Gov. Shutdown Nears End, Fed Speakers 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.

0:17I'm Keith Lansford, and here is Schwab's early look at the markets for Tuesday, November 11th. Investors' eyes are locked on Washington as lawmakers move toward ending the government shutdown, while a busy slate of Fed speakers could shape market expectations for interest rates this week. Senators secured enough backing for a government funding deal over the weekend, setting the stage for a vote that could end what is now the longest government shutdown in U.S. history. But the plan will still need to clear both chambers of Congress and be signed by the President. Investors are hoping for a quick and lasting resolution that will allow key economic data releases to resume and restore normal operations for federal workers and benefit programs like SNAP.

1:05The bottom line? The government should reopen this week. The fastest this could be done is probably Wednesday, but Thursday or Friday may be a more realistic time frame, said Michael Townsend, Managing Director of Legislative and Regulatory Affairs at Schwab. But Congress will also have a new deadline looming at the end of January. Lawmakers will have to figure out how to avoid another shutdown at that time. With the bond market closed for Veterans Day, but stocks trading as usual, investors will start their morning with a read on Main Street's confidence from the NFIB Small Business Optimism Index at 6 a.m.

1:44Eastern Time. After Friday's preliminary reading of November's University of Michigan survey of consumers revealed consumer sentiment fell to a three-year low and inflation expectations ticked higher, the NFIB report takes on added significance as investors gauge how small businesses are holding up amid the uncertainty. Normally, investors would be eagerly awaiting key reports on consumer prices, producer prices, and retail sales this week for a clearer view into how the economy is performing, but those releases remain delayed due to the government shutdown. Economic data will begin to flow again, but it won't be complete since the various agencies haven't been out collecting data during the shutdown, said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research.

2:33That means it will be hard to get a firm grip on the pace of growth and inflation for another month or so.

2:42The lack of economic data this week will put Fed officials in the spotlight as investors look for clues about the path of interest rates amid ongoing signs of labor market cooling and stubborn inflation. The packed week of Fed speakers will kick off with a speech from Fed Governor Michael S. Barr at 10.25 a.m. Eastern Time. After that, Wednesday will bring comments from four regional Fed presidents, as well as Fed Governors Christopher Waller and Stephen Myron. Investors will then be monitoring speeches from St. Louis Fed President Alberto Moussaleem and Cleveland Fed President Beth Hammock on Thursday, followed by Kansas City Fed President Jeff Schmid and Dallas Fed President Lori Logan on Friday.

3:26Dovish remarks from a few key Fed officials grabbed headlines on Monday, setting the stage for close scrutiny of their colleagues' comments in the days ahead. In an interview with CNBC, Fed Governor Myron once again called for an outsized 50-basis point rate cut at the Fed's next meeting, arguing the central bank should act to stave off any potential economic weakness moving forward. Myron's comments came in the wake of a Monday blog post from San Francisco Fed President Mary Daly, which urged policymakers to keep an open mind about further cuts. Despite the dovish tone from Myron and Daly, the futures market priced in just a 64.1 % chance of a 25 basis point rate cut in December as of Monday afternoon, according to the CME FedWatch tool.

4:14That's down sharply from the 91 % odds seen just a month ago. After stumbling in a tech-fueled sell-off last week, all three major market indices rebounded on Monday amid optimism that the government will soon reopen, with risk-on names leading the charge. Bonds largely went in the other direction, however, leading Treasury yields to move higher across the curve. Economic activity should pick up as a result of the agreement to fund the government, which is removing one of the factors keeping yields lower, said Jones. Overall, we expect bond yields to remain range-bound, with the market divided on the prospect for Fed easing in December in the absence of good economic data.

4:58Although earnings season is winding down, a handful of high-profile reports this week could still move markets. Today, investors will be watching the Southeast Asian e-commerce giant Sea Limited, which reports before market open and could offer insight into consumer demand in the region and the broader health of the Asian tech market. Another name on the radar is Nebius Group, an AI infrastructure firm whose results could shed more light on enterprise AI spending trends. Looking ahead, earnings from several major names could help set the tone for markets later in the week, with Cisco reporting Wednesday, Walt Disney and Applied Materials reporting Thursday, and Sony Group wrapping things up on Friday.

5:44As far as market movers on Monday, shares of the AI darling Palantir surged 8.81%. The recovery followed a 14 % drop last week when the company's quarterly earnings results topped analysts' estimates but weren't enough to offset fears about its lofty valuation. NVIDIA, AMD, Micron Technology and Tesla also saw their shares spike on Monday amid renewed investor enthusiasm for AI-related stocks and a broad tech rebound. Barrick Mining stock got a lift as well, rising 5.29 % to near a 52-week high after the company beat analysts' earnings estimates, raised its dividend and expanded its share buyback program.

6:28The gold miner has benefited from the more than 55 % surge in gold prices over the past year. Barrick's peer, Newmont Corporation, also saw its shares jump 5.85%, lifted by optimism that stronger gold prices could bolster margins across the sector. Meanwhile, shares of major health insurers fell after the Senate's deal to end the government shutdown came without extensions to Affordable Care Act subsidies. The Senate will instead vote on these subsidy extensions in December. Shares of Centene Corporation sank 8.81 percent, while Molina Healthcare and Elevance Health slid 7.36 percent and 4.41 percent, respectively.

7:14Nine out of 11 S &P 500 sectors rose on Monday, led by information technology and communication services, as investors shifted back into risk-on mode. Consumer staples and utilities, on the other hand, fell on the day with investors pivoting away from the defensive sectors.

7:34The Dow Jones Industrial Average rose 381.53 points Monday, or 0.81%, to 47 ,368.63. The S &P 500 index jumped 103.62 points, or 1.54%, to 6 ,832.42, and the Nasdaq Composite surged 522.64 points, or 2.27%, to 23 ,527.17. 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. Join us for another update tomorrow.

8:34For important disclosures, see the show notes and schwab.com slash market update podcast.