PCE Prices, Micron Results Could Help Set Tone

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, September 30th. An important trail marker on the path toward next month's Federal Reserve meeting comes into focus today as investors await the August Personal Consumption Expenditures, or PCE, price index. Consensus for the 8.30 a.m. Eastern Time report is 0.3 % monthly and 3.3 % annually for core PCE, excluding food and energy. Non-core PCE is seen at 0.4 % and 3.7%, though that includes the energy market that has ascendant this month. A Fed policymaker said last week he'd like to see 0.2 % or less core monthly PCE growth.

1:02We believe the Fed will hike at least one more time this year, and maybe again later this year or early next year, said Cooper Howard, Director of Fixed Income Research and Strategy at the Schwab Center for Financial Research. The outlook largely depends on the breadth and pace of inflation. PCE will be important and could help inform the future path of the Fed Fund's rate. Heading into PCE, chances of a rate hike next month stood at 51 percent, according to the CME FedWatch tool, down from 70 percent a day earlier. Odds fell after the August job openings and labor turnover survey, or JOLTS, came in below expectations at 7.08 million, and home prices rose a surprising 2.5 percent in July.

1:49Both suggest difficult circumstances for consumers, perhaps putting the Fed more on the dividing line between yes and no. Consumer confidence from the conference board in September likely played a part, too, coming in at 81.9, well below 88.6 in August. Beyond PCE, market participants will closely study today's August personal spending and income data, seen up 0.7 % and 0.4 % respectively, after smaller rises for both in July.

2:24Tomorrow brings the September Challenger jobs cuts report before the open. The August reading of approximately 53 ,000 didn't raise many eyebrows, but analysts expect a jump to nearly 80 ,000 in September. That's not historically high, but it's the trend that matters. September layoffs a year ago were just 54 ,000. More important is Friday's September non-farm payrolls data with consensus at 84 ,000 jobs created. That's roughly half of August's surprisingly firm 162 ,000, but revisions to August and any earlier data might be enlightening. A very strong jobs report might raise rate hike odds for both October and December, but it would likely take a very weak report to send a hike chances or treasury yields much lower.

3:16The 10-year Treasury note yield topped 5.25 percent early this week for the first time since 2007 and sits not far below that year's peak, near 5.32 percent. It inched up again Tuesday, despite U.S. crude falling below$90 per barrel. However, the two-year note yield fell slightly as hopes grew that the Fed might get less hawkish thanks to the soft data. U.S. government's surprise release of 40 million barrels of oil from inventories kept crude under pressure. Lower oil initially gave stocks a lift Tuesday after the Wall Street Journal reported that crude flows out of the Middle East had reached 80 percent of pre-war levels.

4:00This may be close to what's needed in the near term, considering global demand is down sharply since the war began, the newspaper reported. Prices, however, haven't dropped for drivers or transport firms as damage to refineries hits production of products made from oil. The Trump administration's consideration of a diesel export ban likely wouldn't help matters. A diesel export ban would only provide temporary relief at best, said Michelle Ghibli, director of international equity research and strategy at the Schwab Center for Financial Research. Every barrel of oil produces gas, diesel, and jet fuel.

4:39Stopping production of one product stops all of them. With pipelines full, refineries would have to shut down, resulting in an almost simultaneous increase in gas prices, trading one problem for another. Stocks exposed to the diesel market had a mixed showing Tuesday. Turning to earnings, memory chip maker Micron reports after the close, and might help set direction on Thursday. Analysts expect earnings per share of$31.61 on revenue of$51.1 billion. That would represent astonishing 351.3 % annual revenue growth, highlighting the importance of memory chips in the AI build-out and recent high memory prices.

5:26Micron shares could be volatile after the report, with the options market projecting a 9 % move. The rest of the AI market could follow Micron, likely moving major indexes in pre-market trading Thursday. The full impact, however, might not be felt until Thursday's regular session begins and volume reaches normal daily levels. Volatility could also be up in general today, as it's the final day of the quarter. This can cause some profit-taking. Major indexes stayed under the weather Tuesday, but not dramatically. It appears participants might be lying low awaiting today's PCE data, Micron, and Friday's payrolls report.

6:08Four of 11 S &P 500 sectors climbed Tuesday, improving from three the day before. Communication services roared back and industrials also made a decent showing, while the defensive utilities sector took top honors. Energy fell most as oil sank. The percentage of S &P 500 stocks trading above their 50-day moving averages, an important metric for market breadth, is weak at 24 percent and has fallen almost constantly from the mid-August peak above 70 percent. The low this year was in March, just below 18 percent. Checking individual performers Tuesday Despite fresh AI concerns after OpenAI's decision to halt its latest chat GTP model due to safety concerns AI infrastructure and chip stocks generally rose The rally gained steam later in the day after OpenAI announced enterprise-focused DOTS AI agents Some software shares fell on associated competition worries Carnival Cruise Lines soared 13 percent and Royal Caribbean climbed 7 percent, both helped by strong earnings from Carnival.

7:21Strong demand helped offset rising fuel costs, the Wall Street Journal reported. Nucor slipped another 3.4 percent Tuesday as the steel sector suffered competition concerns after President Trump announced a$15 billion steel plant planned for Iowa. Fair Isaac plummeted more than 26 percent as Federal Housing Finance Agency Director Bill Pulte said a new mortgage pricing structure will allow direct competition to Fair Isaac's FICO score, Barron's reported. SpaceX rose 2.6 percent after successfully launching its Starship to orbit Monday. However, the ship only made it through two orbits instead of the six planned due to engine problems at launch.

8:08CarMax surged almost 5 percent as earnings impressed. Bank stocks mostly fell, and the financial sector is down more than 6 percent in September. Worries percolated lately about investment banking demand and a flattening yield curve. And Summit Therapeutics climbed 6 percent as Reuters reported AstraZeneca would invest $2 billion in the company and collaborate on cancer studies.

8:37The Dow Jones Industrial Average slipped 131.51 points or 0.26 % Tuesday to 51 ,349.92. The S &P 500 Index lost 12.85 points or 0.17 % to 7 ,670.84. And the Nasdaq Composite gave back 22.84 points or 0.09 % to 26 ,797.54. 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.

9:36For important disclosures, see the show notes and schwab.com slash market update podcast.