CPI Next with Focus on Ceasefire as Weekend Looms

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, April 10th. Geopolitics remain firmly in the headlines, even as investors examine key inflation news due at 8.30 a.m. Eastern Time. The March Consumer Price Index, or CPI, will be the first government inflation data collected during the war and after oil prices soared. The weekend approaches with a ceasefire looking fragile, and the traffic through the key Strait of Hormuz still slow, if not stalled. Crude oil prices neared$100 per barrel again yesterday, as Iran and the U.S. traded ceasefire violation accusations, and Iran claimed Israel's attacks on terror cells in Lebanon violated the agreement.

1:02Though Israel said it sought discussions with Lebanon, it added it doesn't believe strikes on Hezbollah are covered by the ceasefire, media reports said. All this makes for possible treacherous geopolitics. Negotiations between the U.S. and Iran are expected to resume this weekend, and progress is likely to receive close market scrutiny. Considering markets are closed to the next two days, caution could be the watchword on Wall Street today, possibly keeping rallies capped. Profit-taking pressure can't be rolled out after the last two days of solid gains for equities. The S &P 500 index and NASDAQ composite are up seven straight days.

1:46About 800 ships remain stuck in the Persian Gulf as Iran and the U.S. continue haggling. The ceasefire may be fragile due to disagreements, including the desire of Iran to continue to control traffic, either by granting approval to vessels and or charging fees for transit, said Michelle Gibley, Director of International Equity Research and Strategy at the Schwab Center for Financial Research, or SCIFR. While hostilities may end, the impact on energy prices and the economy is likely to linger. The initial market relief rally may be followed by more volatility in coming days. For March CPI, analysts expect a sharp 0.7 % monthly jump in the headline number and 0.3 % growth in core CPI that excludes food and energy.

2:36Annual headline CPI is seen up 3.3 % year-over-year, but just 2.7 % for core CPI. The headline figures for March reflect prices during the war after oil soared above$100 a barrel and U.S. gasoline prices climbed above$4 per gallon. If inflation has a three-handle in March, real-wage growth might be close to zero or even negative, said Kevin Gordon, head of macro research and strategy at Skiffer. Nominal average hourly earnings for non-supervisory workers fell to 3.4 percent in March. With so much volatility last month as the war started and oil surged, it might be best to take near-term data with a grain of salt.

3:22April's data due next month might be more key, showing where things landed after the first rumblings of conflict played out in the market. Still, CPI is a good read on housing prices, as it's more weighted to that market than yesterday's personal consumption expenditures or PCE prices data. The housing aspect of CPI might be interesting amid signs that rental expenses are finally calming down. Yesterday featured an abundance of data. PCE headline and core prices increased 0.4%. Analysts had expected 0.4 % headline growth and 0.3 % for core. Annual core inflation, closely watched by the Federal Reserve, climbed 3 percent in line with expectations.

4:13Inflation isn't showing signs of slowing, which is concerning given the situation in the Middle East, said Cooper Howard, director of fixed income research and strategy at Skiffer. The longer oil remains elevated, the greater the possibility that it translates into higher inflation going forward. Since we're already at levels that are above the Fed's 2 % target, it's likely concerning for the Fed. PCE is the inflation meter the Federal Reserve watches most closely. While yesterday's data might not get as much credence as some PCE reports due to the pre-war data collection, the 0.4 % PCE price rise occurred in February, reminding investors that inflation isn't just oil-related.

4:57The government's final fourth-quarter gross domestic product estimate fell to 0.5 percent from the previous 0.7 percent, another sign of economic weakness. Combined with recent higher oil and weaker personal income, it raises concerns about consumer health. Another aspect of the GDP report raised concern about the health of businesses as non-residential fixed investment, a measure that covers business capital expenditures, continued to slow. It has now moved from 10 % to 7 % to 3 % to 2 % over the last four quarters. There had been a lot of hope for business capital spending to be a driver of the economy, and that's where you're seeing the most disappointment, said Lizanne Saunders, chief investment strategist at Skiffer, in a Thursday interview on the Schwab Network.

