SpaceX, Samsung in Spotlight After Chips Revive

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 Tuesday, July 7th. SpaceX joins the NASDAQ 100 today, and investors also get a look at earnings from South Korean chip giant Samsung Electronics. Results from Samsung, where analysts expected operating income to rocket 18-fold from a year ago, might send a signal flare for the broader tech market after it wobbled in recent days. Monday saw semiconductors revive to lead the path on Wall Street, while tech in general advanced aside from weakness in the software realm after Microsoft announced layoffs. Monday isn't a trend, and it's unclear if chips can hold Monday's gains, but it could be constructive that the Nasdaq Composite, which late last week dipped below its 50-day moving average, bounced back Monday to close above it.

1:11One possible tailwind is earnings as the new season looms starting later this week. Second quarter S &P 500 earnings growth is seen at 23.3 % year-over-year, according to Faxet. Some of Monday's strength might reflect investors returning to tech before that, with key names like ASML and Taiwan Semiconductor Manufacturing reporting next week. Last quarter's earnings season saw chip and chip-related companies post massive earnings beats for the most part, so there might be some fear of missing out or FOMO at play. Something to keep in mind, however, is that expectations are high. Companies that fail to raise guidance might get punished, as they did last quarter.

1:57Though SpaceX joining the NASDAQ 100 might raise concerns about investors and funds selling other shares to fit the newcomer into their portfolios, that's likely not a huge concern. SpaceX has a relatively small float or percentage of shares eligible for trading in the public market. Most shares remain locked up.

2:22Aside from possible chip and SpaceX fireworks, the first week of earnings season starts with a relatively slow flow. Highlights include consumer names PepsiCo and Delta Airlines Thursday and Friday. Tomorrow brings a look at minutes from the hawkish June Federal Reserve meeting, the first one chaired by Kevin Warsh. The old quarter ended with persistent concerns about narrow market leadership concentrated among the biggest chip stocks, but some of those worries calmed over the last few days. Chips continued to retreat last week, even as buyers stepped into other sectors, suggesting a rotation might be underway.

3:02Reports from consumer names later this week and big banks next week could offer more insight into the broader economy beyond tech, perhaps lending more assistance to the rotation. Consumer discretionary is the only S &P sector posting losses year-to-date, while tech is surprisingly just third on the chart behind industrials and energy. The investor's strength, however, partially reflects the AI infrastructure build-out, so could be called tech-related. Federal Reserve minutes due tomorrow could help investors glean thinking behind the latest rate pause. Last week's jobs report came in well below expectations, which likely takes some pressure off policymakers to consider a near-term rate hike.

3:46However, as of late Monday, futures trading pointed to 55 % chances of a hike as soon as September, according to the CME FedWatch tool. The minutes may show how close of a call it was to keep rates unchanged versus hiking at Warsh's first meeting at the helm, said Cooper Howard, Director of Fixed Income Research and Strategy at the Schwab Center for Financial Research. Going forward, we believe the Fed will remain on hold for the remainder of the year as it waits to see how the risks to inflation develop. We would not be surprised if the Fed pairs back its communication strategy. strategy. Minus could affect the treasury market, where the benchmark 10-year note yield dipped under 4.4 % a week ago and then stormed back toward nearly 4.5%.

4:33Heavy issuance could continue weighing on treasuries. Today features a 3-year note auction followed by a 10-year note auction tomorrow. Results typically come out before the close, and any sign of easing demand might send yields even higher. Still, they're not expected to move much above current levels, barring dramatic changes in the financial picture. We expect the 10-year Treasury to remain range-bound between 4 % and 4.5 % over the rest of the year, Howard said. However, there's likely more of a chance it moves higher than that range than lower. Technically, this week began with some vulnerability in both the Nasdaq composite and the PHLX Semiconductor Index, or SOX.

