Micron Up Next as Investors Prepare for CPI Read

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. I'm Keith Lansford, and here is Schwab's early look at the markets for Wednesday, December 17th. Santa Claus continues to delay his appearance as major indexes lick wounds following three straight losing sessions and investors digest data. Yesterday's jobs and retail sales reports held mixed messages, leaving tomorrow morning's Consumer Price Index, or CPI, as the last piece of the weekly economic puzzle. Market participants will be on their toes after today's close for earnings from chipmaker Micron, followed late tomorrow by consumer Bellwether's FedEx and Nike.

0:57After that, earnings go relatively quiet until 2026. For those fretting over Santa's absence, the official Santa Claus rally period typically involves just the last five trading days of the old year and the first two of the new year, so there's still time. Thursday's CPI is the next major economic reading. Analysts expect headline and core CPI to each rise 0.3 % in November, with core excluding food and energy. That compares with 0.3 % and 0.2 % in September. There was no data in October due to the shutdown. Glancing back at yesterday's November non-farm payrolls, the U.S. added 64 ,000 jobs and unemployment rose to 4.6 percent.

1:47While jobs growth slightly topped expectations, unemployment outpaced consensus of 4.5 percent and was the highest since 2021. This, along with the government's partial October data showing a massive loss of 105 ,000 jobs, raised new concerns about the economy and whether the Federal Reserve has cut rates quickly enough. Consensus heading to the report was for November jobs creation of 30 ,000, with unemployment little changed at 4.5 percent, so the November data could be read as mixed. However, jobs growth from August and September got revised downward by a combined 33 ,000 before October's big drop.

2:30In addition, the November U-6 unemployment rate, which accounts for unemployed and underemployed workers, rose to 8.7 percent in November from 8 percent in September, another sign of clume. The report shows there's ongoing weakness in the labor market, said Cooper Howard, director of fixed income research and strategy at the Schwab Center for Financial Research, or SCIFR. The labor market is softening, but not falling off a cliff. Much of October's downturn reflected a drop in federal government jobs due to a deferred resignation program, taking that category down by 162 ,000, perhaps a one-time impact.

3:11Other factors slowing employment the last few months include lower immigration and the light higher low-fire economic trend that's persisted throughout the year as companies remain cautious amid tariffs and stubborn inflation.

3:27Treasury yields, which touched three-month highs last week amid inflation and debt worries, edged down Tuesday after the jobs data. Though the 10-year yield fell three basis points to 4.15%, said it's up over the last few weeks, partly on the chance of rising rates overseas. The Bank of Japan decision is due early Friday, U.S. time, and a hike is expected. The European Central Bank's rate decision is due early tomorrow, U.S. time. Analysts don't expect a rate move, but recent economic data impressed, meaning further ECB cuts seem unlikely. There's also a growing sense that an ECB hike might not be out of the question next year, and one thing to watch as the ECB releases its decision tomorrow is whether it raises economic growth projections.

4:15The Fed's rate cuts and signs of near-term economic softness sent short-term yields down more than the long ones recently, widening an already steep yield curve. When the curve is steep, it means longer-term notes have higher yields than short-term ones. This can be helpful for financial industry stocks, as banks benefit when they borrow at low rates and lend at higher ones. Big bank earnings start in less than a month, possibly providing fresh perspective on the economy and corporate health. Bottom line is we have some mixed data and some push-pull market narratives, said Nathan Peterson, director of derivatives research and strategy at Skiffer.

4:54The bullish narrative is that the economy is firm, The Fed will be accommodative in 2026 if labor market gets too weak, and earnings growth forecasts are double-digit. Concerns include AI overspending, whether labor market weakness will begin to hurt the firm economy, and potentially higher treasury yields on the long end of the curve. Along with a jobs report, investors received October retail sales data Tuesday. Though headline sales were flat, that reflected continued weakness in the automobile sector. Excluding autos, sales rose a solid 0.4%, suggesting consumers remain resilient. That said, the report doesn't adjust for inflation, so some of the gains reflect higher prices, not more exuberant shoppers.

5:44The closely watched Control Group retail sales figure, which excludes auto dealers, food services, building materials stores and gas stations, rose 0.8 percent, the highest in four months, and one possible reason yields stayed up after Tuesday morning's flood of data. Department stores and sporting goods stores saw firm October sales. Tuesday also brought December S &P Global U.S. Manufacturing and Services PMI data, which both remained in expansion above 50 but down from previous levels. By late yesterday, chances of a rate cut next month were basically unchanged from a day earlier at 24 percent, according to the CME FedWatch tool.

6:25Market participants work in solid chances for at least one rate cut and possibly two by June, but the Fed's dot plot of rate projections anticipates only one for the year. Turning to earnings, last time out, Micron exceeded Wall Street's earnings expectations and delivered solid guidance, sending shares higher. The company makes memory and storage components for computers, a business that's benefited from AI because high end AI chips require high bandwidth memory, a market Micron serves. Tuesday saw major indexes waver after the heavy helping of mostly bearish data before posting their session lows around midday.

7:06A late surge of dip buying rescued the S &P 500 index from technical weakness. The index had an interesting day on the charts, falling to just under its 50-day moving average of 6 ,764 for an intraday low. The S &P 500 managed to cling to 6 ,800, the weakest close so far this month and down three straight days, but well above the 50-day moving average. Technically, that may appear positive. The Nasdaq found itself in an unaccustomed position as market leader Tuesday and the only major index to gain, possible evidence that the rotation out of tech stocks is running out of steam. For that to be true, a few more sessions of similar performance would likely need to happen.

7:53As it was, Infotech accompanied consumer discretionary and communications in the top three sectors for the session. However, the broadening market breadth that characterized recent sessions faded Tuesday, as the percentage of S &P 500 stocks above their 50-day moving averages fell to around 56 percent from 60 percent. It's unclear if Tuesday's turn back to tech is a one-session move or has legs, but early action today might provide clues. Checking individual performance, Pfizer dropped 3.4 percent after disappointing with its guidance. Healthcare was among the worst sector performers Tuesday, also hurt by a six percent drop in Humana that came after the U.S.

8:37House of Representatives said it won't vote on an extension of Affordable Care Act subsidies. Energy shares were another weak link Tuesday, pushed down as crude oil fell to levels last seen in early 2021 amid hopes for a peace deal in the Russia-Ukraine war that would put Russian oil back on the market. Airline stocks got a boost from hopes for lower fuel costs. Chip stocks were mixed, though large players like NVIDIA and advanced microdevices rose. Recent laggards Oracle and Broadcom found buyers Tuesday helping tech. Tesla climbed 3 % to new record highs amid excitement over robo-taxis, CNBC reported.

9:21Roku climbed nearly 2 % after getting an upgrade to overweight from underweight by Morgan Stanley, which sees a strong 2026 for U.S. advertising spending due to digital strength. And Bitcoin futures got back on their feet Tuesday with a 2 % rise, but stayed under$90 ,000.

9:43The Dow Jones Industrial Average dropped 302.30 points Tuesday, or 0.62%, to 48 ,114.26. The S &P 500 index fell 16.25 points or 0.24 % to 6 ,800.26. And the Nasdaq Composite gained 54.05 points or 0.23 % to 23 ,111.46. 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.

10:41For important disclosures, see the show notes and schwab.com slash market update podcast.