Record Highs Reflect Solid Earnings, Peace Hopes

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, April 16th. Earnings in press this week and war news sounded more positive, giving stocks a tailwind and pushing the S &P 500 index and NASDAQ composite to new all-time highs Wednesday. Two weeks ago, this would have seemed unlikely, with stocks battered and bruised near eight-month lows. Ideas that the oil price shock might be contained, fresh buying interest in AI infrastructure stocks, and relatively solid economic data combined with earnings and upbeat war news helped stocks recover from their skin. Company reporting resumes today, with Taiwan Semiconductor Manufacturing and Netflix taking center stage, while investors await updates on a possible extended ceasefire and new talks between the U.S.

1:10and Iran. The broader market enjoyed a midday boost Wednesday from a Bloomberg headline that the U.S. and Iran might extend their ceasefire another two weeks. The current ceasefire is scheduled to expire next week. Administration officials said yesterday their hopeful talks can resume in coming days and the war could be near an end, though the two sides seem far apart in their demands. A U.S. blockade of ships to and from Iran appeared relatively successful so far, according to media reports, though some ships have slipped through. Also, China raised objections, complicating the strategy. China buys massive amounts of Iranian oil.

1:54Traffic through the Strait of Hormuz Wednesday was only about 10 % of normal, Goldman Sachs said in a note published Wednesday. As long as negotiations are moving in the right direction and U.S. crude stays below$100 per barrel, there could be more upside bias in the stock market, said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research. The economic data has been behaving, but we may still be in this period where the oil price shock is lagged, so we'll have to monitor the data over the coming months to assess. The flow of money into stocks over the last week picked up for AI infrastructure stocks, as the PHLX Semiconductor Index keeps notching fresh all-time highs.

2:42Crude slid less than 1 % Wednesday and stayed above$90 per barrel, still nearly 50 % above pre-war levels, but down from peaks well above$100 over the last few weeks. Before crude fell sharply this week, equities trading seemed to pull away from its tight correlation with oil prices. Wall Street's lesser emphasis on crude might reflect the CME futures curve where contracts farther out, like October and November, trade below$80 per barrel. This means, for now, the futures market prices in at least some relief at the pump this year. Crude traded near$65 before the war, so the market doesn't suggest a return to those relatively cheap levels.

3:28On the domestic front, earnings from big banks over the last few days reassured investors that despite the war, the U.S. economy remains on relatively solid footing. Several banks lowered their provisions for loan losses, meaning they see less need for heavy amounts of cash on hand to guard against default on loans. Also, wealth management and trading results looked solid in the first quarter, with Morgan Stanley the latest to impress with better-than-expected trading activity. J.B. Hunt Transport Services reported late Wednesday, offering a roadside view of how firms in its sector are affected by rising diesel costs, and Taiwan Semiconductor Manufacturing delivered its results early Thursday.

4:14J.P. Hunt shares moved slightly up initially in post-market trading after the company topped analyst's estimates. The TSM report came after the world's largest chip manufacturer reported solid annual first-quarter revenue gains of more than 35 percent. That helped lift the chip sector to new all-time highs early this week before ASML, which builds equipment used to make chips, disappointed Wednesday with weaker-than-expected second-quarter guidance. Results topped estimates, however. Netflix reports after the close. Shares rallied after the company failed in its attempt to buy Paramount Skydance earlier this year, and this will be the first earnings since Netflix lost that battle.

4:57In its last earnings report, Netflix impressed with subscribership and ad revenue to metrics to watch. Investors might also want to hear if Netflix has any new acquisition plans. As of late Wednesday, odds of a pause at this month's Fed meeting were near 100 percent, which would make April the third straight meeting to keep the target range between 3.5 percent and 3.75 percent. Chances of any rate cut this year stood near 30 percent, according to the CME Fed Watch tool. In a CNBC interview Wednesday, Cleveland Fed President Beth Hammock said she thinks rates are in a good place and that the Fed will be on hold for a good while and has concerns on both sides of the Fed's mandate of stable prices and maximum employment.

5:46This was in the same vein as other recent Fed speakers. In other Fed-related news, the Senate Banking Committee will hold a confirmation hearing next Tuesday for Kevin Warsh, President Trump's nominee to succeed Fed Chairman Jerome Powell. And President Trump threatened to fire Powell if he stays as chairman beyond his term, which ends May 15th. The Fed's Beige Book yesterday presented a mixed economic picture for the U.S. economy, with consumer spending up slightly and employment steady as prices rose moderately. It called overall activity slightly to modestly improved since the last report in February.

