Last-Minute Ceasefire Extension Has Market on Edge

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, April 22nd. A two-week ceasefire that was supposed to end today got a last-minute extension from President Trump after Iran and the U.S. couldn't find a way to meet for more peace talks. The situation seemed volatile as of late Tuesday, and the market has played defense so far this week. Aside from Tesla's earnings after the close, there's not much domestic news on tap, meaning events overseas and the price of oil might set the market's direction. As of late Tuesday, talks between the U.S. and Iran appear to be on ice.

0:57Vice President Vance called off plans to travel to Pakistan, the Associated Press reported just before Tuesday's close, and Iran called the U.S. blockade an act of war. Iran said it wouldn't attend talks unless the U.S. stopped its threats. Amid the confusion, crude remained just below$90 per barrel for spot CME futures as of late Tuesday, while below the highs above$110 reached a month ago. Regardless of the straight reopening or not, energy prices will take time to normalize, warned Michelle Gibley, Director of International Equity Research and Strategy at the Schwab Center for Financial Research.

1:37Physical delivery of oil and gas is constrained and it isn't reflected in energy futures prices. All this, Ghibli said, reverberates around the world in terms of monetary policy as several major central banks, including the Federal Reserve, prepare to make rate decisions next week. Most global central banks are on hold for now, waiting for more clarity on the duration of energy supply disruptions and higher energy prices, Ghibli said.

2:08Back home, President Trump's pick to head the Fed, Kevin Warsh, appeared at a confirmation hearing in the Senate Tuesday and stressed the importance of Fed independence. Fed Chairman Jerome Powell's term ends May 15th, but it's unclear if Warsh can get confirmed by then, especially with North Carolina Republican Senator Tom Tillis threatening to vote against it if the criminal investigation of Powell isn't resolved. The Fed holds its April meeting next week, which includes the usual Powell press conference, and Powell's plans could come up again then. Last time, Powell said he'd stay on as temporary chairman until Warsh gets confirmed.

2:50None of this is likely to affect rate policy when it meets next week, with the market overwhelmingly convinced another pause is on the way. Chances of a rate move were less than 1 % as of late Tuesday, according to the CME FedWatch tool. Treasury yields climbed slightly Tuesday on oil strength, and after a hot March retail sales report showed consumer spending rising broadly across different product categories. March retail sales rose 1.7 % monthly, well above the 1.3 % briefing.com consensus, and up from 0.7 % in February. Though a 15 % jump in gas prices factored into the data, it was impressive just the same.

3:35This was a pretty strong report, even with inflation, said Colin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research. The ex-auto and gas series beat expectations, and the control group, which feeds into the GDP report, also came in strong. Diving deeper, control group retail sales, which exclude sales from auto dealers, building materials stores and gas stations, climbed 0.7 % near the high end of Bloomberg's expectation range. Strength at the retail counter could indicate resilient consumers and suggests that we're not necessarily seeing negative economic consequences from the war just yet, Martin said.

4:18The gains were broad-based, with almost all subcomponents of the retail sales report coming in positive for the month. Earnings on Tuesday were stronger than analysts had expected, almost across the board, and for both earnings per share and revenue. Only four S &P 500 firms reporting Tuesday morning missed Wall Street's consensus on revenue, and only one missed on earnings. Some large earnings beats included GE Aerospace, DR Horton, RTX, and 3M. Still, most consumer-facing firms affected by last quarter's spike in oil prices haven't reported yet. Their results, which could include margin hits as they grapple with rising energy costs, might shape the narrative in coming weeks, starting with Tesla today after the close.

5:06At Tesla, auto deliveries missed market expectations last quarter, though EV demand may be on the rise thanks to higher oil prices. The company's robo-taxi and battery initiatives will likely be scrutinized when Tesla reports. Another thing to watch is revenue, which has been down three straight quarters. That income fell sharply from a year ago last time out as well. Also later today, earnings loom from ServiceNow. Quarterly results for this mid-sized stock might have once been overlooked by many investors, who don't closely track the company and its sector, but now loom large as AI competitions sent software shares reeling earlier this year.

