebounding initial public offering or IPO market, solid merger and acquisitions or M &A activity, resilient net interest income and strong trading revenues are expected to bolster results. But increased economic uncertainty due to the war and signs of resurgent inflation may lead forward guidance to be more important than first quarter data. Investors will watch trading metrics closely. Goldman Sachs reported Monday that its first quarter equities trading revenue rose 27 % year-over-year, but fixed income trading revenue fell.

3:35This metric will also be key for other major Wall Street banks, including JPMorgan Chase and Citigroup Today and Tomorrow. Trading revenues was strong the fourth quarter of last year. One question after Goldman's results yesterday is whether the company's shortfall in fixed income trading was its own issue or industry-wide, Briefing.com noted. As far as headwinds, investors will likely be focused on credit quality amid concerns about inflation, private credit, and the labor market. Overall, analysts look for S &P 500 earnings growth of 12 % to 13 % year-over-year in the first quarter and haven't made many downgrades in those estimates over the last few weeks.

4:20This means the bar is set fairly high. Besides banks, big reports to watch this week include chip names ASML and Taiwan Semiconductor Manufacturing, along with Netflix. Next week brings the first mega-captor report, Tesla.

4:40Turning to data, monthly headline PPI is seen up a sharp 1.2 percent, according to briefing.com consensus. CORE, which excludes food and energy prices, is seen at 0.4%. Like last week's Consumer Price Index, or CPI, energy is seen driving headline PPI much higher in March. CPI wasn't a complete wash, however, showing some moderation in housing price gains. Monday's economic news was light, though it included existing home sales for March, came in just below consensus views at a seasonally adjusted annual rate of 3.98 million. The calendar for the rest of the week isn't as packed as the last couple, with jobs and inflation data on the light side.

5:28Import and export prices due tomorrow might have implications for product costs, however. Stay tuned tomorrow for updated economic data from China, including a reading on first-quarter gross domestic product or GDP growth. As of late Monday, odds of a rate pause at this month's Fed meeting were near 100%, which would make April the third straight meeting to keep the target range between 3.5 % and 3.75%. Chances of any rate cut this year stood near 30 % late Monday, with the market pricing in little chances of a hike any time in 2026, according to the CME FedWatch tool. Near-term swings in yields will likely continue, given the ongoing talks of a potential end to the conflict and on how open or closed the Strait of Hormuz is, said Colin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research.

6:25The implied probabilities of rate cuts at upcoming meetings can change by the day or week, but we are keeping our outlook simple. We expect the Fed to remain on hold for several meetings. If inflation is expected to remain elevated for longer than expected, the Fed could stay on hold all year. Treasury yields gave back some gains Monday on hopes for peace. They'd risen after the blockade news Monday and after last Friday's hot CPI. However, it's possible investors will look through dramatic CPI and PPI headline increases in the near term and ideas that are mainly energy-related and could diminish once the war is settled.

7:08This goes against some evidence that inflation was a problem even before the war. Still, market participants may not want to be sanguine about where crude and gasoline prices go from here, even if the conflict ends in the next few weeks. Some of what was destroyed, particularly part of a liquid natural gas field in Qatar, has put energy production in a hole that's going to take years to build back. So even if the war ends, again, we're not at the end of the economic implications, said Lizanne Saunders, chief investment strategist at the Schwab Center for Financial Research, in a podcast earlier this month.

7:49In trading Monday, major indexes posted solid gains on hopes for peace progress. The S &P 500 index finally topped the level. It closed out one day before the war began and is only about 1 % below all-time highs posted in January. It's now up 9 % from the intraday March 30 low. Small caps outperformed other indexes, possibly boosted by hopes for an improved domestic economy. Nine of 11 S &P 500 sectors rose Monday, with only consumer staples and utilities landing in the rough. Cyclical sectors that tend to perform well in a growing economy performed best. Financials and Infotech both advanced more than 1%, followed by communication services and industrials.

8:39In individual trading Monday, Goldman Sachs fell 2%, despite reporting better-than-expected quarterly earnings, Though overall revenue was solid, trading revenue in Goldman's fixed income, currency, and commodity operations fell short of analyst estimates. Trading revenue in equities showed firm growth, and the investment banking business had a healthy quarter. Best Buy dropped 2.5%. Goldman Sachs downgraded shares to sell from Buy, seeing risk to the company's sales as higher memory prices worked their way into the price of laptops and computers. The company also faces margin compression as customers potentially trade down to lower-priced models, the analysts said.

9:25CarMax rose nearly 6 percent ahead of today's earnings report. ConAgra dropped 4 percent on news its CEO is stepping down next month. Fastenal fell almost 7 percent despite announcing earnings and revenue that met Wall Street's expectations for the industrial and construction supply distributor. As Briefing.com notes, Fastenal often sets the tone for earnings from industrial and manufacturing names. Dell rose 7%, still gaining from AI momentum ahead of earnings from major chip firms. Oracle surged 12 % as software names rebounded from recent AI-driven weakness. ServiceNow, AppLovin, and Adobe also gained.

10:10Chip and chip-related stocks, which set an all-time sector high Friday, built on that Monday with big gains for names like Intel, CoreWeave, Arm Holdings, Broadcom, and SanDisk. There's been a bit of a rotation the last two weeks into some tech sector stocks that sagged earlier this year. One of those on Monday was Microsoft, which climbed 3.6%. And Revolution Medicines soared 40%, lifted by positive results for a Phase III trial of its pancreatic cancer drug. The company plans to seek U.S. food and drug administration approval soon, CNBC reported.

10:54The Dow Jones Industrial Average surged 301.68 points Monday, or 0.63%, to 48 ,218.25. The S &P 500 index climbed at 69.35 points, or 1.02%, to 6 ,886.24, and the Nasdaq Composite added 280.84 points, or 1.23%, to 23 ,183.74. This has been the Schwab Market Update podcast. To stay informed, visit www.schwab.com slash marketupdate 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.

11:53For important disclosures, see the show notes and schwab.com slash market update podcast.