6:27Treasury Secretary Scott Besson told CNBC Wednesday that he understands if the Fed wants to wait on cuts in the current climate, but noted that core inflation, excluding food and energy, is in a downward trend. He also expects the war to slow first-quarter GDP growth. In related data yesterday, March import prices rose 0.8 percent, the government said, though the gain was only 0.6 percent when stripping out oil, down from 0.8 percent in February. Treasury yields inched up Wednesday, but the 10-year note stayed just below 4.3 percent, a technically important level. Speaking of technicals, the stock market appears overbought in the near term, Peterson said, but that doesn't mean it can't continue to melt up.

7:14Perhaps more of a standout is the near-term technical supply of the SPX has around its 6 ,950 to 7 ,000 area, Peterson said. We'll have to wait and see if the bulls can punch through it in the coming days. The Russell 2000 appears like it may challenge its all-time high of 2735, and that will be another interesting test to see if markets are ready to walk another leg higher into all-time high territory. In trading Wednesday, major indexes kept their momentum to send the S &P 500 index to its first ever close above 7 ,000 and an all-time intraday high of 7 ,026.04. It closed just below the intraday peak, positive from a technical perspective.

8:02The old all-time intraday high of just above 7 ,000 was set in January. The Nasdaq climbed for the 11th straight session, and the S &P 500 is up 10 of the last 11 days. The Nasdaq is up nearly 5 % week-to-date through Wednesday. The Relative Strength Index, or RSI, which indicates momentum strength, rose to nearly 70 from below 30 at its low last month for the S &P 500 index. However, 70 traditionally hints at overbought levels. The rally narrowed yesterday, possibly a cautionary sign, as just four of 11 S &P 500 sectors rose versus eight or nine earlier this week. The MegaCap-dominated infotech, discretionary, and communications sectors all posted gains of 1 % or more, with tech up nearly 2%.

8:54But cyclical industrials and materials sectors fell 1 % or more. Checking individual names Wednesday, Snap jumped 7.6 % after the company announced plans to slash up to 16 % of its global workforce, citing AI-driven efficiencies. Tesla climbed 7.6 percent the second straight day of gains after an upgrade from UBS. Earnings loom next week, and although deliveries flagged sequentially last quarter, technical trading appears to help shares push toward the 200-day moving average near$398 after they fell to recent six-month lows. Private credit company shares, including Blue Owl and Apollo Global Management, rose moderately Wednesday after bank earnings this week reduced fears about the health of the private credit industry.

9:45Shares remain well below peaks. Another sector that sold off earlier this year, software, also rebounded this week and enjoyed additional gains Wednesday. Adobe, Salesforce, and ServiceNow popped Wednesday, even as on the other side of tech, memory chip firms gave back some of the recent parabolic gains. There appears to be some rotation going on within tech as investors consider whether software got oversold on AI fears. Also in tech, NVIDIA shares hit$200 intraday for the first time since November 5th. They're up 18 % from their late March lows. Other chip stocks also rose, including advanced microdevices and Broadcom, with Broadcom up more than 4 % as it announced a multi-year partnership with Meta Platforms to support Meta's AI compute infrastructure.

10:39Nike ran up 2.8 % gains following insider purchases of the company's stock, including by its president and CEO. Shares of MicroCap Allbirds catapulted almost 600 % Wednesday after the company announced its shifting from footwear sales to AI infrastructure selling its shoe business. Bank of America rose 1.8 % on better-than-expected earnings. The company beat on revenue and earnings, while net interest income powered 9 % higher year-over-year. The company also lowered its provision for credit losses, hinting that credit conditions don't represent a major issue. And Morgan Stanley added 4.5 % following its better-than-expected quarterly results.

11:25Provisions for credit losses fell, and fixed income trading revenue rose from a year ago. Trading results looked healthy in fixed income and equities. The Dow Jones Industrial Average fell 72.27 points Wednesday or 0.15 % to 48 ,463.72. the S &P 500 index gained 55.57 points, or 0.80%, to 7 ,022.95, and the Nasdaq composite rose 376.93 points, or 1.60%, to 24 ,016.02. 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.

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