Powell Up Next with Stocks at New AI-driven Highs

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 Colette O 'Claire, and here is Schwab's early look at the markets for Tuesday, September 23rd. Stocks might tread water heading into a lunchtime speech by Federal Reserve Chairman Jerome Powell after several policymakers sounded unenthusiastic about further rate cuts Monday. Despite the hawkish Fed talk, AI-related excitement sent major indexes to new highs as Nvidia and Apple both gained momentum yesterday. Anything, Powell says in his 12.35 p.m. Eastern Time remarks about inflation and jobs could potentially move both stocks and treasury yields.

0:57Several Fed speakers kicked off the week Monday with remarks of their own after the Fed lowered rates last week for the first time since December. St. Louis Fed President Alberto Musolem said there's limited room for more rate cuts, Bloomberg reported. And Atlanta Fed President Rafael Bostic said he thinks the cut last week was likely the only one needed this year, the Wall Street Journal reported. The futures market prices in two more cuts this year, with odds of around 90 percent for a 25 basis point trim at the Fed's late October meeting, according to the CME FedWatch tool. That number dropped just slightly on Monday's conservative Fed Talk.

1:41Key data this week include August new home sales tomorrow and an updated look at second quarter gross domestic product Thursday. But Friday's personal consumption expenditures, or PCE, price index and inflation reading closely watched by the Fed is likely to have the most influence. The PCE price index is likely to show that inflation continues to edge higher, said Kathy Jones, chief fixed-income strategist at Schwab. Analysts expect August PCE to climb 0.3%, up from 0.2 % in July. Core PCE, which excludes energy and food prices, is seen rising 0.2 % in August, down from 0.3 % in July. New home sales due at 10 a.m.

2:28Eastern time Wednesday are seen at a seasonally adjusted annual rate of 650 ,000 in August, essentially unchanged from 652 ,000 in July, according to Briefing.com. Investors once again will likely watch the median sales price, which dipped nearly 6 % year-over-year in July. Homebuilders have been offering incentives to get buyers interested. New home sales fell more than 8 % in volume from a year earlier in July, a sign that lower prices aren't necessarily drawing more demand. This week could also see increased focus on Washington, D.C. as a government shutdown possibly looms by the end of the month.

3:14We would put the odds of a shutdown at the start of October at about 50-50, though last-minute agreements are a hallmark of these annual funding showdowns, said Michael Townsend, Managing Director, Legislative and Regulatory Affairs at Schwab. Historically, government shutdowns have not been big market movers. That said, Treasuries have sometimes rallied on government shutdowns in the past, Schwab's Jones noted. On the earnings front, investors await results this week from Micron, Costco, and KB Home. This afternoon's results from chipmaker Micron loom large after it beat analysts' expectations last time out and Morgan Stanley upgraded shares of three chip component suppliers early Monday.

4:00Micron's forecast in June was solid, with the company seeing strong demand in the high-bandwidth memory market due to the AI boom, CNBC reported at the time. Investors stayed in a buying mood Monday after NVIDIA and OpenAI announced a strategic partnership to deploy at least 10 gigawatts of NVIDIA systems for OpenAI's next-generation AI infrastructure. This will represent millions of NVIDIA Graphics Processing Unit, or GPUs, and is above and beyond NVIDIA's previous sales guidance delivered last month, the company told CNBC. NVIDIA will also invest up to$100 billion in OpenAI to support the build-out of data center capacity, Behrens reported.

4:45Shares of NVIDIA posted an all-time intraday high yesterday. Apple also approached all-time peaks Monday as Wedbush raised its price target on the stock to$310 on signs of strong early demand for the iPhone 17. It's late September, but Monday's move finally made Apple stock positive for the year after it spent most of the year well below its late December highs on worries it's fallen behind in the AI race. Other stocks on the move Monday included Lamb Research, ASML, and Applied Materials, all rising on upgrades from Morgan Stanley, a potential boost for chip sector sentiment. Pfizer rose Monday after agreeing to buy weight loss drug developer Metzera for as much as$4.9 billion.

5:38Shares of Metzera surged more than 59 % on the news. The deal could be worth more than$7 billion if three specific clinical trial milestones are met, the Financial Times reported. Tesla surged nearly 2 % after getting an upgrade from Baird and seeing its price target elevated by Piper Sandler. Oracle also remained hot after a White House official said a joint venture would be formed to manage a new U.S. version of social media platform TikTok, Barron's reported. Oracle would be among the investors in the venture. Major Tech and Magnificent Seven stocks didn't appear initially affected today by news that President Trump signed a proclamation to overhaul the H-1B visa program, requiring a$100 ,000 fee for applicants and raising concerns about the future availability of workers for the industry.

6:33Technically, the S &P 500 and the NASDAQ composite are both above 70 in terms of their respective Relative Strength Indexes, or RSI, territory historically considered overbought. Though that doesn't necessarily mean the market faces a pullback, RSI's higher than these levels occur rarely. The high RSI for the Nasdaq composite this year was 76 in July. RSI is a momentum indicator. The market sits at historically high valuations, though that reflects prices of the biggest tech stocks with their large margins. If there's any late September pullback in what's traditionally a weak time of the year for equities, investors may want to look for possible support near the 20-day moving average for the S &P 500 index, which now stands near 6 ,525.

7:27The relative strength index of the S &P 500 inched above 70 last week, traditionally a level where worries of overbought conditions sometimes emerge. The 10-year Treasury yield finished flat at 4.14 percent yesterday, still up from lows near 4 percent posted ahead of the Fed rate cut. Today features a$69 billion two-year note auction, results of which are likely by early afternoon. Recent auctions saw solid demand, but any sign of weakening at current yields might put pressure on treasuries and send yields higher, a possible headwind for stocks. The dominant trend is likely to continue to be yield curve steepening, said Schwab's Kathy Jones.

8:13Until there are signs that inflation is beginning to turn lower and or deficits are coming under control, the long end of the bond market is likely to remain elevated relative to the short end, which is driven by Fed policy. For the 10-year yield, 4.25 percent represents the 50-day moving average and potentially a near-term resistance level, Schwab-Peterson said. The Dow Jones Industrial Average added 66.27 points or 0.14 percent to 46 ,381.54. The S &P 500 climbed 29.39 points, or 0.44%, to 6 ,693.75, and the NASDAQ composite rose 157.50 points, or 0.70%, to 22 ,788.98. This has been the Schwab Market Update podcast.

9:17To 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. Join us for another update tomorrow.

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