Jobless Claims, Deere Follow Early Holiday Party

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 Wednesday, November 26th. First, an important note. U.S. markets are closed Thursday, November 27th, in observance of the Thanksgiving holiday. Due to the early market close, Friday's Schwab Market Update will be an abbreviated version, published at the normal time ahead of the market open. Before breaking for the holiday tomorrow, investors face earnings from Deere this morning, along with a final helping of data before the stuffing and pumpkin pie. If Thanksgiving were today, bulls would have lots to celebrate after Wall Street spent the last three sessions digging itself out of a deep November hole, thanks to rising rate-cut hopes and mostly solid retail earnings.

1:02Deere is among the last major industrial firms to report, and shares are up over the last month. Deere is among the last major industrial firms to report, and shares are up over the last month. Last time, the agriculture machinery maker estimated a pre-tax impact of$600 million from tariffs in fiscal 2025, though recent progress on sales of U.S. soybeans to China may have brightened the farm picture in a tough year for the industry. Deere lowered the top end of its net income guidance last time it reported, which sent shares down. Guidance will likely be the focus again today. Today's initial jobless claims data at 8.30 a.m.

1:42Eastern Time is expected to show a 225 ,000 reading, up from 220 ,000 the prior week, according to Briefing.com. The prior week's continuing claims, a measure of how difficult it is to find a job and went out of work, rose to a four-year high of 1.97 million. The MBA Mortgage Application Weekly Applications Index is also due early today after falling 5.2 percent in the week that ended November 14th. Yesterday's rally came despite mostly disappointing data. Payroll processing firm ADP said job losses averaged 13 ,500 per week for the four weeks ending November 8th, weighing on Wall Street. While September retail sales disappointed, and the September producer price index, or PPI, was mostly in line with expectations, but still stubbornly above the Federal Reserve's 2 percent goal.

2:34PPI rose 0.3%, with core PPI, excluding energy and food prices, up 0.1%. Consensus had been for a 0.3 % headline increase and a 0.2 % uptick in core. Retail sales rose 0.2%, well under 0.4 % consensus. The ADP report raises broader questions, with October government jobs data not available due to the shutdown and November data not due until after the Fed's meeting next month. The ADP report is raising concerns that the labor market is weaker than expected, said Cooper Howard, Director of Fixed Income Research and Strategy at the Schwab Center for Financial Research, or SCIFR. PPI was mostly in line with expectations.

3:19It doesn't suggest that inflation is turning a corner and will move lower anytime soon. The next key inflation reading comes a week from Friday when delayed September personal consumption expenditures or PCE data are due. Retail sales data look concerning, especially a 0.1 % drop in the closely watched category of control group retail sales used to calculate gross domestic product, or GDP. Analysts had expected a 0.3 % rise. This raises concerns that the consumer is weakening going into the holiday season and may pull back, Howard said, adding that this is September data, so it's unclear how much weight the Federal Reserve wants to put into it.

4:02November consumer confidence from the conference board also released yesterday was a dismal 88.7, well below the briefing.com consensus of 93.3 and down from 95.5 in October. A year ago, it was 112.8. On a positive note, long-term inflation expectations remained at 5.7 percent. Less positive was the expectations index trending down again, suggesting pessimism. Overall readings are near the pandemic lows, said Kathy Jones, Chief Fixed Income Strategist S. Skiffer. Chances of a rate cut in December climbed to 83 percent by late Tuesday after all the soft data, according to the CME FedWatch tool.

4:45That doesn't mean a rate cut is guaranteed, however, considering September's PPI numbers. PPI came in higher than expected at 2.7 % year-over-year and core at 2.9%, Jones said. A Fed rate cut in December is still a toss-up. The PPI report combined with ADP and retail sales data puts the Fed in an awkward position amid signs the economy continues to slow while prices aren't retreating. The Fed's dual mandate of maximum employment and stable prices means it must consider both labor and inflation when it makes a rate move and both look concerning. Voices from Fed policymakers late last week and early this week generally appeared to tilt towards another cut, one reason the odds climbed so much over the last week.

