Intel Results Mulled as Earnings Season Speeds Up

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.

0:18I'm Colette O 'Claire, and here is Schwab's early look at the markets for Friday, January 23rd. Wall Street stands at the precipice of the busiest two weeks of the quarter. A Federal Reserve rate decision next Wednesday accompanies a host of tech earnings, including six of the magnificent seven between now and early February. Barring further geopolitical developments, investors may focus more on corporate and economic health in days ahead, with analysts expecting another strong showing from reporting companies. In the first major tech earnings report this season, Intel late Thursday reported better than expected earnings and revenue but delivered first-quarter guidance that came up short of the average Wall Street estimate.

1:04Shares of the company initially skidded 6 percent in post-market trading. The results follow dramatic gains in four-year highs for Intel, which saw investments by NVIDIA and the U.S. government over the last half a year. Intel sees flat earnings per share in the first quarter, excluding items, versus analysts' average expectation for$0.06, according to FactSet. Intel said in its press release it's navigating industry-wide supply shortages it expects to bottom out in the first quarter before improving. It's unclear if initial weakness for Intel shares might spill into other tech stocks, but it's possible, meaning the tech-heavy Nasdaq could be weighted down.

1:48Prior to Intel, a little more than 10 percent of S &P 500 companies had reported, with 61 percent beating estimates on the top line and 82 percent on the bottom line, according to Bloomberg. Average annual revenue growth was 7.18 percent, while year-over-year earnings per share growth was 17.1%. FactSet delivers its weekly earnings update around midday today, with new estimates for overall fourth-quarter earnings growth. Its blended annual earnings per share estimate last week was 8.2%, including both companies already reporting and estimates for those to come. Earnings from Microsoft, Meta Platforms, Tesla, and Apple loom next week, along with Visa, American Express, and MasterCard.

2:37The latter three could provide insight into consumer trends, and so could results from Starbucks and General Motors. Meanwhile, big defense firms and railroads also pepper next week's calendar, with big oil making an appearance next Friday morning. Before that, the Fed meets Wednesday, and market participants expect a pause after three consecutive rate cuts. Fears around Fed independence cooled earlier this week, when Supreme Court justices appeared skeptical of President Trump's effort to fire Fed Governor Lisa Cook. Also in Washington, attention turns next week to attempts by Congress to avoid another government shutdown.

3:17Congress is racing to pass six appropriations bills before the deadline next Friday. The timing is tight, but it's not impossible, said Michael Townsend, managing director of legislative and regulatory affairs at Schwab. Politics played a major role in trading this week, but less as the days passed. Tensions over Greenland cooled as Trump announced the framework of a deal with NATO that apparently could provide the U.S. with additional bases in Greenland and total access to the country, Trump said in an interview with Fox Business early Thursday. He added that there would be big retaliation if the European Union began selling U.S.

4:00assets. That was a concern earlier this week when U.S. Treasury yields jumped and the dollar flagged, following Trump's threat of tariffs against Europe. And despite easing tensions on that front, the benchmark 10-year Treasury yield remains elevated above its near-term range as the weekend approaches. Though it's possible yields could go back to that range, it wouldn't be surprising to see them retest Tuesday's 4.3 percent high, or even move above that, based on economic and political trends. Several important Treasury auctions loom next week and could help set the pace. I believe longer-term yields have more upside than downside, said Cooper Howard, director of fixed income research and strategy at the Schwab Center for Financial Research, or SCIFR.

4:51Geopolitical concerns elevated inflation, less Fed rate cuts because the economy holds up, and higher budget deficits, all are reasons yields could remain elevated in the near term. Historically, higher yields can hurt stocks by raising the cost of consumer and corporate borrowing. In addition, higher bond yields tend to compete with stocks for investor funds. The prospect of a 4 % or higher yield on a perceived safe asset, like U.S. Treasuries, may entice some market participants, though no investment is truly safe. Corporate bond yields, however, remain mostly in check for now, meaning credit is relatively easy for companies to take on.

