Inflation Data, GDP Ahead Along with Key Earnings

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 Thursday, May 28th. The market's steady climb faces a test today. Record highs fueled by chip strength and falling crude match up this morning against what could be problematic inflation data that puts the Federal Reserve in more of a bind. The April Personal Consumption Expenditures, or PCE, price index at 8.30 a.m. Eastern Time is expected to look relatively mild at 0.5 % monthly growth for the headline figure and 0.3 % for core PCE, which excludes fuel and food. This briefing.com consensus would likely be a relative yawner for stock prices.

1:02What's unclear is whether the core figure has begun ticking up thanks to pressure from higher energy prices spilling into the broader economy. That wasn't so much the case with the April Consumer Price Index, or CPI, released two weeks ago. That report showed core CPI up 0.4 % in line with consensus. However, the CPI is weighted more toward housing than the PCE data, and housing costs might be less likely to immediately reflect rising energy prices. A surge in producer prices during April, however, has some market participants anxious ahead of PCE because several elements of wholesale prices that spill into core PCE rose sharply in April, including airline fares.

1:50On the other hand, hopes for a peace deal could potentially override inflation concerns if the war looks like it's winding down. Crude oil prices briefly dropped to one-month lows Wednesday after Iranian news reports that the Strait of Hormuz could open again in a month under terms of a peace agreement being negotiated. The U.S. later denied those reports, but crude oil still dropped nearly 5 % to below$90 per barrel. Stocks remained vulnerable to any sudden disappointments around negotiations. The ceasefire looked fragile earlier this week when the U.S. fired on Iranian boats laying mines in the strait and Iran threatened retaliation.

2:32New conflict in Lebanon between Israel and Hezbollah also remains a possible touchpoint as negotiations continue. Barring any major developments on geopolitics, corporate health and relatively solid data continue to primarily set Wall Street's direction. Unless and until the economic data or EPS growth forecasts take a turn lower, it seems the path of least resistance is higher, said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research. June is not a bullish month from a seasonality stance, but that in and of itself is probably not enough to deter bullish momentum, at least for now.

3:15What might deter sentiment is higher global yields, which could come into play if inflation keeps climbing and eventually affects consumer behavior. High gas prices are an issue, many big-box stores reported last week when they delivered earnings. Consumer sentiment is also historically low.

3:37PCE is one of two reports due this morning that could have an impact on stocks. Investors also get a revised first-quarter gross domestic product, or GDP, estimate from the government, the second of three. Last time, GDP was estimated at 2 % on a seasonally adjusted annual basis, driven mainly by gross private domestic investment and personal consumption expenditures. A secondary number to check in the GDP report is the GDP chain deflator, which measures the quarterly change in prices of goods and services produced in the U.S. and is another way to monitor inflation. It outpaced expectations at 3.6 % in the government's first GDP estimate.

4:21A rise from that elevated level might raise concerns. The briefing.com consensus is for GDP to remain at 2%, but for the deflator to rise to 4.5%. The report also tracks personal consumption, which takes on extra importance in these times of high gas prices. We know the consumer is a big driver of the economy, and we're looking to see if the consumer is still holding up, said Cooper Howard, director of fixed income research and strategy at the Schwab Center for Financial Research, adding that so far consumers appear resilient. Turning to earnings, Marvell Technology, Salesforce, and Snowflake results after yesterday's close generally topped estimates, while the associated stocks moved different directions initially in post-market trading.

5:13Snowflake, a cloud-based data platform company, spiked more than 28 % on earnings and revenue that beat consensus and higher-than-expected guidance that it raised from the previous quarter. Salesforce also beat earnings estimates, but guidance was mixed and shares stumbled. Marvell's results basically matched consensus, while guidance was as expected and shares were roughly flat. More earnings await today as Dollar Tree, Best Buy, Costco, and Gap Report, Dell, and MongoDB represent tech at the earnings party. Dell, due after today's close, has catapulted into earnings with shares more than doubling over the last three months, due in part to AI-related server demand.