5:50If they can put up strong enough results to demonstrate that AI is an enabler for their business model, it could help shift the lingering narrative around AI disruption, but it may be too early to get a full shift, said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research, referring to ServiceNow. Key companies reporting before the open include Boeing, GE Vernova, AT &T, and Philip Morris. United Airlines reported late Tuesday, and its results surpassed Wall Street's average earnings and revenue estimates. However, its guidance for second-quarter earnings per share was below the FACSET consensus, and shares slipped initially in post-market trading.

6:34The earnings call could provide more insight on passenger demand and the impact of higher fuel costs. In other corporate news, the market is still buzzing after Apple announced late Monday that longtime CEO Tim Cook plans to step down on September 1st and hand the reins to John Ternus, with Cook becoming executive chairman. The timing of the announcement suggests near-term results are resilient, Bank of America noted. Apple reports next week. Major indexes dropped a second straight session Tuesday, with losses steepening toward the end of the session, as hopes for peace talks faded. The S &P 500 index ended well off its highs, and the small-cap Russell 2000 index, which advanced Monday, fell 1%.

7:24That was the worst performance of any major index. Its recent strength may reflect ideas that the U.S. economy is more protected than others from high oil prices, as small caps generally have less international sales. Energy was the only one of 11 S &P 500 sectors up on Tuesday, with Infotech a distant second falling 0.32 percent. Five sectors lost 1 percent or more, though traditionally defensive ones like utilities and real estate fared worst. This could be a function of concerns that Tuesday's yield rise might advance if war resumes. The PHLX Semiconductor Index, which hit new all-time highs earlier this week, remained resilient Tuesday, climbing roughly 1 % as Intel rose ahead of its earnings Thursday.

8:16In Individual Trading Tuesday, GE Aerospace fell 4 % despite earnings and revenue beating analysts' expectations. GE also reaffirmed guidance, which it says includes expectations for continued high crude prices. Order growth looked strong, but there's concern high jet fuel costs could ultimately reduce demand for GE's products. Amazon rallied 1.3 % after announcing it will invest as much as$25 billion in Anthropic to help build its AI infrastructure, even as Anthropic said it plans to spend more than$100 billion on Amazon's AWS cloud over the next 10 years. This is another vote of confidence in AWS's chip technology, Bank of America said in a note.

9:093M slipped 2 % despite beating analysts' expectations for earnings and meeting them on revenue. It also reaffirmed guidance for fiscal 2026. T-Mobile U.S. fell 1.5 % after Bloomberg reported late Tuesday that Deutsche Telekom is considering a merger with T-Mobile. United Health Group soared nearly 8 % after earnings and revenue beat Wall Street's expectations. The company raised its full-year earnings guidance, and the company cited a medical loss ratio of 83.9 percent below consensus and a sign of improved cost management. Northrop Grumman fell more than 5 percent despite topping Wall Street's earnings and revenue estimates and reaffirming fiscal year guidance.

9:55In its release, the defense firm cited robust bookings and continued strong demand. Shares of defense firm RTX also fell in spite of stronger-than-expected earnings and a guidance hike. And D.R. Horton jumped 6 % after beating analysts' earnings consensus and meeting revenue expectations. The home builder also reduced the upper end of its guidance ranges. Net sales orders rose 11 % in the quarter, the company said, but its release still cited affordability constraints and cautious consumer sentiment. The Dow Jones Industrial Average lost 293.18 points Tuesday, or 0.59%, to 49 ,149.38. The S &P 500 Index fell 45.13 points, or 0.63%, to 7 ,064.01.

10:51and the NASDAQ composite dipped 144.43 points, or 0.59%, to 24 ,259.96. 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.

11:31For important disclosures, see the show notes and schwab.com slash market update podcast.