Fed, Nvidia, Micron Loom but $98 Crude Crowds View

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, March 16th. Normally, the start of a major NVIDIA conference and an approaching Federal Reserve meeting would top the news. These aren't normal times, however, thanks to the Middle East war that continues to dominate market psychology. U.S. crude oil closed up another 3 percent at above$98 per barrel Friday, and that critical commodities moves in either direction likely hold Wall Street captive as long as conflict rages. One pushback against rising oil late last week was the U.S. Treasury's decision to grant a second temporary authorization which allows countries to purchase more Russian oil currently stranded on tankers due to sanctions.

1:05According to Treasury Secretary Scott Besant, this measure applies only to oil already in transit and shouldn't provide significant financial support to the Russian government. While it offers some relief, it only addresses a small portion of supply loss from recent turmoil in the Strait of Hormuz, so its effect will likely be limited and short-lived. U.S. crude prices are up about 46 percent since the war began.

1:34The war has evolved from a geopolitical event to a global energy supply shock. The disruption to energy and commodity supplies is likely to have an increasingly negative impact on economic and financial conditions the longer it goes on. This report was recorded before weekend developments, so for the latest news, check the Schwab market update a bit later this morning. Even if military activity ends soon, the impacts, growth, inflation and commodity prices could linger, said Michelle Gibley, director of international equity research. and Chris Ferrarone, head of equity research and strategy, both at the Schwab Center for Financial Research.

2:17The longer energy and commodity supplies remain disrupted, the greater the potential economic damage. Asia appears most vulnerable, with Europe also facing meaningful exposure. While markets would likely rebound in the case of an end to military operations, international developed and emerging market stocks may not resume their outperformance, Ghibli and Ferrarone said. Our base case outlook implies greater downside risks for international markets in the near term and lingering economic and financial pressures that could persist over the next 6 to 12 months, even with a quick end to the conflict.

2:55In what Schwab's experts called a moderate scenario, military operations may continue for several weeks before winding down. Oil prices may remain elevated due to lingering supply impacts and general uncertainty. In this environment, financial conditions can remain tighter than normal and risk aversion can stay higher for longer, and market leadership may not revert to international markets as had been the case leading up to the war, Ghibli and Fararone said. Last week ended with a flurry of key data. The January Personal Consumption Expenditures, or PCE, Price Index, a report the Fed eyes closely, rose 0.3 % from December.

3:38Core PCE, excluding food and energy, climbed 0.4 percent, matching December's 10-month high. On an annual basis, Core PCE rose 3.1 percent, still far above the Fed's 2 percent goal and a notch above 3 percent in December. Participants appeared to focus on that slight rise from December, putting the report in a bearish light. Inflation remains elevated, said Nathan Peterson, Director of Derivatives Research and Strategy at the Schwab Center for Financial Research. Add in recent softness in labor market data, heightened uncertainty around the Iran conflict and higher oil prices, and it leaves the Fed in a difficult position.

4:20While January's PCE matched expectations, the information didn't reflect the recent surge in energy prices. Other Friday economic releases were weaker, with fourth-quarter gross domestic product or GDP growth revised lower to 0.7 % from the advance estimate of 1.4%. January durable goods orders and personal income both missed estimates, with no growth in durable goods. These broad downward revisions affected consumption, capital expenditures, and net exports. At the same time, the GDP price deflator, an inflation signal, rose to 3.8 % from 3.6%. A bit of a stagflationary update for U.S. fourth quarter GDP, observed Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research.

5:14March preliminary consumer sentiment data from the University of Michigan released Friday offered the first look of how consumers reacted economically to the start of the war. The headline reading fell to 56.5 from 56.6 in February. Friday's January job openings and labor turnover survey, or JOLTS, showed openings up slightly to 6.946 million, a bit above expectations but low versus the one-year average. The 10-year Treasury note yield edged up another two basis points Friday to just under 4.3%, up 16 basis points for the week. As of late Friday, the CME FedWatch tool showed no chances of a cut at this week's Fed meeting and little chance of a cut before September.

