Intel Results Impress After Tough Day for Tech

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.

0:30Friday's calendar is relatively empty, with no major earnings and little data, putting focus squarely on the Middle East events ahead of the weekend. This could bring more caution, especially if crude oil ticks up, where there's any sign of an end to the tenuous ceasefire. Still, tech and chips in particular might be boosted today by Intel. The chipmaker's shares catapulted double digits in post-market trading yesterday after 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%.

1:13Geopolitics remains the market's swing factor, along with oil. Though$100 per barrel oil didn't break equities, it keeps inflation sensitivity high and could quickly cause a rise in rates and risk premium if the price rises from current levels near$96 per barrel. Beyond the negative impact on consumers, rising crude can threaten businesses with oil-related margin squeezes and rising capital costs. Crude prices are at their highs for the week and more than$10 above last Friday's one-month lows, one of the headwinds for stocks late this week. Software shares slumped Thursday, another pressure point.

1:55The big news beyond geopolitics comes next week when three major central banks, including the Federal Reserve, decide on rates and five of the Magnificent Seven report. Wednesday is a big day as four megacaps report and the Fed concludes its meeting. No rate move is expected, though Chairman Jerome Powell's press conference could be interesting ahead of his term's end on May 15th. There's no guarantee the Senate will have approved a successor by then, and President Trump has threatened to fire Powell if he stays in his role. Whether Trump has the power to do that could be decided by the Supreme Court at any time.

2:34Its ruling on Trump's effort to fire Governor Lisa Cook likely has implications for Powell's future as chairman. Senators are expected to block confirmation of Kevin Warsh, Trump's choice to succeed Powell until a criminal investigation into Powell ends. Next week includes a boatload of data, including housing starts and building permits, the government's first look at first quarter gross domestic product, or GDP, and the Fed's favorite inflation reading, personal consumption expenditures, or PCE, prices. Today isn't completely quiet, as investors get the final April reading on University of Michigan consumer sentiment at 10 a.m.

3:16Eastern Time. The Briefing.com consensus is 47.6 unchanged from the preliminary figure. Long-term inflation expectations, which rose to 3.4 percent in the preliminary report from 3.2 percent in March, are a key metric. Any uptick might attract the Fed's attention as it's concerned about keeping long-term inflation expectations anchored. Yesterday's data included initial weekly jobless claims of 214 ,000, roughly in line with the briefing.com consensus and still historically low. In Middle East developments Thursday, the ceasefire continued to hold, despite midday news reports of new attacks on Iran that sent stocks lower but were later disproven.

4:06No progress was made on peace talks, and the U.S. re-emphasized its blockade strategy that Iran has called an act of war. The European Union is dangerously low on jet fuel stocks, the Wall Street Journal reported, but U.S. jet fuel supplies are only slightly below the seasonal average. Earnings from several firms across different industries on Wednesday and Thursday reflected geopolitical unease, including the rising price of oil. For instance, instance, Railroad CSX raised its guidance but said that only applies if the futures curve for crude, which now points significantly lower for the rest of the year, plays out as the market now expects.

4:47Next week features results from five of the Magnificent Seven. The five magnificent stocks Apple, Alphabet, Meta Platforms, Amazon, and Microsoft could help determine the market's direction with their results and guidance. In recent quarters, Magnificent Seven stocks often declined after earnings, a tradition Tesla continued Thursday as investors grew concerned about its spending. With major indexes near record highs, there's pressure on for mega caps to deliver even better than expected earnings and guidance, setting up possible profit-taking even if they simply match or slightly exceed expectations.

5:28As the magnificent part of earnings season starts, there's been a move toward more buying of individual stocks, especially in tech, as investors sell index premium. Call buying into mega cap earnings can raise the odds of larger post-print moves. Treasury yields rose moderately Thursday, with steeper gains for longer-term yields more tied to economic growth trends, The 10-year yield touched 4.35%, the highest level since April 13th. Yields may look range-bound, but the market remains sensitive to upside rate shocks. Yields also got a boost Thursday from stronger-than-expected S &P Flash US PMI manufacturing data for April, which came in at a headline level of 54.0, above the 52.5 consensus.