5:59When Dell last reported in late February, shares surged more than 20 % as the company said it expected AI server revenue to double in 2027, CNBC reported then. Guidance today will likely get a close look to see what Dell can serve as a follow-up to that positive report. On Wednesday, major indexes held their ground but couldn't find much upward traction amid weakness in some of the largest tech stocks, including NVIDIA, Microsoft, and Broadcom. Tech shares lost ground generally, and so did financials, which were hurt by a 2.5 % decline in JPMorgan Chase, after Bloomberg reported the company expects to spend$1 billion more than previously expected this year.

6:46Treasury yields barely budged Wednesday after falling early in the day on hopes of a conflict resolution drawing closer. The second Treasury auction of the week found average demand for$70 billion in five-year notes. The results were a little worse than Tuesday's two-year note auction, Briefing.com noted. Weaker demand for Treasury notes could cause yields to rise. The PCE report, along with jobs data due next week, will conceivably help shape expectations for Fed policy, though analysts expect the central bank to keep rates paused for some time. Anything bearish on the inflation front would likely lift odds of rate hikes in the longer term.

7:28As of late Wednesday, chances of a rate hike at some point this year were around a 50-50 proposition, according to the CME FedWatch tool. Just a month ago, investors pegged no chance of a rate hike in 2026. Leading sectors Wednesday included two on the consumer side, Staples and Discretionary. Both rose more than 1%. Strength initially appeared to hinge on the drop in crude oil prices that in turn took its cue from rising hopes for a conflict resolution that would reopen the Strait of Hormuz. Some optimism got sapped around midday when President Trump, answering media questions, struck a hard line on what the U.S.

8:12is willing to give Iran in return for what he called behaving properly. Looking at individual movers Wednesday, Zscaler plunged 31 percent. Earnings and revenue topped analysts' expectations, and so did guidance for fiscal fourth quarter earnings per share. revenue guidance fell short of consensus and the caution damaged shares. Weakness as Zscaler hurt other cybersecurity stocks, including Palo Alto Networks and CrowdStrike holdings. The memory triple play of Micron, Western Digital and SanDisk all rose Wednesday, though gains were less dramatic than investors might be used to. Barclays raised its target price for Micron to$1 ,175 from$675.

9:02SanDisk also got an upgrade from Barclays. Taiwan Semiconductor Manufacturing climbed 2.7 percent, drawing support from a Reuters report that NVIDIA will invest up to$150 billion toward chipmaking capacity expansion and partnerships in Taiwan. Appleven rose 10 % as Morgan Stanley put out a bullish note on the company. Lululemon added 3 % as the company entered into a cooperation agreement with founder and major shareholder Dennis Wilson and added two people to its board of directors. This ends the company's proxy battle with Wilson, Reuters reported. MGM Resorts jumped 9 % after getting upgrades from Truist and JPMorgan Chase.

9:49The J.P. Morgan analyst cited resilience in leisure travel and stronger forecasts for growth at the Las Vegas Strip, CNBC reported. Airline and other transport stocks generally enjoyed healthy gains Wednesday thanks in part to lower oil prices. Dick's Sporting Goods dropped almost 7 percent even though the company surpassed earnings and revenue expectations and reaffirmed guidance. Falling margins appeared to hurt shares. In all, 6 of 11 S &P sectors climbed Wednesday, including several cyclical sectors left behind by the recent chip-fueled rally. One day isn't a trend, but many participants might welcome rallies in a broader group of stocks, as it might build a wider foundation less dependent on chips.

10:40The Dow Jones Industrial Average gained 182.60 points Wednesday, or 0.36%, to 50 ,644.28. The S &P 500 Index added 1.24 points, or 0.02%, to 7 ,520.36. And the Nasdaq Composite climbed 18.55 points or 0.07 % to 26 ,674.73. 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.

11:39For important disclosures, see the show notes and schwab.com slash market update podcast.