Fed Speakers, Bank Earnings, TSM Strength in Focus

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. I'm Keith Lansford, and here is Schwab's early look at the markets for Friday, January 16th. More bank earnings are on the menu today as earnings season continues to ramp up, while Federal Reserve speakers remain in focus amid a packed week of commentary largely centered on inflation and Fed independence concerns. Strong results for Goldman Sachs, Morgan Stanley, and BlackRock helped lift financials out of their short-lived slump yesterday, following a mixed bag of earnings from the sector earlier in the week.

0:47The tech, utilities, and industrial sectors were the stars of the show, however. Chip and AI infrastructure-linked stocks got a boost from AI bellwether Taiwan semiconductor manufacturing, which outperformed Wall Street's lofty expectations and rallied to a new high. TSM's healthy beat and raise quarter is one of the cleanest reads on demand and where we stand on the AI infrastructure build-out cycle, said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research. Additionally, tech stocks have been underperforming recently as a consequence of the rotation trade, so the TSM report provides a near-term justification for money to flow back into tech.

1:30Investors looking forward to a long weekend with markets closed Wednesday for the Martin Luther King Jr. holiday will have for more Fed speakers to monitor today before the break, including Fed Vice Chair Philip Jefferson and Boston Fed President Susan Collins. With Fed speakers emphasizing inflation risks more than labor market weakness so far this week and recent data pointing to economic resilience, markets have dialed back expectations for rate cuts this year. As of the market close Thursday, futures priced in just 5 % odds of a January rate cut and roughly 20 % odds of a March rate cut, according to the CME FedWatch tool.

2:10Just a week ago, the odds of a March cut were over 40%. Central Bank independence has been the other hot topic among Fed speakers of late, amid the Department of Justice's criminal investigation into Jerome Powell. The Fed chair is being investigated for allegedly lying to Congress about the scope and cost of the central bank's headquarters renovation. On Thursday, Fed Governor Michael Barr told Yahoo Finance that the Department of Justice's investigation amounts to an assault on the independence of the Fed. And Chicago Fed President Austin Goolsbee told CNBC that he fears inflation could come roaring back if Fed independence is threatened.

2:50On Capitol Hill, there have been similar concerns about the threat to Fed independence and its potential impact on the economy. News that the administration has launched a criminal investigation into Fed Chair Jerome Powell has been met with considerable pushback from both sides of the aisle, said Michael Townsend, Managing Director of Legislative and Regulatory Affairs at Schwab. Even staunch Trump supporters on Capitol Hill have said that Fed independence is paramount. With global central bankers, former Fed chairs, and others coming to Powell's defense, the issue has not played out how the White House anticipated.

3:28On the economic data front today, the NAHB Wells Fargo Housing Market Index and December Industrial Production data are the only major reports to watch. It will also be a slower day in terms of earnings reports, although State Street Corporation and multiple major regional banks, including PNC Financial Services and M &T Bank Corporation, are on the schedule. Investors will likely be looking ahead to next week's packed slate of earnings and key economic data, which includes the final third-quarter GDP numbers, construction spending figures, and earnings from Netflix, Johnson & Johnson, Intel, and others.

4:10Turning back to the market's performance yesterday, all three major U.S. market indexes ended the day in the green, with the tech, utilities, and industrial sectors supporting the move higher. After rising throughout the week, the market's fear gauge, the SIBO Volatility Index, or VIX, also fell sharply, while market breadth continued to improve. The percentage of S &P 500 stocks trading above their 200-day moving average rose to 67.6 % as of market close yesterday, near a 52-week high. Meanwhile, crude oil prices reversed a five-day hot streak, sliding nearly 5 percent after comments from President Trump eased market concerns about oil market disruptions due to potential military action against Iran.

4:55On the other hand, treasuries rose across most of the curve, potentially weighing on equity's surge as they paired some of their gains by the end of the day. In economic data on Thursday, both the Empire State Manufacturing Survey and the Philadelphia Fed's Manufacturing Business Outlook survey showed rising manufacturing activity in their respective regions. The surveys could suggest that the broader U.S. manufacturing sector is stabilizing after a prolonged soft patch, but investors will need to continue monitoring incoming data. The Department of Labor also revealed Thursday that there were just 198 ,000 initial jobless claims for the week ending January 10th.

5:37The figure was well below the consensus estimate of 215 ,000 and down from the 207 ,000 claims seen the week prior. Overall, however, the latest employment data has shown resilience, but not improvement, and highlights an ongoing low-hiring, low-firing backdrop, according to Lizanne Saunders, chief investment strategist at the Schwab Center for Financial Research. In Washington, the eagerly anticipated and potentially consequential Supreme Court decision on the legality of President Trump's tariffs has still yet to arrive. That may signal that the decision is a complicated one, said Townsend. Companies are eager for a resolution, particularly if the court rules against the administration and decides the refunds need to be issued to companies that have paid the levies already.

6:25The next opportunity for a decision to be released is next week. Looking at individual market movers on Thursday. All eyes were on Taiwan Semiconductor Manufacturing, which rose 4.4 percent after reporting a 35 percent eurovier surge in profits for the fourth quarter. Asia's most valuable company also offered investors strong guidance, forecasting roughly 38 percent eurovier revenue growth for the current quarter. The results seem to boost market hopes for a sustained AI boom, lifting chip and AI infrastructure-linked stocks. The Dutch semiconductor equipment giant ASML, for example, saw its stock soar 5.4 percent after Taiwan Semiconductor, ASML's largest customer, revealed it will lift its capital spending as high as$56 billion in 2026.

7:19Thursday's renewed AI enthusiasm also helped Sandisk continue its meteoric rise. Shares of the data storage company have skyrocketed roughly 72 % in January alone and more than 1 ,000 % over the past year amid a massive surge in demand for flash memory and solid-state drives used in AI training and inference. turning to financials goldman sachs stock jumped 4.7 percent after topping wall street's profit forecasts due in large part to a 25 percent year-over-year rise in its equities trading revenue the bank also posted strong results in its fixed income trading investment banking and asset and wealth management businesses morgan stanley shares rose 5.8 percent after topping analysts' earnings and revenue forecasts.

8:10The better-than-expected results were driven primarily by a 47 % year-over-year increase in investment banking fees, as well as a strong performance from the company's wealth management business. BlackRock saw a similar move higher, rising 5.9 % after beating Wall Street's revenue and adjusted earnings estimates. The investment management company saw its assets under management top$14 trillion for the first time in the fourth quarter. From a sector perspective, utilities, industrials, and information technology outperformed after Taiwan semiconductor manufacturing results boosted chip stocks and AI infrastructure-focused names.

8:49Energy, communication services, and healthcare, meanwhile, lagged the broader market. Overall, seven out of 11 S &P 500 sectors ended the day in the green. The Dow Jones Industrial Average jumped 292.81 points Thursday, or 0.60%, to 49 ,442.44. The S &P 500 Index rose 17.87 points, or 0.26%, to 6 ,944.47. and the Nasdaq Composite gained 58.27 points or 0.25 % to 23 ,530.02. 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.

9:49It really helps new listeners find the show. I'll be back with another update Monday.

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