5:34Whatever decision it makes is likely to draw dissenters. Some of the optimism around Fed policy appeared related to a Bloomberg report that the administration is considering White House National Economic Council director Kevin Hassett as a frontrunner to be Fed chairman. Hassett appears to want to push rates lower. Trading volume could lighten today as the holiday approaches, possibly leading to sharper daily moves. Anyone trading may want to consider extra care, with the water already rough after last week's turbulence.

6:09Major indexes climbed for a third straight session Tuesday, led by small caps on encouragement over a possible rate cut. The Russell 2000 small cap index climbed more than 2 % and settled above its 50-day moving average. The S &P 500 index also closed above its 50-day moving average for the first time since November 14th in a possible sign of technical resilience. The Nasdaq 100 index followed suit, despite a 2.6 % drop for NVIDIA, its largest component. Sector-wise, tech continues to struggle amid competition in the AI space that's weighing on chip market leaders NVIDIA and advanced micro-devices.

6:52Both fell sharply Tuesday, and their heavy market capitalizations, particularly NVIDIA's, made it hard for the Nasdaq Composite to gain much traction, despite gains from Broadcom and Alphabet. On News Meta may be checking out Alphabet's chips that were designed with Broadcom's assistance. Investors saw that as bad news for NVIDIA and AMD. I think it is safe to say that investing in the AI space appears to have entered into a phase where investors are more sensitive to company-specific fundamentals and are attempting to sniff out potential winners from losers, as evidenced by Oracle versus Alphabet's performance over the past 60 days, said Nathan Peterson, director of derivatives research and strategy at Skiffer.

7:38Oracle reports December 8th, and that could be a useful driver for near-term AI sentiment. One question is whether Oracle can calm investor fears about overspending and heavy debt issuance. While tech struggled, other sectors picked up the slack, notably consumer discretionary. It finished in second place behind the surging healthcare sector and just ahead of communications services, a sector dominated by Alphabet and Meta. Tech barely climbed, keeping the Nasdaq composite underwater until midday Tuesday. Healthcare is easily the leading S &P sector over the last month, up 8.4%, with communication services the only other sector in the green over that time.

8:24The S &P 500 remains on track for November losses despite this rebound, while strength in healthcare reflects what may be rotation out of tech as some investors take profit before year-end. Yesterday's rally stayed broad, with 8 of 11 S &P sectors higher and advancing shares exceeding declining ones at a 4-to-1 clip. More than 50 % of S &P 500 stocks are above their 50-day moving averages for the first time since November 12, up from 31 % late last week. For bullish investors, this is good news, as is the market's ability to rally Tuesday without any help from NVIDIA, the largest stock. In corporate news, Dell shares initially climbed late Tuesday as earnings beat expectations, though revenue appeared just short.

9:14Guidance for solid fourth-quarter revenue well above consensus appeared to give shares a lift. Checking individual stocks Tuesday, retailers like Kohl's, Macy's, Gap, Best Buy, and Home Depot performed well Tuesday as earnings from Kohl's and Best Buy beat analyst estimates. Abercrombie & Fitch rose more than 30 percent and Kohl's more than 40 percent. Alphabet added one and a half percent to new record highs Tuesday on a media report that Meta Platforms is considering its chips. Excitement about Alphabet's Gemini 3 AI launch last week continues to drive shares as well. And Broadcom, which rose 11 percent Monday in association with Alphabet's rally, added another 1.9 percent Tuesday on the report of Meta's interest in Alphabet's chips, which Broadcom helps design.

10:09The Dow Jones Industrial Average added 664.18 points Tuesday, or 1.43%, to 47 ,112.45. The S &P 500 index rose 60.76 points, or 0.91%, to 6 ,765.88. And the Nasdaq Composite climbed 153.59 points, or 0.67%, to 23 ,025.59. This has been the Schwab Market Update Podcast. To stay informed, visit www.schwab.com slash marketupdate 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.

11:08For important disclosures, see the show notes and schwab.com slash market update podcast.