Disney Up Next Following Firm Cisco Results

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 Thursday, November 13th. Consumer sentiment is near its lowest level in years, an auspicious time for one of the largest U.S. consumer-driven firms to report earnings, but that's what investors get this morning when Walt Disney dishes out quarterly results. Eyes also remain on Washington, where the House voted late Wednesday on a plan to reopen the government, possibly putting the lights back on later this week. The question is when and whether investors received the data they missed when offices were shut for more than 40 days.

0:55Jobs data especially is crucial after a mixed tone from several private jobs reports over the last few weeks. Assuming the shutdown ends today, the Bureau of Labor Statistics is likely to release a schedule of when we'll get the reports that we missed either late this week or early next week, said Cooper Howard, Director of Fixed Income Research and Strategy at the Schwab Center for Financial Research. We expect much of the same. The labor market is softening and inflation continues to remain above target. The Federal Reserve will also scrutinize these data as it prepares for next month's meeting.

1:32A futures market prices in about two in three chances of another rate cut, according to the CME FedWatch tool. However, traders could be getting ahead of themselves, especially if inflation stays stubborn. Any indication of the Fed holding back if it starts to emerge might form a barrier for the stock market rally.

1:53For now, investors seem comfortable dipping their toes back in following last week's Wall Street retreat. Much of the weakness then came in the tech sector amid concerns about AI valuations. Though those aren't going away, soothing news arrived yesterday as advanced microdevices shared strong financial guidance and positive sentiment about AI demand at its analyst meeting. This afternoon brings another piece of the puzzle for AI ahead of next week's NVIDIA earnings. Applied Materials, a semiconductor equipment firm, reports after the close, and focus could be on its guidance after that metric disappointed investors last time the company reported.

2:34That guidance reflected macroeconomic issues, but perhaps some concern faded now that trade tensions between the U.S. and China eased. Earnings season picks up next week as major retailers like Walmart, Home Depot, and Target report. This comes amid those weak consumer sentiment numbers raising concerns about holiday spending. However, the National Retail Federation said last week it expects retail sales this month to grow between 3.7 % and 4.2 % over a year ago, reaching$1 trillion for the first time. Consumers are cautious, the Federation said, but fundamentally strong. Earnings and guidance from big-box stores next week could reinforce that or raise new questions.

3:21Before that, Disney shares results this morning ahead of the opening bell. The company's earnings can be a revealing barometer of consumer health, reflecting how much people want to spend on cruises, theme park visits, movies, and streaming video. Last time out in August, Disney fell short of analysts' revenue estimates despite growth in theme park revenue. Streaming video was also solid that quarter, but Disney struggled in the traditional TV bundle, CNBC reported at the time. The company's customers were doing very, very well, a Disney executive told CNBC then. Investors likely want to know if Disney feels the same way now.

4:01Consensus for Disney earnings is$1.05 per share, with revenues seen up less than 1 % at$22.7 billion. Cisco reported earnings late yesterday that narrowly edged above consensus views for both earnings per share and revenue. Guidance also came in above what Wall Street had expected. Shares climbed 4 % in preliminary post-market trading after climbing 3 % Wednesday heading into its results. The Fed remains on today's scorecard with remarks from St. Louis Fed President Alberto Musolem and Cleveland Fed President Beth Hammock. Investors will also track speeches tomorrow from Kansas City Fed President Jeff Schmid and Dallas Fed President Lori Logan.

4:46The remarks from Schmidt could be interesting considering he dissented on the Fed's decision late last month to cut rates by 25 basis points. Though a 10-year Treasury note auction saw lackluster demand Wednesday, Treasury yields mostly fell after the market closure for Veterans Day, hurt by ideas that fourth-quarter U.S. growth might be slowed by the government shutdown. The benchmark 10-year yield dipped four basis points to 4.07%, the lowest close since October 29th. That said, yields have traded in a very narrow range over the last two months, between roughly 4 % and 4.15 % for the 10-year.

5:27With inflation stubborn, despite a backdrop of diminishing labor demand and climbing layoffs, Schwab's Howard says investors should stay up in credit quality and stick to a benchmark duration. Major indexes treaded water Wednesday as an early rally in tech quickly faded. The Nasdaq composite fell for the second straight day, but the S &P 500 index just managed a fourth consecutive higher close. The Dow Jones Industrial Average kept its momentum and topped 48 ,000 for the first time. Looking at sectors, Infotech managed a slightly higher finish, but Wednesday was another session that likely pleased investors looking for room to rally in sectors less exposed to the mega caps.

6:11Healthcare, materials, and financials have all been on a roll this week. Each climbed more than 1 % Wednesday. Banks appeared to get a boost from CNBC reporting that leaders of some of the biggest U.S. banks would dine with President Trump Wednesday night. Healthcare, meanwhile, seems to be the beneficiary of some rotation into more defensive sectors lately, while material stocks, including steel and mining firms, got support from hopes for more infrastructure spending as the government reopens. The move into health and staples recently might not simply be a defensive one, but could also reflect investors looking for lower valuations.

6:49The number of S &P 500 companies trading above their 50-day moving average continued to creep higher to 52 % by late Wednesday. That's up from recent lows below 40%, but still on the light side from a breadth perspective. That indicator is important because it provides some indication of strength below the surface. With mega cap stocks mostly lower Wednesday, it's positive to see breadth moving up. Checking stocks that moved Wednesday, shares of advanced microdevices climbed more than 8.5 % Wednesday after outlining its long-term financial model at a meeting it held for financial analysts. The company expects to drive a better than 35 % revenue compound annual growth rate the next three to five years, and also said AI data center revenue should grow by more than 80 % per year over that same time period.

7:43NVIDIA barely inched upward Wednesday after Tuesday's 2 % drop. Shares rose earlier in the day on earnings from Foxconn, which builds cloud and networking products along with AI servers. Profit topped expectations, and the company cited solid demand for AI software, Barron's reported. Circle Internet Group shares cratered 10 % after the crypto-related company reported solid earnings but also forecast higher expenses. On the charts, any dip in the S &P 500 index could test support near the 50-day moving average of 6 ,694. The 50-day line has held on several tests over the last month. The Dow Jones Industrial Average climbed 326.86 points Wednesday, or 0.68%, to 48 ,254.82.

8:38The S &P 500 Index added 4.31 points, or 0.06%, to 6 ,850.92. and the Nasdaq Composite slipped 61.84 points or 0.26 % to 23 ,406.46. 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.

9:26For important disclosures, see the show notes and schwab.com slash market update podcast.