Data Picture Still Foggy as Shutdown's End 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 Wednesday, November 12th. With the government shutdown likely ending later this week, investors eagerly await data to add some color onto October's bling canvas of an economic picture. There's a smattering of reports ahead, but not any that are especially market-moving. The weekly MBA Mortgage Index comes before the open following a mixed set of private reports yesterday. ADP's preliminary data showed private employers shedding an average of 11 ,250 jobs a week during the four weeks ended October 25th. And the October NFIB small business optimism showed uncertainty trending lower, but economic expectations and hiring plans also down.

1:07What investors really want a crack at are the September and October employment and inflation reports from the U.S. government. September's non-farm payrolls numbers were collected prior to the shutdown and could be released once the Bureau of Labor Statistics gets the lights back on. The October data are an open question because the government was shut during the normal collection time. Either way, there almost certainly will be some fresh numbers coming down the pike with job creation front and center. Perhaps the biggest test will be the labor market data. How weak is it out there, said Nathan Peterson, director of derivatives research and strategy from the Schwab Center for Financial Research.

1:50The answer might be quite weak if ADP's numbers translate beyond the private sector, but they seldom correlate with official government data. Before data, the government needs to formally reopen. Investors will watch a vote on that in the House of Representatives expected today. House Speaker Mike Johnson can only lose two Republican votes on the bill to reopen the government, noted Michael Townsend, Managing Director of Legislative and Regulatory Affairs at Schwab. But it is expected that at least some moderate Democrats will support the measure, likely giving Johnson more wiggle room. Assuming the measure passes, President Trump would likely sign it Thursday, making it likely the government will open by the end of the week, Townsend added.

2:39The bond market reopens today after Tuesday's Veterans Day closure. Yields climbed on Monday as risk on appetite returned, pushing down the price of treasuries, which moved the opposite direction of yields. Treasuries will likely be watched closely today after results this afternoon from a 10-year note auction. Demand for that could help determine the direction of yields, with any weakness potentially sending them higher. A three-year auction on Monday found generally solid buying interest. Along with today's auction, investors await Cisco's earnings after the close. Cisco's presence extends throughout the global tech world, including cloud and semiconductors, meaning its results can be a decent barometer of the sector amid current bumpiness.

3:24Last time out, Cisco cited solid AI infrastructure orders from web companies, a category that will be closely watched today. While Disney and Applied Materials report tomorrow, with Disney providing an update on whether consumers continue to spend their extra cash on movies, streaming, theme parks, and cruises. Applied Materials is a semiconductor equipment company that disappointed investors when it reported in August, as its CEO cited increased uncertainty due to the macroeconomic and policy climate CNBC reported at the time. The Federal Reserve stays in focus today with remarks from four regional Fed presidents, as well as Fed governors Christopher Waller and Stephen Moran.

4:10Investors will also track speeches from St. Louis Fed President Alberto Moussoulem and Cleveland Fed President Beth Hammock on Thursday, followed by Kansas City Fed President Jeff Schmidt and Dallas Fed President Lori Logan on Friday. Fed policymakers seem increasingly divided about the central bank's next step in December, a meeting about a month away. Though there was some dovish commentary earlier this week, Musalim's latest comments brought a chill, as he expects a substantial economic rebound in the first quarter and said there's limited room for further rate cuts. As of late Tuesday, odds of a rate cut next month were 67.4 percent, according to the CME FedWatch tool.

4:54Though odds have vacillated since the last Fed meeting two weeks ago, chances seem to be holding near the two-thirds level. Except for the tech sector, which ran into a semiconductor roadblock after storming higher Monday, major indexes held their own Tuesday. If it weren't for tech's huge weighting, the S &P 500 index might have risen far more. Nine of 11 sectors were higher, led by defensives like healthcare and energy, but also with healthy gains for cyclicals, including financials and materials. While one day is never a trend, it was the second session in a row to see decent performance beyond the usual AI suspects.

5:37Over the last week, energy, healthcare, materials, and communication services lead the sector scorecard, with Infotech dead last and the only one down over that stretch. This could suggest continued sector rotation as investors look to shift money out of communication services and tech. Those remain the best year-to-date performers by far, with each up more than 25%, but AI valuations recently came into focus, slowing the tech rally last week before a brief surge on Monday. The number of S &P 500 companies trading above their 50-day moving average climbed just under 46 % by Monday's close and nearly 50 % by late Tuesday, up from recent lows below 40%, but still on the light side from a breadth perspective.

6:24That indicator is an important call-out because it provides some indication of strength below the surface. Checking Tuesday's stocks on the move, shares of NVIDIA fell nearly 3 % after Monday's 5.8 % climb, as the$5 trillion company continues to see volatility ahead of its earnings report a week from today. NVIDIA's losses Tuesday came as shares of CoreWeave, a company NVIDIA owns a stake in, dove 16 % following earnings. News of SoftBank selling its entire$5.88 billion position in Nvidia hurt too. I can't say if we're in an AI bubble or not, SoftBank CFO Yoshimitsu Goto said during an earnings conference call.

7:11SoftBank sold Nvidia so that the capital can be utilized for our financing, he added. Corweave lost 16 % despite reporting better than expected revenue for the third quarter. A provider of AI infrastructure, the company also reported a better-than-expected loss of$0.22 a share. The culprit was supply chain pressure related to a partner's data-centered development delay that could take a bite out of fourth-quarter revenue. Several Wall Street firms lowered their target prices. Novo Nordisk rose more than 7 percent as investors seemed relieved and lost a bidding war with Pfizer over purchasing obesity drug developer MetSyra.

7:53Pfizer ended up buying the company for up to$10 billion, Reuters reported ending the takeover battle. But Pfizer's shares also were rewarded, jumping 4.6 percent, and the entire health care sector regained some of the buying interest seen a couple months ago when there was a short-term rotation toward this part of the market. Apple's 2 percent gains, meanwhile, helped the Dow Jones Industrial Average climb more than 1 percent to a new record high not far from 48 ,000. Apple got a lift from news reports saying the U.S. and India were close to a trade deal, which might help Apple due to its heavy manufacturing footprint there.

8:32On the charts, last week's pullback brought the S &P 500 index down to its 50-day moving average for the first time since April and support held on Friday. The Russell 2000 small cap index, which looked weakest among the majors, was able to get back to its 50-day moving average line on Monday. Those two chart points could represent support on any pullbacks, with the 50-day level for the S &P 500 at 6 ,685 as of midday Tuesday.

9:03The Dow Jones Industrial Average climbed 559.33 points Tuesday, or 1.18%, to 47 ,927.96. The S &P 500 index added 14.18 points, or 0.21%, to 6 ,846.61. And the NASDAQ composite dropped 58.87 points, or 0.25%, to 23 ,468.30. 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.

10:01For important disclosures, see the show notes and schwab.com slash market update podcast.