Earnings In-Focus Amid Economic Data Delays

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 Monday, November 3rd. The Federal Reserve pulled the trigger on an interest rate cut last week, but big tech earnings did most of the heavy lifting to keep markets afloat after relatively hawkish comments from Chairman Jerome Powell dimmed hopes for a December rate cut. Now investors' focus turns to another crowded earnings calendar this week, with limited economic clues ahead as the government shutdown continues to delay data releases. We were not surprised that Powell threw a cold water on the idea of a December cut, said Cooper Howard, director of fixed income strategy at the Schwab Center for Financial Research.

0:59Prior to the meeting, we believed that the market had gotten ahead of itself on the pace of rate cuts. While Powell's comments helped send stocks lower midweek, all three major market indexes ended Friday in the green, with the Nasdaq Composite getting a boost from Amazon's robust earnings results. However, with big tech stocks and AI favorites continuing to serve as the main drivers of the market's gains this year, breadth remains a sore spot. Less than 54 % of S &P 500 stocks traded above their 200-day moving average as of market close on Friday, while just 40 % traded above their 50-day moving average.

1:37This could suggest a lack of broad participation to help support the market's rally over the longer term.

1:46Looking ahead, what would have been a packed week of government economic data is now expected to be much quieter due to the government shutdown. Key data releases on the trade deficit, factory orders, productivity, and non-farm payrolls are all expected to be delayed or potentially cancelled. There are still a few economic indicators to watch, however, including the October ISM Manufacturing Purchasing Managers Index, or PMI, due at 10 a.m. ET. Investors will be hoping to see more evidence of a manufacturing sector recovery in the report. After contracting throughout 2023 and 2024, there have been green shoots in U.S.

2:26manufacturing of late. The manufacturing PMI rose to 49.1 in September from 48.7 in August, and consensus expects that figure to close in on 50 today. A reading above 50 signals the sector is in expansion territory. The ADP Employment Report, a critical source of jobs data amid the government shutdown, could be the economic highlight of the week on Wednesday. Last month, ADP's data showed private employers shed 32 ,000 jobs in September, but economists expect a gain of 25 ,000 jobs in October. The light week of economic data will be capped off with the University of Michigan's preliminary November consumer sentiment reading on Friday.

3:10The consumer sentiment index plummeted 24 % year-over-year and 2.7 % month-over-month in October to just 53.6%. Investors will be looking to see if consumer sentiment stabilizes or continues to reflect caution among consumers. Before any economic data, investors pour over results from Berkshire Hathaway, which came out Saturday. AI darling Palantir, reporting today after the close, will be a highlight in this week's packed earnings slate. Investors will be looking for continued adoption momentum from Palantir's Artificial Intelligence Platform, or AIP. The company could also provide insight on investors' sentiment toward AI and help validate whether corporations are turning AI capabilities into tangible revenues and profits.

4:00All eyes will then be on advanced microdevices on Tuesday. The semiconductor giant reports after the bell and should provide another read on the AI infrastructure market after industry leader NVIDIA beat analysts' earnings and revenue forecasts last week. Shopify, Uber, Visor, and Spotify will round out the full schedule of earnings reports on Tuesday. On Wednesday, investors will be watching Qualcomm, which recently entered the AI chip market, as well as McDonald's, Applevin, Arm Holdings, DoorDash, and the international giants Novo Nordisk and Toyota Motor Corporation. Then on Thursday, biopharmaceutical company AstraZeneca, the energy giant ConocoPhillips, and Airbnb will be in focus, while Friday will see earnings from more energy players, including Constellation Energy and Endbridge Energy, as well as the investment firm KKR & Company.

4:55As far as market movers, on Friday, Amazon's stock soared 9.58 % after the company beat analysts' expectations in the most recent quarter, turning in revenue of$180.2 billion and earnings per share of$1.95. The e-commerce giant also boosted its capital expenditures forecast amid robust demand for its AI services. Amazon's cloud unit, Amazon Web Services, was a standout, growing revenues 20 % eurovier to$33 billion while generating$11.4 billion in operating income. First, solar shares also jumped 14.28 % after reporting solid third-quarter earnings due to strong demand for its solar energy solutions.

5:41Revenue surged 80 % from a year ago to$1.59 billion, while earnings per share jumped 46 % year-over-year to$4.24. The company also revealed plans to build a new 3.7-gigawatt solar panel manufacturing plant in the U.S. next year. Reddit was another highlight on Friday. Shares of the social media company surged 7.47 % after topping analysts' revenue and earnings estimates while reporting a nearly 20 % jump in daily active users. Chevron stock rose 2.74 % on Friday as well after the oil and gas giant posted record oil production due in large part to the finalization of its$55 billion acquisition of Hess Corporation early this year.

6:29However, net income declined due to the roughly 17 % drop in crude oil futures prices this year. A 300 % year-over-year surge in U.S. refining profits due to higher margins and sales were a highlight for the company. Shares of ExxonMobil, on the other hand, fell slightly after the company missed analysts' revenue forecasts early Friday. Exxon boosted oil production, much like Chevron, but turned in third-quarter revenue of just$85.3 billion compared to the expected$86.5 billion. Analysts also pointed to Exxon's rising net debt figures as cause for concern, Barron's reported. Meanwhile, Microsoft continued its post-earnings decline on Friday, dropping another 1.52%.

7:16Shares are now down 4.4 % since the big tech giant reported earnings Wednesday afternoon. Microsoft topped analysts' expectations for both earnings and revenue in the most recent quarter, but a 74 % year-over-year jump in capital expenditures to nearly$35 billion unnerved investors, with many seeing it as a sign that future AI-related costs could remain elevated. Chipotle fell another 2.6 % on Friday after guidance from the fast-food company disappointed investors. This followed a double-digit plunge Thursday. Treasury yields were mixed, but mostly stable across the curve on Friday after a busy week of central bank decisions.

7:59Treasuries have been range-bound recently because of data due to the government shutdown, Howard said. Rates moved higher after Chairman Powell's press conference on Wednesday, but there's been little movement since. For fixed-income investors, Howard recommends focusing on credit quality and intermediate-term duration. Credit spreads are historically tight and don't justify taking on excess credit risk in our view, he said. Despite the relatively strong performance from equity markets on Friday, just five out of 11 S &P 500 sectors ended Friday in the green, demonstrating the weakening breadth in the market.

8:37The consumer discretionary sector led the way, surging 4.15 % with Amazon-boosting results, while an odd mix of defensive and cyclical sectors, including utilities, materials, and consumer staples, lagged on the day.

8:53The Dow Jones Industrial Average rose 40.75 points Friday, or 0.09%, to 47 ,562.87. The S &P 500 Index advanced 17.86 points, or 0.26%, to 6 ,840.20. and the Nasdaq Composite jumped 143.82 points or 0.61 % to 23 ,724.96. For the week, the Dow Jones Industrial Average rose 0.75%, the S &P 500 advanced 0.71%, and the Nasdaq Composite gained 2.24%. And for the month, the Dow Jones Industrial Average increased 2.51%, while the S &P 500 and NASDAQ composite rose 2.27 % and 4.70%, respectively. 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.

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