6:21Next week is busy for treasuries. Several key auctions take place, which could give investors a sense of demand for U.S. assets from overseas buyers that typically make up an important customer contingent. Any perceived weakness in bids might send yields up further, though the benchmark 10-year yield is likely to remain in its near-term range, between 4 and 4.5 percent. Yields might also take dictation from rate decisions next week by the Bank of Japan, or BOJ, and the European Central Bank, or ECB. The Iran war put pressure on central banks to at least consider higher rates to blunt the impact of inflation caused by rising crude prices.

7:05Investors price in low odds of an ECB hike this coming Thursday, but still see two hikes this year, according to the Financial Times. The BOJ is likely to avoid raising rates next week, Reuters reported, but a June hike can't be ruled out, according to Bloomberg. Earnings on Thursday generally topped Wall Street's expectations, and 81 % of S &P 500 companies reporting through Wednesday had beaten consensus on earnings per share. However, first quarter reporting season isn't even 20 % complete. The mostly solid earnings to date are what's driving the market toward record highs, with geopolitical risk less of a factor for participants now.

7:50Companies that disappoint with earnings have been getting crushed in the market, as IBM and ServiceNow shareholders found to their chagrin Thursday. But those delivering positive surprises were rewarded amply. Texas Instruments jumped double digits after results yesterday. Major indexes fell across the board Thursday, but the S &P 500 index managed to close above 7 ,100 after dipping below it earlier, the second day in the last three that's happened. Technically, it's in a tight range between the psychological 7 ,000 level and the recent intraday high of just below 7 ,148. It tested that level Thursday and couldn't find fresh buying interest.

8:36Investors tilted toward caution Thursday, sending defensive stocks like utilities, staples, and real estate higher, while eschewing infotech and discretionary. Five S &P 500 sectors finished up and six fell. In individual trading Thursday, Tesla lost nearly 4 percent despite beating analysts' earnings expectations and roughly matching consensus for revenue. The company expects a significant increase in capital expenditures and gross margin compression. The increased spending is for robotics and self-driving technology. ServiceNow plunged 17 percent, though revenue and earnings per share were roughly in line with expectations.

9:24Subscription revenues rose 22 percent year-over-year in the first quarter, exceeding consensus but lower than expected due to deals delayed by the Middle East war. Shares of IBM sank 8%, despite topping analysts' quarterly earnings and revenue expectations, as guidance apparently failed to impress. Other software stocks taking heat included Adobe, Microsoft, and Salesforce. Microsoft fell 4 % amid the general software weakness, and also after the Wall Street Journal reported that the company had offered buyouts to 7 % of its workforce. Texas Instruments soared 18 percent to new all-time highs after impressing with earnings and receiving upgrades from two Wall Street firms.

10:10Earnings far exceeded expectations, and revenue also topped consensus, while the company issued better-than-expected guidance. The chip company reported a recovery in its industrial market, and data center revenue rose 90 percent year-over-year. Supermicrocomputer shares toppled 8%. According to Yahoo Finance, there are reports that the company lost a significant contract with Oracle. Lululemon fell almost 13 % after announcing a new CEO. Freeport McMoran lost 11 % despite an earnings beat. Negative news was hard to glean from the report, so this could represent profit-taking after the stock rallied into earnings.

10:54Railroads Union Pacific and CSX climbed 8 percent and 7 percent, respectively, on Thursday. CSX got a friendly reaction to earnings, which showed quarterly volume growth up 3 percent and improving operating margin. The company also raised guidance. Union Pacific reaffirmed guidance after an earnings beat. The Dow Jones Industrial Average dropped 179.71 points Thursday, or 0.36%, to 49 ,310.32. The S &P 500 Index lost 29.50 points, or 0.41%, to 7 ,108.40, and the Nasdaq Composite fell 219.06 points to 0.89 % to 24 ,438.50. This has been the Schwab Market Update podcast. To stay informed, visit schwab.com slash market update or follow for free in your favorite podcasting app.

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