Shortened Trading Week Features Fed Minutes

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 Monday, December 29th. Another truncated trading week begins today, with markets closing early Wednesday and shut Thursday for the New Year's holiday. Action on Wall Street could be light, with stocks squarely in the Santa Claus rally period that stretches the last five trading days of the old year and the first two of the new. Major U.S. indexes behaved well for Santa last week, climbing to new all-time highs intraday Friday before backtracking late in the session.

0:51The S &P 500 index rose 1.4 % overall, its fourth gain in the last five weeks. However, volume is traditionally low this time of year, raising questions about the rally's relevance. With volume light, conviction may not be fully behind this move higher, and next week could tell the tale when most participants return. Though the days ahead are light in earnings, data is on the way. Investors will monitor housing numbers from November's pending home sales report at 10 a.m. Eastern Time today and await October's S &P cotality Case-Shiller Home Price Index at 9 a.m. Eastern Time tomorrow. With mortgage rates slowly coming down, pending home sales have risen for three straight months while home prices have appreciated on an annual basis for four straight months.

1:42The home prices index rose 1.4 percent in September, but gains eased for the eighth straight month and represented the smallest increase in more than two years. If the trend continues, it might mean prices are finally starting to reflect weak housing demand to some extent.

2:02The Federal Reserve's meeting minutes from December following the housing reports at 2 p.m. Eastern time tomorrow, potentially providing investors with a better idea of the outlook for interest rates among the divided members of the central bank. Minutes could also provide more clarity on the economic projections policymakers delivered several weeks ago, which were notably rosy in terms of inflation, growth, and unemployment. It might be interesting to find out why officials see this sort of progress, especially considering the recent weakness in consumer sentiment. Treasury yields finished mixed Friday with declines for the short end of the curve and a gain for the 30-year.

2:43The benchmark 10-year yield ended the day unchanged at 4.14%, down just one basis point for the week and in the upper end of its near-term range. A futures market prices in a 19 % chance of a January rate cut as of late Friday, according to the CME FedWatch tool. Chances have fallen since last week's surprisingly firm U.S. third-quarter gross domestic product, or GDP, report. However, fourth-quarter GDP is widely expected to soften thanks to the long government shutdown. Market participants see growing chances of a rate cut by the time of the Fed's March meeting, where chances topped 50 % of rates being down at least a quarter point from the current 3.5 % to 3.75%.

3:30We expect the Fed to lower the target range to somewhere in the 3 % to 3.5 % range over the next year, implying two to three additional 25 basis point rate cuts, wrote Kathy Jones, Chief Fixed Income Strategy, and Colin Martin, Head of Fixed Income Research and Strategy at the Schwab Center for Financial Research, in a recent post. The sharp slowdown in hiring over the past few months and rise in the unemployment rate are raising concerns among some Fed members about a slowdown in the labor market. Treasury trading this week could see influence from the government's auctions later this morning of three-month and six-month bills.

4:09Considering the time of the year, demand might be light and results might be discounted by the market with so many participants likely away. As far as earnings this week, investors won't have too much to monitor other than a few more small and micro cap reports. Major indexes wavered Friday in light holiday trading before closing lower but just off all-time highs. By midday, volume at the New York Stock Exchange was just$170 million compared with the average of$307 million. Things were even more subdued over the Nasdaq, with only about half the average volume. The trend of decliners outpacing advancers continued from earlier in the week, potentially something to track in coming days for signs of any sentiment shift.

4:58That said, the S &P 500 Relative Strength Index topped 61 by late Friday, well above mid-month lows that fell beneath 50. A 61 is considered relatively strong, but not overbought, and 61 % of S &P 500 stocks now trade above their 50-day moving averages, up from 30 % a month ago, and a sign that the rally has lifted many stocks, not just the biggest whales. This is considered healthy in terms of momentum. Checking sectors Friday, things looked mostly red. One exception was Infotech, lifted by NVIDIA and strength in several other semiconductor names. materials got a boost from rising metals prices.

5:42While seven of 11 S &P 500 sectors were lower by late in the session, none of the losses exceeded 0.5%, a sign of the tepid trading that kept price moves limited much of the day. NVIDIA climbed more than 1 % Friday. Following news, it's entered an inference technology license agreement with AI chip startup Grok that it says will accelerate AI inference at a global scale. As part of the agreement, Grok will remain independent, but its team will join NVIDIA to help advance and scale the license technology. The agreement is valued at$20 billion. Warner Brothers dropped 1.4 percent after the New York Post reported that the company wants Paramount to increase its hostile offer.

6:31Target jumped 2.6 percent Friday after the Financial Times reported that Tom's Capital Investment Management had built a stake in shares. Shares of cruise lines, including Norwegian Cruise, Royal Caribbean, and Carnival, fell moderately Friday, but news was thin. Some of the pressure potentially reflected profit-taking after the recent surge, Briefing.com noted. And Freeport-McMoran climbed more than 2 % as gold prices notched another record-high Friday to close above$4 ,500 an ounce. Gold has been soaring as the dollar weakens and the Fed cuts rates. Palantir dipped 2.8 % Friday, but news was thin, and the move could represent profit-taking after shares put on a sharp rally over the last month before stalling near$200.

7:24The Dow Jones Industrial Average fell 20.19 points Friday, or 0.04%, to 48 ,710.97. The S &P 500 index shed 2.11 points, or 0.03%, to 6 ,929.94, and the Nasdaq Composite lost 20.21 points, or 0.09%, to 23 ,593.09. For the week, the Dow Jones Industrial Average rose 1.2%, the S &P 500 index gained 1.4%, and the Nasdaq climbed 1.2%. 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.

8:23Join us for another update tomorrow.

8:31For important disclosures, see the show notes and schwab.com slash market update podcast.