Broadcom Results Assessed After Stocks Post Record

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.

0:18I'm Colette O 'Claire, and here is Schwab's early look at the markets for Friday, December 12th. After Oracle's earnings wiped out a rally ignited by the Federal Reserve's rate cut and sent the Nasdaq lower Thursday, investors regrouped today to mull results from Broadcom. The AI titan reported late Thursday and topped analyst expectations all around, including guidance. Broadcom's results came after a mixed performance on Wall Street that saw both the S &P 500 Index and Dow Jones Industrial Average post new closing highs. That was done without much participation from tech as AI worries persisted.

0:58The question today is whether Broadcom's results can give tech stocks a lift. Broadcom reported revenue just above$18.02 billion and earnings of$1.95. Both easily surpass consensus, and the company sees first-quarter revenues of$19.1 billion. That's well above the fact-set consensus of$18.38 billion. Shares rose 3 % initially in post-market trading. Earnings and data are sparse today and Monday, shifting attention squarely to next Tuesday before the open, when investors finally get some monthly jobs data. The non-farm payrolls report is the first in more than two months due to the government shutdown, and investors go in with a dim view of job creation that only slightly improved with this week's robust job openings data.

1:49That said, the Fed's economic projections paint a very rosy picture for 2026 and 2027. Growth estimates rose from September's projections while inflation estimates fell. Unemployment is seen down slightly at 4.4 percent next year from the projected 4.5 percent level this year. The economic backdrop is rather firm, said Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research, or SCIFR. And that might sound counterintuitive, but it mostly boils down to the fact that we still have this split between the hard data, so actual economic data like GDP, and the soft data, such as anything that's just survey-based.

2:34Fed officials penned in just one rate cut in 2026, and the CME FedWatch tool pegged January rate cut odds at 24 % as of late Thursday. By the end of 2026, the futures market is pricing about a 70 % chance of the Fed funds rate falling to a range of 3 % to 3.25 % or below. This puts market participants in a more dovish mode than the central bank, which kept its rate projection for the end of 2026 unchanged from its September estimate at 3.4%. Rate cuts can help smaller companies that rely more on borrowing, as well as other rate-sensitive firms like homebuilders or automakers. Lower rates can also hurt the U.S.

3:18dollar, making goods manufactured here more alluring abroad. In addition, they removed some pressure from the federal government and its debt payments, now one of the top expenses for Washington. Still, a weaker dollar can push inflation higher, though the Fed sees inflation getting back toward its 2 % goal by 2027.

3:41Lenar, a homebuilder, is one of the few major earnings reports on tap next week. This follows results from fellow homebuilder Toll Brothers early this week that seem to displease investors. The subsector showed some flash late this week after the rate cut. In data Thursday, weekly initial jobless claims jumped to 236 ,000 last week from 192 ,000 the week before. Some of these gyrations could reflect this short Thanksgiving holiday week and may be discounted, and there was a big drop in continuing claims to below 1.9 million. However, it may take a few more reports to see if this was jumbled due to the holiday or a new trend, as continuing claims recently hit four-year highs.

4:27Stocks vacillated Thursday, with tech and AI names stumbling early on Oracle's results and the communication services sector finishing last in sectors amid pressure on Alphabet. Shares of that make a cap dove more than 2 percent after OpenAI, which competes with Google's Gemini 3, announced a new AI model that the privately held firm said is better at enterprise tasks. One thought, according to Investor's Business Daily, is that the new model could also challenge the employee productivity software market dominated by Microsoft and Google. In an interview Thursday on CNBC, OpenAI CEO Sam Altman sounded open to eventually sharing information on the company's revenue.

5:10That would likely please investors worried about finances at the company that's so deeply wrapped into the AI space. Technically, about 54 % of S &P 500 stocks trade above their 50-day moving averages, near normal for market breadth, and a sign that rotation into stocks beyond mega caps continues but not at a frantic pace. Advancing shares narrowly outpaced declining ones through midday Thursday for the week, and the momentum indicating Relative Strength Index, or RSI, for the S &P 500 index is positive. However, RSI shows signs of divergence, indicating chances of a possible trend reversal. Thursday's S &P 500 close at 6 ,901, about 10 points above the old closing high, might be seen as technically constructive.

6:03Still, signs point to a consolidating market waiting for its next catalyst, not necessarily one ready to spring. Treasury yields retreated from their midweek three-month highs but remained elevated. The 10-year yield fell two basis points Thursday to 4.14 percent. The yield curve expanded as short-term yields more influenced by Fed policy fell more. Sector-wise, cyclicals that tend to do best in a growing economy led the charge Thursday, helped by the Fed's economic outlook and dot plot that showed another rate cut possible in 2026. Materials, financials, and industrials topped the scorecard, while Infotech fell more than 0.5%.

6:49Visa and MasterCard were two of the biggest gainers, reflecting what appears to be a strong shopping season and hopes for more consumer spending next year in a lower rate and tax environment. The combination of the Fed's updated dot plot, which included higher GDP growth and slightly lower inflation expectations, coupled with Oracle's increased CapEx spending, appears to be contributing to continued money flow toward more cyclical, non-tech areas of the market, said Nathan Peterson, director of Derivatives Research and Strategy at Skiffer. Retailers including Nike, Macy's, Ralph Lauren, Target, and Walmart all had strong Thursdays.

7:31So did airlines and restaurants. Banks also outperformed the broader market. Oracle fell 11 percent but finished off its lows. The company's results late Wednesday came up short on revenue, though earnings per share easily topped expectations. Drilling down, investors seem disappointed in cloud growth and worried about the firm's higher spending forecast. Oracle's pain weighed on shares of NVIDIA, which fell 1.5 percent Thursday. Semiconductor shares as a group fell 0.75 percent. Netflix revived almost 1.5 percent Thursday after falling four straight sessions as investors focused on the potential acquisition of Warner Brothers Discovery.

8:14Some analysts call the deal expensive and suggest it could be a response by Netflix to combat weak engagement trends, investors Business Daily reported. They also cite regulatory risks. While Disney climbed nearly 2.5 percent after CNBC reported the company is making a$1 billion investment in OpenAI, this might be another reason for pressure on Google Thursday. The Dow Jones Industrial Average powered 642.26 points higher Thursday, or 1.34%, to 48 ,704.01. The S &P 500 Index climbed 14.32 points, or 0.21%, to 6 ,901 even. And the Nasdaq Composite dropped 60.30 points or 0.26 % to 23 ,593.84. Small caps finished up more than 1 % to another record high.

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9:44For important disclosures, see the show notes and schwab.com slash market update podcast.