Packed Earnings Slate, Economic Data Loom Large

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 Tuesday, January 20th. Fourth quarter earnings season takes center stage this week. With major indexes near record highs and valuations elevated, there's little room for disappointment. Early results have been encouraging, however. Of the 7 % of S &P 500 companies that have already reported, 79 % have beaten earnings estimates, while 67 % have topped revenue forecasts, according to FactSet. Economic data will also be in focus this week. Investors will be looking for the upcoming Inflation and Gross Domestic Product, or GDP, reports to help confirm that growth is holding up and consumer prices are stabilizing.

1:053M will kick off the week's crowded earnings calendar early this morning. The diversified industrial company, known for its safety gear and brands like Post-it, has steadily gained ground since late 2023 and could provide a read into industrial demand as well as data center construction trends. More bank earnings are also on the menu before the open, with U.S. Bancorp reporting following mixed financial sector results so far this earnings season. Then, the homebuilding giant D.R. Horton will provide insights into U.S. housing demand and how homebuilders are coping with rising costs and still elevated mortgage rates.

1:44United Airlines and Netflix will wrap up the packed earnings day after the market closes. Shares of Netflix have fallen roughly 35 percent from their all-time high last June amid valuation concerns and, more recently, skepticism about the proposed acquisition of Warner Brothers Discovery. United Airlines stock, on the other hand, has benefited from strong travel demand and recent analyst upgrades, leading it to trade near its all-time high on Friday. Tomorrow, Johnson & Johnson will be the highlight. Shares of the pharmaceutical and medical technology company have surged since last June, despite ongoing lawsuits related to its talc-based baby powder.

2:27Robust financial results, optimistic guidance, and largely positive analyst coverage have helped boost shares in recent quarters. Thursday, meanwhile, will feature earnings from GE Aerospace, Procter & Gamble, Abbott Laboratories, and Intel. Intel has been under the microscope ever since the U.S. government made a historic$8.9 billion investment in the tech company last year in a bid to help develop domestic semiconductor production. AI-driven data center CPU demand will be in focus in the Company's quarterly report. Pivoting to the economic calendar, the weekly ADP employment pulse is the only major domestic data due today.

3:11Investors will be hoping to see initial signs of a shift away from what appears to be an ongoing low-hire, low-fire environment. China's fourth-quarter and full-year GDP data, released yesterday, will also be dissected. Chinese policymakers have been under pressure to stoke economic growth through fiscal stimulus and rate cuts of late. The People's Bank of China already announced last Thursday it would cut rates by 25 basis points, a move that went into effect yesterday. Despite tariffs leading to a 20 percent drop in exports to the U.S. in 2025, China's trade surplus grew by 20 percent to reach a record$1.2 trillion last year.

3:57China's exports to the rest of the world have made up for the drop in shipments to the U.S., said Michelle Gibley, Director of International Equity Research and Strategy at the Schwab Center for Financial Research, or SCIFR. However, so far, little has been done to address the problem of weak Chinese domestic demand, which limited imports and contributed to the growing trade surplus. Turning back to the U.S. economy, after getting a read into the housing market from D.R. Horton, investors will be closely watching December's pending home sales data tomorrow. Then on Thursday, the final third-quarter gross domestic product, or GDP, report will be the highlight.

4:42The data could confirm that economic growth, consumer spending, and business investment remained resilient last year, even as the labor market showed some signs of strain. It's worth noting that the Atlanta Fed's GDP Now gauge estimates fourth-quarter GDP will come in at 5.3%, potentially indicating the economy has been running hotter than advertised. The delayed release of November's Core Personal Consumption Expenditures, or Core PCE, price index will also draw attention Thursday. Investors will be hoping to see a drop in the Fed's favorite inflation gauge to help pave the way for more market-boosting rate cuts this year.

5:24Finally, the week will be capped off by the University of Michigan's final consumer sentiment reading for January. Looking at market action on Friday, there was only muted movement in all three major U.S. market indexes. Gold and Bitcoin prices both fell slightly, and Treasury yields rose across most of the curve. Yields have been range-bound for over a month, despite heightened geopolitical tensions, including U.S. military action in Venezuela, plus a criminal investigation into Fed Chair Jerome Powell. The bond market is really sort of snoozing through everything these days, Kathy Jones, chief fixed-income strategist at Skiffer, said on the On Investing podcast Friday, I worry that the market's a bit too complacent about the risks to the economy, but the collective wisdom of the market right now is that all this is just noise.

6:15The Treasury yield curve steepened slightly on Friday, however, continuing an ongoing trend. This came after President Trump hinted that he may want to keep the dovish-leading Fed chair candidate Kevin Hassett in his current White House job. The move lifted the odds for the slightly more hawkish former Fed Governor Kevin Warsh to be the next Fed chair. Despite Treasury yields move higher on Friday, the chances of a Fed rate cut in both January and March hardly budged, according to the CME FedWatch tool. As of the market close, futures priced in just 5 % odds of a rate cut this month and roughly 20 % odds of a cut in March.

6:59Looking at individual performances on Friday, shares of Micron Technology surged 7.8 % after insider buying activity lifted investor sentiment. The semiconductor and computer memory company has skyrocketed over the past year due to rising demand for its data storage solutions amid the AI boom. PNC Financial shares also rose 3.9 percent to an all-time high after the bank topped analysts' profit forecasts, largely due to a deal-making rebound. Other financial sector stocks that reported earnings Friday didn't fare as well, however. State Street Corporation, Regions Financial, and M &T Bank all ended the day in the red.

7:42The mixed results continued the recent hot and cold streak for the financial sector this earnings season. Novo Nordisk stock, meanwhile, jumped 9.1 percent after early prescription data showed strong demand for the Danish pharmaceutical company's GLP-1 obesity pill. The energy equipment giant GE Vernova also saw its stock pop 6.1 percent. This came after news that President Trump and several state governors have agreed to push for an emergency wholesale electricity auction to pressure tech companies to find new power plants, Bloomberg reported. Such an auction could potentially provide guaranteed long-term revenues for GioVernova.

8:25On the other side of the ledger, shares of the largest emissions-free power provider in the U.S., Constellation Energy nosedived 9.8 percent due to the regulatory news. The proposed two-year energy price cap in President Trump's electricity auction plan directly threatens the revenue streams of Constellation. From a sector perspective, real estate and industrials led the way, while health care, communication services, and utilities lagged. Overall, six out of 11 S &P 500 sectors fell on the day, pushing market breadth lower. Still, 71.1 % of S &P 500 stocks traded above their 50-day moving average on Friday.

9:10The Dow Jones Industrial Average fell 83.11 points Friday, or 0.17%, to 49 ,359.33. The S &P 500 index shed 4.46 points, or 0.06%, to 6 ,940.01, and the Nasdaq Composite dropped 14.63 points, or 0.06%, to 23 ,515.39. For the week, the Dow Jones Industrial Average was down 0.29%, The S &P 500 slipped 0.38%. And the NASDAQ dropped 0.66%. 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. And if you like what you've heard, please consider leaving us a rating or review. It really helps new listeners find the show.

10:10Join us for another update tomorrow.

10:18For important disclosures, see the show notes and schwab.com slash marketupdatepodcast.