5:33This could help propel economic growth. Speaking of which, the government's final third-quarter gross domestic product, or GDP, estimate rose to 4.4 percent from 4.3 percent on a seasonally adjusted annual basis Thursday, while initial jobless claims of 200 ,000 met expectations. Both numbers suggest economic vitality, and Treasury yields rose slightly on the news. Yesterday's Keystone report, however, was the November Personal Consumption Expenditures, or PCE, Prices Index, which the Fed monitors closely for inflation trends. PCE rose 0.2 percent, both for headline and core PCE that strips out food and energy.

6:19November personal income rose 0.3%, less than the briefing.com consensus of 0.4%, while personal spending rose 0.5%, above the consensus of 0.4%. The annual 2.8 % PCE growth in November was up from 2.7 % in October, another sign that inflation remains stubborn. Treasury yields stayed flat after the PCE data, but remain elevated from their near-term range. This could reflect ideas that stubborn inflation is unlikely to allow for rate cuts in the immediate future. However, the stock market didn't seem phased, partially because recent economic data has looked vigorous despite higher yields. This includes Thursday's updated Gross Domestic Product, or DDP, data, last week's retail sales, financial sector earnings, and the Atlanta Fed's updated Nowcast that estimates fourth-quarter GDP growth of 5.4 percent.

7:20Where is the evidence that Fed policy is restrictive, said Nathan Peterson, director of derivatives research and strategy at Skiffer. Yes, there have been softening trends in the labor market, but it's not being driven by economic growth concerns. The Treasury market faces another milestone with the Bank of Japan or BOJ's rate decision early Friday. Bond yields there fell the last day or two after rising late last week and reigniting fears of the yen-carry trade, in which investors pull money out of U.S. markets to invest in Japan. Some of this week's Treasury yield climb might have reflected higher Japanese yields.

8:02We'll turn to Thursday's market action in a minute, but if you would like to receive market news and actionable insights from Schwab's experts, sign up for the daily market update and more at schwab.com slash newsletters. Major indexes had another solid day Thursday, led by the big three sectors, communication services, consumer discretionary, and infotech. These three include all the magnificent seven stocks, six of which report next week. The small-cap Russell 2000 index, meanwhile, outpaced the S &P 500 index for the 14th consecutive day. Solid performance by small caps partly reflects sector rotation out of tech over the last few months and could signal investor optimism over rates and the domestic economy.

8:54Volatility eased back toward pre-Greenland levels Thursday, signaling less odds of choppiness ahead. Additionally, the market's quick comeback from Tuesday's Sell America trade indicated that they're still buying interest on retreats. Buy-the-dip mentality is still alive and well, said Lizanne Saunders, chief investment strategist at Skiffer. Only seven of 11 S &P sectors rose Thursday, but laggards were mostly defensive areas like real estate and utilities. Checking individual market movers Thursday, Boeing rose more than 1 percent to a 52-week high ahead of its earnings report next week. Though the company is expected to report another loss, analysts now see a chance of profitability returning in the first or second quarters, briefing.com noted as aircraft deliveries trend higher.

9:48Meta Platforms rose 5.4 % Thursday in what might have been a technical move after the stock plumbed two-month lows earlier this week. Moderna rose another 4%, adding to Wednesday's double-digit gains on positive trial data for its melanoma cancer vaccine. The Dow Jones Industrial Average climbed 306.78 points Thursday, or 0.63%, to 49 ,384.01. The S &P 500 index had a 37.73 points or 0.55 % to 6 ,913.35. And the Nasdaq Composite rose to 11.20 points or 0.91 % to 23 ,436.02. 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.

10:52And if you like what you've heard, please consider leaving us a rating or review. It really helps new listeners find the show. Join us for another update Monday.

11:07For important disclosures, see the show notes and schwab.com slash market update podcast.