Fed Decision, Economic Data Take Center Stage

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, September 15th. After all three major market indexes hit record highs Thursday, the final day of the week brought mixed results with investors looking ahead to this week's Federal Reserve meeting. Market expectations now tilt heavily in favor of a rate cut on Wednesday afternoon, as soft jobs data overshadowed a sticky consumer price index report last week. Friday's preliminary University of Michigan survey of consumers reading underscored concerns about inflation expectations, however, complicating the Fed's future policy decisions.

0:54Investors will be closely examining updated economic and rate projections from the Fed, along with Chairman Jerome Powell's press conference for clues on the path of monetary policy. We expect the Fed to cut by 25 basis points and signal more cuts to come, said Cooper Howard, director of fixed income strategy at the Schwab Center for Financial Research. The combination of high inflation and a weak labor market put the Fed in a difficult spot for policy going forward. At the close of trading on Friday, futures markets priced in 94.4 % odds of a 25 basis point rate cut and 5.6 % odds of a 50 basis point rate cut at the Fed's upcoming meeting according to the CME FedWatch tool.

1:37Consumer sentiment weakened for the second straight month in September. The index fell from 58.2 last month to 55.4 this month. That's down significantly from levels above 80 seen prior to the pandemic, but still above the April and May lows seen after President Trump's initial reciprocal tariff announcement. Year ahead Fed inflation expectations held steady at 4.8 % in September, but long-run inflation expectations edged up for the second straight month, hitting 3.9%. Any rise in consumer inflation expectations isn't welcome news for the Fed, but long-run expectations are still considerably below the 4.4 % seen in April.

2:21Besides the Fed, there's a packed slate of economic data to watch in coming days. The week kicks off with the Empire State Manufacturing Survey today and then brings its Philadelphia counterpart on Thursday, offering multiple perspectives on the health of the manufacturing sector. In between, investors will parse a slew of housing data, including the Home Builder Confidence Index, housing starts and building permits for signals on the sector's momentum. Tomorrow's August retail sales report is arguably this week's key economic release, however. After a revised 0.9 % month-over-month rise in retail sales in July, investors will be looking for evidence that consumers are continuing to spend despite persistent inflation and a softening labor market.

3:07Economists are forecasting a 0.5 % month-over-month rise in August retail sales. The Data Heavy Week will wrap up with the Conference Board's U.S. Leading Economic Index, providing a forward-looking read into business conditions and the broader economic cycle. On the earnings front this week, investors will be watching Ferguson Enterprises tomorrow for clues on the health of both residential and commercial construction, as the company is a key supplier of building industry products. General Mills earnings will then be in focus on Wednesday, with investors monitoring results for insights into consumer demand as grocery inflation continues to weigh on discretionary food spending among budget-conscious consumers.

3:52FedEx Corporation's Thursday earnings will be another highlight of the week. The shipping giant faces potential headwinds from recent changes to tariff exemptions and shifting trade policies amid its ongoing cost-cutting efforts. After a slew of housing-related economic data, the homebuilder Lennar's earnings will also be closely watched on Thursday. Homebuilder stocks have been helped by rising rate-cut hopes since July, even with the housing market in a sustained lull. Weekly mortgage applications jumped in the last reading as rates fell and could be worth checking Wednesday morning. Investors will also eye any new developments in the composition of Fed voting members this week.

4:35Monday's confirmation vote on Stephen Myron could seat him as a Fed governor in time to cast a ballot at Wednesday's Fed meeting. Meanwhile, President Trump is pushing for a swift decision on his appeal of a ruling which prevented him from removing Lisa Cook from the central bank. Whether that ruling arrives in time to impact Cook's participation in the Fed's meeting remains uncertain, leaving markets to speculate on how the Fed's stance could shift due to the makeup of its voting members. Despite Myron's potential confirmation buoying hopes for a rate cut, Treasury yields rebounded across most of the curve on Friday.

5:12The 30-year bond yield rose to 4.68 percent and the 10-year note yield advanced to 4.06 percent, while the two-year note yield hit 3.56%. Today brings separate three-month and six-month treasury note auctions, followed tomorrow by a 20-year bond auction. The results typically appear by early afternoon. Strong demand characterized several treasury auctions last week, suggesting investors have an appetite even at recent lower yields. More of the same in coming weeks could help keep yields from rebounding from current levels near five-month lows, perhaps easing one possible headwind for equities.

5:51In other news Friday, Amazon and Alphabet made headlines amid reports that the U.S. Federal Trade Commission, or FTC, is investigating the tech giant's advertising practices. The FTC's Consumer Protection Unit is examining Amazon's advertising auctions and its reserve pricing disclosures for some search ads. It's also looking into Google's internal ad pricing process, considering whether the company raised the cost of ads without disclosing it to advertisers, Bloomberg first reported. Looking at individual stock movers on Friday, Tesla extended its rally, rising 7.36 percent, with investors betting the company's robotics and AI ambitions will spark a new era of growth.

6:36Hopes for Fed rate cuts added to the momentum. Warner Brothers Discovery also built on its recent gains after the Wall Street Journal reported Thursday that Paramount Skydance is preparing a takeover bid for the company. Investors piled into the stock due to a Friday New York Post report revealing CEO David Zaslav is hoping to set up a bidding war for his media conglomerate, which owns properties including Warner Brothers Studios, HBO, Discovery, TNT, and CNN. Super Microcomputer shares jumped 2.39 % on Friday as well, after the data center hardware maker announced it is shipping products for AI computing powered by NVIDIA's Blackwell Ultra Chips.

7:22Meanwhile, shares of Pfizer and Moderna plummeted after a Washington Post report indicated the Trump administration plans to link COVID vaccines to the deaths of 25 children. The furniture retailer RH also slumped 4.82 % on Friday after missing Wall Street's earnings estimates and issuing weak full-year guidance due to rising tariff-related costs. RH CEO Gary Friedman unnerved investors on the company's quarterly earnings call Thursday afternoon. The CEO warned furniture retailers would be forced to offer significant discounts to boost sales due to a weak housing market and accelerating inflation.

8:03Looking at market breadth, the percentage of S &P 500 stocks above their 50-day moving average fell to 62.8 % on Friday, a relatively weak figure given the blue chips index recent rise. It's a sign that mega-cap tech stocks continue to lead the dance for the broader market this year, meaning a pullback in these leaders could potentially leave the S &P 500 vulnerable to a sharp decline. Only four of 11 S &P 500 sectors traded higher Friday, led by an odd mix of defense and cyclically sensitive sectors, including utilities, consumer discretionary, information technology, and communication services.

8:42Materials and health care, on the other hand, were the worst performers, giving back some of Thursday's gains.

8:51The Dow Jones Industrial Average fell 273.78 points Friday, or 0.59%, to 45 ,834.22. The S &P 500 index dipped 3.18 points or 0.05 % to 6 ,584.29, and the Nasdaq Composite rose 98.03 points or 0.45 % to 22 ,141.10. For the week, the Dow Jones Industrial Average rose 0.95%, the S &P 500 gained 1.59%, and the Nasdaq jumped 2.03%. 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.

9:51Join us for another update tomorrow.

9:59For important disclosures, see the show notes and schwab.com slash market update podcast.