Fed, Mega-Cap Earnings, PCE Data and More Ahead

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, April 27th. This week comes in like a lamb and then roars like a lion. Today is quiet in terms of data and key earnings. Then investors run a gauntlet of three central bank meetings in three days and five of the Magnificent Seven reporting in two days. The Federal Reserve's Wednesday decision and press conference lost some drama value Friday after the Justice Department closed its criminal investigation of Fed Chairman Jerome Powell. This likely clears the way for the Senate to confirm nominee Kevin Warsh in time for him to step in by May 15th when Powell's term ends.

1:02The Senate Banking Committee is likely to confirm worse around midweek, followed by a full Senate debate and vote the week of May 11th as Congress is out on recess next week. The intrigue now shifts to whether Powell will stay on as a regular Fed governor since his term runs until 2028, said Michael Townsend, Managing Director of Legislative and Regulatory Affairs at Schwab. Doing so would block the president from nominating someone to an open seat because there would not be a vacancy. The United States Attorney said the Justice Department could resume its criminal investigation if it finds reason to.

1:39That might affect Powell's decision whether to stay or go. I'm in the camp that he stays, but it's pretty much 50-50, Townsend said. If Powell stayed, he might remain another hawkish voice on the Federal Open Market Committee countering Warsh's dovish tenor. No rate moves are expected as the Bank of Japan, Fed, and European Central Bank gather in coming days, starting with the Bank of Japan on Tuesday, or very late night U.S. time. Still, what policymakers say about the chance of future rate hikes in Europe and Japan could affect the U.S. Treasury market after yields showed no signs of easing late last week.

2:18Back home, focus on Warsh might outweigh what's expected to be a relatively featureless meeting with no new projections scheduled. Worse doesn't change the near-term outlook for the Fed, said Cooper Howard, Director of Fixed Income Research and Strategy at the Schwab Center for Financial Research. It would be a more dovish voice on the Federal Open Market Committee, but I don't think that changes the near-term outlook. We expect the Fed to remain on hold for the time being, but the next move will likely be a cut. Even after Friday's news that likely paved the way for Warsh, odds of a rate cut this week were less than 1%, according to the CME FedWatch tool.

2:57Odds of at least one cut sometime this year did tick up a bit from 20 % before the announcement to 35 % afterwards. At his press conference, Powell could be asked about the impact of crude oil on inflation, especially longer-term inflation expectations. The Fed wants to see these anchored to keep down any chance of a runaway wage price spiral like the one from the 1970s.

3:25Friday's final April University of Michigan Consumer Sentiment report showed three long-term inflation expectations at 3.5 percent compared with 3.4 percent in the initial monthly report and 3.2 percent in March. It wasn't that big a jump, though the preliminary May data in a couple weeks might capture a bigger impact from gas prices. Headline sentiment improved to 49.8 % from the initial record low of 47.6%, but remains in the basement historically. Expectations climbed slightly. The five magnificent seven stocks reporting this week, Apple, Alphabet, Meta Platforms, Amazon, and Microsoft, could help determine direction with their results and guidance.

4:10It all happens Wednesday and Thursday afternoon, and focus likely will be on data center spending, return on investment from that spending, iPhone sales in China, Apple's recent CEO change news, and the state of the online advertising business. Though the Magnificent Seven dominate earnings, there's plenty of additional action ahead in what's one of the most crowded earnings weeks on the quarterly calendar. To date, 28 % of S &P 500 companies have reported, and 84 % have beaten expectations, Faxa said Friday. That's historically strong, and so is the 81 % that have beaten revenue consensus. Blended earnings growth so far is very solid at 15.1%, above expectations of around 13 % heading into the season.

5:00One of the highest-profile earnings beats came late Thursday from Intel, which received a 23.6 % share boost Friday. The chipmaker's quarterly earnings and revenue easily topped Wall Street's consensus. Intel's guidance also appeared to impress, and the key metric of foundry revenue climbed 16 % year-over-year. Data center and AI revenue rose 22 % as demand climbs for Intel's central processing units, or CPUs, and the company partners with big tech players, including Tesla. Capital expenditures guidance will be key, said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research.

