Markets Digest Fed Cut, Broadcom Earnings On Deck

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, December 11th. After the third consecutive rate cut from the Federal Reserve yesterday, investors eye its impact on stocks and treasuries, while digesting results from tech giant Oracle and awaiting this afternoon's earnings from AI Titan Broadcom. The 25 basis point rate cut took the target range for the Fed funds rate to between 3.5 percent and 3.75 percent, the lowest in three years. It was the first time the Fed has cut rates by 25 basis points in three straight meetings since 2019, though last year it cut by 50 basis points followed by two cuts of 25.

1:00The decision to cut rates wasn't unanimous, however, with three Fed board members voting against the move for the first time since September of 2019. Still, Fed Chairman Jerome Powell's relatively dovish post-meeting comments helped assuage investors' fears that they may have to fight a hawkish central bank moving forward. While the press conference was largely viewed as leaning dovish, Powell suggested that after 75 basis points of cuts since September of 2025 and 175 basis points of cuts since September of 2024. The current target range is in a broad range of estimates of neutral value and that the committee is well positioned to wait and see how the economy evolves from here.

1:47This could be interpreted as supporting a pause in rate policy and watching the data. The Fed hasn't seen much in the way of numbers for this quarter due to the government shutdown. The key November non-farm payrolls report is due next Tuesday.

2:06All three major indexes rose on Wednesday, with the S &P 500 closing near a record high in the wake of the Fed meeting. Treasury yields, meanwhile, fell sharply across the curve, reversing their recent trend. The 10-year Treasury yield was up 19 basis points this month alone heading into the meeting, creating a bearish overhang hinting at inflation and debt worries. A steepening yield curve in which short-term yields soften on rate policy while long-term yields stay high and continue to weigh on borrowing costs likely remains a threat. The major trend continues to be the steepening of the yield curve, said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research, or SCIFR.

2:50That's a signal that the market is nervous about inflation as well as rising supply due to high and increasing deficits. There's also a risk premium being built into the market for weakening the Fed's independence. Jones looks for one to two more rate cuts in 2026, bringing the target range for the Fed funds rate down to 3 percent to 3.5 percent. Unless the economy weakens considerably or inflation falls, that's about as low as it makes sense for rates to fall, Jones said. The reasoning for the rate cut is evidence that the labor market is weakening. While we don't have up-to-date jobs data, the numbers we have suggest that the labor market has stalled with little hiring taking place.

3:36Layoffs have started to pick up, although not at recessionary levels. Wednesday's rate cut came with the Fed's updated quarterly economic projections and the dot plot of where officials see rates headed. The median estimate for the December dot plot pegged the Fed funds rate at 3.4 percent by the end of 2026, while gross domestic product, or GDP, growth was seen at 2.3 percent and core inflation at 2.5 percent. Growth estimates rose from September's projections, while inflation estimates fell, but Fed officials are still penciling in just one rate cut for 2026 for now. However, the range between voting members' estimates for interest rates next year has widened, with the most dovish official now expecting the Fed funds rate to fall to 2.1 percent and the most hawkish official seeing rates rising to 3.9 percent.

4:32The CME FedWatch tool pegged January rate cut odds at 22.1 percent as of Wednesday afternoon. By the end of 2026, the futures market is pricing in a more than 70 percent chance of a Fed funds rate falling to a range of 3 % to 3.25 % or below. The Fed has based recent rate cuts on labor market weakness. However, inflation remains well above the central bank's 2 % goal. The last reading on core personal consumption expenditures, or PCE, the Fed's favorite inflation metric showed a 2.8 % year-over-year rise.

5:11Shifting to corporate earnings news, Oracle, a major player in cloud infrastructure and data centers, which relies on AI chips, reported better-than-expected earnings results but missed revenue estimates after the close Wednesday. Shares fell in after-hours trading, with investors focused on the company's weaker-than-expected cloud infrastructure and software revenue. Semiconductor giant Broadcom reports after today's close. Shares have surged this year based partly on Broadcom's sales of chips to Alphabet, which has emerged as one of the leading firms in the AI arms race. Last time out, Broadcom narrowly beat analysts' earnings and revenue expectations and said it expected$17.4 billion in fourth quarter revenue, outpacing consensus.

6:00Investors might be looking for more color on Broadcom's strategic collaboration with OpenAI, announced in October. As far as individual market movers on Wednesday, Warner Brothers' Discovery stock continued its rise, jumping 4.5 percent on the day amid a bidding war for the company between Paramount and Netflix. Paramount launched a$108 billion hostile takeover bid for Warner Brothers this week in an 11th-hour attempt to prevent Netflix from acquiring the company. GE Vernova stock rose 15.6 % after raising its outlook for revenue by 2028 to$52 billion from$45 billion and doubling its dividend.

6:44It also raised its buyback authorization to$10 billion from$6 billion and said it sees this quarter's revenue coming in toward the higher end of expectations. The company received rating upgrades from Oppenheimer and RBC Capital, while several other firms raised their price targets for the stock. Marvell Technology stock rose 4%, supported by CEO Matt Murphy's remarks that, contrary to reports, the company hasn't lost any business from major customers, CNBC reported. The semiconductor company previously topped earnings estimates on December 2nd, revealing it grew revenues by 37 percent to a new record of over$2 billion in the third quarter of its fiscal year of 2026.

7:31Marvell also announced last week that it will pay$3.25 billion to acquire Celestial AI, which uses fiber optics to connect AI chips. uber stock meanwhile continued its slide on wednesday falling 5.6 percent the ride share and delivery company is coping with regulatory pressure in europe and canada which were recently spurred by protests from taxi drivers in barcelona morgan stanley also slashed its price target for Uber to$110 earlier this week. Nine out of 11 S &P 500 sectors rose Wednesday. Cyclical sectors, including industrials, materials, and consumer discretionary drove the market's gains, while defensive sectors like consumer staples and utilities lagged.

8:21The tech sector barely climbed, and Oracle's weakness after the close might suggest pressure to come in that arena today. Chipmaker shares generally rose yesterday, with NVIDIA a notable exception. Microsoft's weakness continued to hurt tech.

8:40The Dow Jones Industrial Average jumped 497.46 points Wednesday, or 1.05%, to 48 ,057.75. The S &P 500 index rose 46.17 points or 0.67 % to 6 ,886.68. And the Nasdaq Composite climbed 77.67 points or 0.33 % to 23 ,654.16. 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.

9:39For important disclosures, see the show notes and schwab.com slash market update podcast.