5:20The SOX firmly broke its uptrend last week, falling below support at the 20-day moving average. Profit-taking appeared to be a source of chip pressure. July is seasonally a stronger month than June historically, but with chip stocks forming a large share of indexes by market capitalization, further wobbling in that sector could be a headwind even if the recent rotation out of chips and into a broader sampling of stocks continues. While market participants generally stepped away from tech last week, retail investors tracked by the Schwab Trading Activity Index, or STAX, continued to be net buyers of major chip stocks in June.

6:01The STAX rose 7.33 percent from May to 59.12 last month, a new multi-year high, with information technology leading the sector net buy list followed by communications services. The stacks rose every week of the month after a slight retreat the very first week of June. Buyers outpaced sellers by a 2-to-1 margin among clients tracked by stacks above the typical 1.5-to-1 range. In data Monday, June S &P Global U.S. Services and ISM Non-Manufacturing PMI were the major reports. The ISM headline of 54.0 % compared closely with the 54.2 briefing.com consensus. Anything above 50 indicates expansion. However, it was down from 54.5 % the prior month.

6:54Both prices and new orders retreated slightly, but the order backlog climbed. The 12-month average for the headline rating is a healthy 53.1%. Cheaper oil continues to provide a tailwind for stocks. OPEC and its allies over the weekend agreed to raise crude production quotas, providing pressure on the oil market. There are signs of recovery and shipping through the Strait of Hormuz, Bloomberg reported. Treasury yields barely moved Monday, staying just below 4.5 % for the benchmark 10-year note. The strength in yields over the past week could reflect new supply coming to market and mostly solid U.S.

7:37economic data. Major indexes started mostly higher Monday and maintained their gains all day. Though the Nasdaq led, the small-cap Russell 2000 also edged higher and remains the leading index year-to-date. The Dow Jones Industrial Average pierced 53 ,000 for the first time. While buying narrowed Monday and stayed concentrated in tech and communication services, five of the 11 S &P 500 sectors finished higher Monday. Behind the two mentioned above, Consumer Discretionary made a decent showing with nearly 1 % gains approaching key earnings later this week. Financials also rose ahead of next week's big bank earnings.

8:19Defensive and rate-sensitive sectors, including staples, utilities, and real estate, made up the lower end of Monday's sector action. Breadth looked healthy, with 67 % of S &P 500 stocks above their 50-day moving averages. Among individual movers Monday, chips-led gains, with advanced microdevices up more than 6%, Taiwan Semiconductor Manufacturing rising 4 percent, and Western Digital up nearly 7 percent. Semiconductor infrastructure names also advanced, including 3 percent for ASML. Broadcom was another big gainer. IBM added more than 3 percent after Bank of America raised its price target for shares to$330 from$315 and said it anticipates that IBM will raise fiscal 2026 guidance modestly, CNBC reported.

9:15Dell rose 4 % after President Trump touted the company and told consumers to go out and buy a Dell computer, Barron's reported. Dell's competitor, HP Incorporated, rose 2.5%. Microsoft dipped 1 % after the Wall Street Journal reported the company is cutting more than 3 ,000 jobs in its Xbox division amid falling revenue for the video game unit. Retailers, restaurants, cruise lines, and home building stocks generally moved lower Monday, turning back on last week's gains and also possibly taking a hit from Thursday's weak jobs report and rising treasury yields that could mean higher borrowing costs.

9:57Crypto-related stocks were on the rise Monday, led by Circle Internet Group. The gains for Circle came after the company entered into token purchase agreements with certain institutional investors, Briefing.com reported. Bitcoin rose more than 3 percent as risk sentiment appeared to improve from last week.

10:19The Dow Jones Industrial Average climbed 155.84 points or 0.29 % Monday to 53 ,055.91. The S &P 500 Index added 54.19 points or 0.72 % to 7 ,537.43. And the Nasdaq Composite gained 288.49 points, or 1.12%, to 26 ,121.16. This has been the Schwab Market Update podcast. To stay informed, visit www.schwab.com slash marketupdate 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.

11:18For important disclosures, see the show notes and schwab.com slash market update podcast.