5:44advanced micro devices appeared to benefit friday from intel's sharp gains as amd is intel's main competitor in the cpu market as ai workloads shift away from training large language models and toward ai agents using models to execute tasks which analysts call inference cpus have become critical Barron's reported Friday. Geopolitics remains a swing factor this week, along with oil. The market received a slight boost Friday from a drop in U.S. crude prices to below$95 per barrel on hopes for new talks between the U.S. and Iran. President Trump also announced the extension of a ceasefire between Israel and Lebanon.

6:29This week also includes important data, including housing starts and building permits, the government's first look at first-quarter gross domestic product or GDP, and the Fed's favored inflation gauge of personal consumption expenditures or PCE prices. Treasuries don't get left out, facing several auctions, including two-year and five-year notes going on the block later today. Results should be available this afternoon, and any dip in buying interest might be another tailwind for yields. The 10-year note yield only fell slightly Friday, despite the Powell news, and remained above 4.3%, while the two-year yield that more closely tracks rate policy dipped moderately.

7:12The two-year yield remains well above levels earlier this year when investors baked in two to three Fed rate cuts in 2026. For the week, the 10-year yield rose six basis points, while the two-year rose eight. Major indexes rose Friday, with the exception of the less tech-oriented Dow Jones Industrial Average, which was pulled down by energy, healthcare, telecom, insurance, and staples firms. Weekly gains were more modest relative to the prior three weeks, Peterson noted. Earnings from chip stocks helped fuel investor demand. The chip rally has been historic, and it speaks to the strength of the AI build-out theme and the insatiable demand for compute.

7:55The S &P 500 index pulled off its fourth straight positive week, though the rally has narrowed and mainly lifted tech recently. For instance, the PHLX Semiconductor Index was up more than 35 percent this month alone, and the S &P 500 index is up about 13 percent from its March 30th intraday Iran war low, while eight of 11 S &P 500 sectors trailed the index over the last month. Tech sports 17 % gains since late March, followed by 12 % for communication services and 11 % for consumer discretionary. A percentage of S &P 500 stocks trading at or above their 50-day moving average fell to around 50 % Friday, down from 60 % earlier in the week, and only four sectors had weekly gains.

8:44Five of 11 S &P 500 sectors rose Friday, led by that same trio of tech, discretionary, and communication. One test this week is whether other sectors can join the parade, something that could help determine if the rally has another leg. Earnings from many non-tech firms will likely be key. In individual trading Friday, beyond the skyrocketing shares of Intel, other chip and AI-related stocks surged as well, with advanced micro-devices climbing 13.9%. Arm Holdings climbed nearly 15%, and other large gainers included Marvell Technology, Micron, Super Microcomputer, ASML, and Taiwan Semiconductor Manufacturing.

9:29NVIDIA delivered its sharpest gain of the week Friday, climbing 4 % amid the rest of the chip rally and nearing all-time highs posted last fall. Meta platforms rose 2.4 percent as investors responded to news that the company plans to cut 8 ,000 jobs or 10 percent of its workforce. This came a day after Reuters reported that Meta is installing software on U.S.-based employees' computers as part of an effort to teach AI models and grade employees on their AI use. Healthcare had a tough Friday. Shares of Eli Lilly and HCA both fell, with Lilly hurt by data suggesting a slow start for its new obesity pill, according to Bloomberg, and HCA damaged by weaker-than-expected first-quarter patient volumes.

10:18And Lockheed Martin fell another 3 % Friday after Thursday's post-earnings weakness. Lockheed Martin's results missed estimates. The Dow Jones Industrial Average slipped 79.61 points Friday, or 0.16%, to 49 ,230.71. The S &P 500 Index rose 56.68 points, or 0.80%, to 7 ,165.08. And the Nasdaq Composite climbed 398.09 points, or 1.63%, to 24 ,836.60. For the week, the Dow Jones Industrial Average fell 0.44%, the S &P 500 Index rose 0.55%, and the NASDAQ Composite climbed 1.5%. This has been the Schwab Market Update Podcast. To stay informed, visit www.schwab.com slash marketupdate or follow us for free in your favorite podcasting app.

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11:38For important disclosures, see the show notes and schwab.com slash market update podcast.