6:02Rising oil prices pushed up yields most of last week, keeping inflation fears on the front burner. The Fed, the European Central Bank and the Bank of England all meet this week, starting with the Fed decision Wednesday afternoon. Policymakers must simultaneously address energy-driven inflation gains and a dismal jobs climate. Friday's weak U.S. GDP revision and a lighter-than-expected monthly and annual rise in the U.K.'s January GDP reinforced growth concerns both here and overseas. Before their pre-meeting quiet period, Fed speakers generally weighed in against any near-term rate cuts. The Fed's meeting Wednesday includes policymakers' dot plot of the rate path ahead, along with updates on economic expectations, including unemployment and inflation.

6:53Data to watch before the Fed meets includes today's February industrial production and Wednesday's February producer price index, or PPI. Earnings highlights include Micron on Wednesday and FedEx on Thursday, which could help investors better understand the war's impact on their particular sectors. From that standpoint, the earnings calls may be as important as the results. The U.S. dollar continued its resilience despite higher oil and weaker U.S. equities. It topped 100 on Friday for the first time since late November and is up about 3 % since the start of the war, a relatively dramatic move.

7:36The U.S., with its large domestic energy supplies, has some insulation from rising crude and natural gas prices, which might have attracted some safe-haven buyers to the dollar, though no investment is truly safe. In corporate news, today marks the start of NVIDIA's GPU Tech Conference, or GTC, with a speech by CEO Jensen Huang scheduled for 2 p.m. Eastern Time. NVIDIA is expected to show multiple hardware innovations, potentially including a new chip for inference, the process of generating results from AI models, Barron's reported. On Friday, major indexes fell again to mark the third consecutive week of losses for the broader U.S.

8:19market. War and oil-related pressure remained intense, and indexes hit new closing lows for the year. Five of 11 S &P sectors managed to finish green Friday despite heavy selling at times, but they were defensive ones like utilities and consumer staples. Slumping financials also made a late comeback. Energy stocks gained from crude's rally. Communication services and tech, two sectors heavily exposed to mega cap stocks, performed poorly Friday. Software shares receded after finding some buying interest early in the week. Technically, the Nasdaq suffered a blow Friday, closing below its 200-day simple moving average of 22 ,175.

9:02It was the first close below its 200-day since last May. The S &P 500 is less than 1 % above its 200-day moving average that's near 6 ,600. If oil pushes higher and stocks continue to drop, there could be additional selling pressure. Also on a technical note, all four major indexes saw their 20-day moving averages dip below their 50-day moving averages, signaling more near-term weakness. For the S &P 500 index, support could rest near the 200-day moving average, while resistance sits near 6 ,800 now that the previous 6 ,800 to 7 ,000 range has been breached. Implied volatility continued its climb last week, and hedging activity indicates market participants lean toward caution.

9:52In individual trading Friday, Ulta Beauty lost 14 % as quarterly earnings came in shy of Wall Street's consensus, though revenue topped expectations. Guidance for fiscal 2027 also appeared to disappoint from an earnings per share standpoint. Memory chip names bucked a mostly lower day for tech, lifted by a 7 % rise for SanDisk and a nearly 5 % gain for Micron. News appeared thin, so this may be positioning ahead of Micron's earnings this Wednesday. Adobe fell 7 % despite the software giant reporting better-than-expected quarterly earnings and revenue and issuing guidance that topped Wall Street's consensus.

10:32However, fiscal first quarter net new annual recurring revenue of$400 million was shy of some estimates. Adobe also announced it's searching for a new successor for its 18-year CEO. And Meta Platforms sank almost 4 % after the New York Times reported Meta has delayed the launch of its Avocado AI model at least until May due to performance concerns. The Dow Jones Industrial Average descended 119.38 points Friday, or 0.26%, to 46 ,558.47. The S &P 500 Index declined 40.43 points, or 0.61%, to 6 ,632.19. And the NASDAQ composite dropped 206.62 points, or 0.93%, to 22 ,105.36. For the week, the Dow Jones Industrial Average fell 0.26%, the S &P 500 index declined 1.15%, and the NASDAQ fell 1.4%.

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