Catalysts Light Before Weekend After Record Highs

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, July 25th. As busy as this week has been, next week is busier. But before that, investors face some Friday housekeeping, as buzz over a possible trade agreement with the European Union continues, and durable goods orders lie ahead. Next week brings a Federal Reserve meeting, expected to be light on headlines. Investors anticipate less than 3 % odds of a rate cut, according to the CME FedWatch tool. But the market builds in 62 % odds of at least one cut by September. President Trump toured the Fed late yesterday with Fed Chairman Jerome Powell.

1:01The week ahead also features earnings from Apple, Amazon, Microsoft, and MetaPlatforms, as well as the government's first look at second quarter gross domestic product and the June Personal Consumption Expenditure, or PCE, price index. Market participants may want to catch up on sleep this weekend to prepare for the deluge. Before all that, durable goods orders for June arrive at 8.30 a.m. ET today and are seen falling 11 % month over month. That might partly reflect tough comparisons to May, which featured a 230 % increase in orders for non-defense aircraft and parts. Excluding transportation, durable goods orders rose 0.5 % in May, and that should be the part of the report people study when it comes out.

1:51Tariff policy and companies' reaction to it have helped skew this report and some others the last few months. Several major media outlets reported Thursday that a U.S. trade deal with the European Union that would set tariffs at 15 % on European imports could be near. President Trump's deadline is August 1st, and South Korea reportedly was interested in a deal like the one Japan got earlier this week, with 15 percent tariffs. Europe is preparing reciprocal tariffs on U.S. products, ranging from Boeing planes to Kentucky bourbon, if a deal doesn't get done on time, the New York Times reported. Based on trade deals to date, tariffs appear to be in the 15 to 20 percent range, not the 10 percent some bulls had desired.

2:42U.S. auto companies complained that the 15 percent tariffs on Japanese car imports give Japan carmakers an advantage over U.S. manufacturers, which must pay 25 percent tariffs on millions of cars built in Canada and Mexico with U.S.-made parts. The meme craze from a few years ago that returned earlier this week died down a bit Thursday. Investors might want to consider caution around these highly volatile names. Kohl's was one of them, and it rose again yesterday. In earnings-related action, semiconductor firm Intel shares initially popped in post-market trading Thursday afternoon, despite a mixed quarter.

3:25The company missed analysts' earnings per share estimate but beat revenue forecasts. It also predicted below-consensus third-quarter earnings growth but above-consensus revenue. The company recently completed a workforce reduction. Investors might gear up for potential volatility next week after the SIBO Volatility Index, or VIX, fell below 15 on Thursday for the first time since February. A low VIX can sometimes be a contrary signal, and the last time VIX dropped under 15 in late February, stocks ran into trouble the next month or two. Of course, past isn't precedent. In data yesterday, weekly initial jobless claims continued to slide, hitting a three-month low of 217 ,000.

4:14Continuing claims slipped a bit, but remained near three-year highs, perhaps a sign of light hiring. Investors await the July non-farm payrolls report a week from today. Early forecasts are for a drop to around 110 ,000 jobs added, down from 147 ,000 in June. But the data has a recent history of surprising to the upside. Wall Street couldn't find much traction Thursday, perhaps awaiting fresh catalysts to justify moving higher. With so much data, earnings, trade news, and Fed talk straight ahead, It wouldn't be shocking if stocks consolidate a bit over the next day or two in this slight break from heavy news.

4:59Friday and Monday both feature relatively light calendars. Of course, any trade news, good or bad, could interfere with that theory. Trading could also be cautious on worries about August 1 approaching with major deals unannounced. Though action was lackluster yesterday, both the S &P 500 index and the NASDAQ composite registered new all-time high closes. Old standbys, infotech, and communications services constituted two of the three leading sectors Thursday, thanks in part to Alphabet and strength in the semiconductor space. But rising yields after Thursday's better-than-expected jobless claims data hurt rate-sensitive stocks, including those in housing, travel, and retail spaces.

5:47Small caps also fell, possibly on the yield rise. Airline stocks, including American Airlines and Southwest Airlines, lost significant altitude after their earnings and guidance disappointed investors. Other travel-related stocks fell in sympathy. Housing-related stocks also dipped thanks to worse-than-expected June new home sales reported yesterday. At a seasonally adjusted annual rate of$627 ,000, they were short of the Briefing.com consensus of$650 ,000 and just up slightly from$623 ,000 in May and down more than 6 % from a year ago. Prices slipped too, perhaps reflecting builder discounts in a low-demand environment.

6:35Tesla plunged Thursday as investors seemed to seize on CEO Elon Musk's comments during Tesla's earnings call. Musk said, we probably could have a few rough quarters, due partly to tariffs and the expiry of federal electric vehicle tax credits. IBM fell despite beating consensus on revenue and earnings. The important software revenues category rose 10 percent but just missed expectations in dollar terms. Weakness in IBM and UnitedHealth, which disclosed its complying with Justice Department requests, hurt the Dow Jones Industrial Average Thursday. But AI-related semiconductor stocks got a boost from forecasts for heavier capital expenditures from Alphabet.

7:20Micron received an initial lift after a memory chip rival, South Korea's SK Hynix, forecast that its sales of high-bandwidth memory will double this year, Barron's noted. Alphabet also climbed Thursday, though it remains one of the weaker-performing megacap stocks so far this year amid regulatory worries and concerns about competition for search. Alphabet's search business looked strong, potentially a sign of solid advertising demand that could work into results from meta-platforms when it reports next week. Cloud growth of 32 percent year-over-year was up sequentially and might bode well for cloud powerhouses Microsoft and Amazon when they report in coming days.

8:06Norfolk Southern and Union Pacific shares were under scrutiny yesterday amid fresh media reports of a possible merger. The reports originally surfaced earlier in the week and helped ignite a rally in Norfolk Southern. A merger would link Union Pacific's network across the western U.S. with Norfolk's east coast routes, Bloomberg noted. However, regulatory approval could be a challenge, as one argument against mergers is the inflation risk of concentration. The Dow Jones Industrial Average dropped 316.38 points Thursday, or 0.70%, to 44 ,693.91. The S &P 500 Index gained 4.44 points, or 0.07%, to 6 ,363.35.

8:57and the Nasdaq Composite climbed 37.94 points or 0.18 % to 21 ,057.96. This has been the Schwab Market Update podcast. To stay informed, visit schwab.com slash market update or follow for free in your favorite podcasting app. And if you like what you've heard, please consider leaving us a rating or review. It really helps new listeners find the show. Join us for another update Monday.

9:36For important disclosures, see the show notes and schwab.com slash marketupdatepodcast.