5:51The last Atlanta Fed GDPNow estimate for first-quarter GDP was an anemic 1.3 percent, trending down over the last few weeks as investors await the government's first official first-quarter GDP estimate later this month. In other data Thursday, initial weekly jobless claims rose to 219 ,000, above recent levels, but not likely to raise eyebrows. As of late Thursday, odds of a rate pause at this month's Fed meeting remain 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 Thursday, up from 23 % a week ago, and should be tracked closely after today's CPI data.

6:43Treasuries finished little changed yesterday across the curve, with the 10-year yield hovering at 4.29%. That's roughly the middle of its recent range. It's not seen likely to drop below 4 % anytime soon, barring a recession. A 30-year Treasury bond auction Thursday drew soft demand, Barron's reported. The SIBO Volatility Index, or VIX, a barometer of investor fears, fell below 20 on Thursday for the first time since the war began, trading near 19.66 late in the session. That's below the historic average near 20. Any sudden move higher in VIX could be a warning for bulls in the equity market. First quarter earnings season kicks off in earnest next week, starting with Goldman Sachs on Monday and followed by JPMorgan Chase and several other major banks the next day.

7:37Analysts polled by Faxet expect the financial sector to deliver 15.1 % year-over-year earnings growth in the first quarter. The sector delivered just 6 % year-over-year earnings growth during the same period a year ago. Trading revenues and net interest income, or NII, remain the core drivers of earnings results. NII had been growing, but there are signs the trend could be slowing as the yield curve narrows. The final pre-earnings season S &P 500 earnings outlook from FactSet is likely to run later this morning. Its most recent estimate was 13.2%. Earnings guidance could be cloudy this coming quarter, with companies unsure what to expect in a volatile geopolitical climate.

8:24In trading Thursday, major indexes rallied again, but less than 1%, down from Wednesday's parabolic moves. Stocks got a midday lift when the Associated Press reported that Israel authorized direct negotiations with Lebanon in a possible boost to ceasefire efforts. The caveat is volume, which remained well below average at the New York Stock exchange as of midday Thursday, raising questions about convictions behind the two-week rally. The major indexes are on pace to finish higher for a second straight week after falling five straight weeks through the end of March. Seasonally, April tends to be a more bullish month, which could explain some of the recent strength.

9:09Technically, the S &P 500 index topped its 200-day moving average of 6 ,655 on Wednesday, then surged past its 100-day moving average of 6 ,804 on Thursday. The quick recovery from technical weakness suggests there's still a lot of short-term money in the market, and quick swings could continue. All the two S &P 500 sectors rose Thursday, led by cyclical ones like discretionary and industrials. Communication services got a lift from Meta's rally. Energy finished lower despite rising crude. Checking Thursday's individual performers, Marvell Technology climbed almost 5 % following an upgrade by Barclays to overweight from equal weight.

10:00Barclays believes the company's optical business could grow 90 % for this year and next, even with some market share shift to Broadcom. Amazon climbed sharply after announcing new investments in data centers and saying its custom chip business is strong, while Meta gained for the second straight day on its$21 billion AI infrastructure deal with CoreWeave and its announcement of an AI model on Wednesday. Shares of CoreWeave also climbed. Another tech firm, SanDisk, rose 9 % after an analyst raised his price target on the semiconductor stock retail firms lululemon ralph lauren macy's and under armor performed well on thursday solid earnings and guidance earlier this week from levi strauss might be a factor crypto related firm circle internet group plunged nine percent on a downgrade from compass point software shares which failed to gain wednesday despite the markets rally remained under a cloud thursday as adobe and Salesforce lost more ground.

11:12Constellation brands zoomed to 8 % gains after the marketer and producer of beer, wine, and spirits reported better-than-expected quarterly results but lower than expected fiscal 2027 earnings per share guidance, citing an operating environment that remains dynamic.

11:33The Dow Jones Industrial Average gained 275.88 points Thursday, or 0.58%, to 48 ,185.80. The S &P 500 Index added 41.85 points, or 0.62%, to 6 ,824.66, and the NASDAQ composite climbed 187.42 points or 0.83 % to 22 ,822.42. 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.

12:37For important disclosures, see the show notes and schwab.com slash marketupdatepodcast.