Stocks on Edge as War, Oil Remain in Sharp Focus

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 Wednesday, April 8th. War fears likely will dominate the scene today after crude oil reached new four-year highs above$115 per barrel on Tuesday. Early yesterday, the U.S. and Israeli militaries conducted strikes on Iran's Karg Island, a strategically vital oil site, Bloomberg reported. Later Tuesday, media reports said Iran cut off direct talks with the U.S. after President Trump posted intensified threats against the country hinting at heavy attacks.

0:53With President Trump's deadline for Iran to open the Strait of Hormuz looming after this report's deadline, investors remained glued to war headlines. Trump vowed to destroy Iran's infrastructure if his 8 p.m. Eastern Time Tuesday deadline wasn't met. The outcome, whether it's explosions or a delay for further negotiations, will probably help determine direction of both stocks and crude oil today. If the U.S. goes with the strikes, my guess is oil prices go higher and stocks will likely go through another reset of expectations around oil prices, said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research.

1:37Investors seem to remain relatively hopeful that the Iran conflict will resolve in the next couple weeks. If that's the case, attention would likely return to fundamentals market participants focused on before the war, Peterson added, including the AI secular growth story, improved corporate earnings growth forecasts, and jobs data. By late Tuesday, several political headlines indicated possible progress in war negotiations, including Pakistan's proposal for a two-week extension of Trump's deadline, and major indexes recovered from session lows when they'd fallen 1 % or more. U.S. crude oil pulled back from early peaks to close just above unchanged, near$112 a barrel.

2:23At the very end of the day, both the S &P 500 index and the Nasdaq composite moved into positive territory, where they'd spent very little time during the session. Like many people, I'm a bit surprised at the relative resilience of the markets, said Lizanne Saunders, chief investment strategist at the Schwab Center for Financial Research, speaking on CNBC before Tuesday's close.

2:48Turning away from the conflict, there is some market-related news today, notably Delta Airlines reporting before the open and a 10-year Treasury note auction soon after. Results of the auction should be out by early afternoon. A$58 billion three-year note auction yesterday ended with strong demand, Briefing.com reported, and the 10-year Treasury yield spent most of the day pivoting near recent levels before finishing up one basis point at 4.34%. The two-year yield fell two basis points to 3.83%. Yields fell later Tuesday in post-market trading amid hopes for de-escalation. Treasury auctions may seem arcane, but can't influence yields, which in turn help determine stock market moves.

3:36One negative influence on Wall Street last month was soft auction demand that helped drive yields to nearly 4.5 % for the 10-year note at one point. Though rising inflation worries were the main trigger, poor auction demand contributed because it signaled less interest in U.S. assets. The SIBO Volatility Index, or VIX, is also something investors probably want to have on their screens today. It climbed more than 10 % to near 27 on Tuesday, down from recent highs above 30. VIX is a signal of how much fear is in the market, and anything above 20 is high historically. A move back to 30 would likely signal choppier trading ahead.

4:19The lack of extreme volatility could partially reflect market participants taking both sides of the war trade, putting on some protection in case of escalation but keeping their toes in the market in case of a ceasefire. Technically, the S &P 500 index remains well below its 200-day moving average of 6 ,650. So long as crude remains above$110 and the index stays under that 200-day level, it's hard to say the market has truly recovered from its March slump. In Data Tuesday, the U.S. government reported a much worse than expected 1.4 percent monthly drop in February durable goods orders. It was the third straight monthly decline in this metric after a 0.5 percent decrease in January.

5:06Transportation equipment was a notably weak spot, and removing its impact, durable orders rose a solid 0.8 % month-over-month above the 0.5 % briefing.com consensus. Inflation data is just around the corner, starting with tomorrow's February Personal Consumption Expenditures, or PCE, price index, the Fed's favorite inflation gauge. It's due at 8.30 a.m. ET and expected to show 0.4 % headline growth and 0.3 % core, according to Briefing.com. Core excludes volatile food and energy prices. Those numbers aren't much different than January's, but also don't reflect data from after the war when oil prices spiked.

5:51With that in mind, investors might discount the report to some extent. Other major data straight ahead include the final government estimate of fourth-quarter gross domestic product, or GDP growth, due early tomorrow, and minutes from the Fed's March meeting at 2 p.m. Eastern time today. The minutes could provide more insight into the Fed's decision to pause rates last month. Odds of a rate cut before the end of the year stood near 23 percent late Tuesday, according to the CME FedWatch tool. There's about a 75 percent chance that rates stay paused all year and a 4 percent chance of a hike. No change is expected at this month's meeting.

6:33In earnings, Delta dominates today's tarmac, with investors likely focused on how rising fuel costs and overall inflation might affect margins and passenger demand. Consensus is for Delta to post earnings per share of$0.61, a 33 % year-over-year increase. Shares are up 14 % since mid-March, Briefing.com notes, but down 5 % for the year. The call could be interesting for what the company says about customer reaction to rising prices. Investors might also want to know if Delta has plans to reduce capacity as it wrestles with fuel costs, something UBS expects airlines to continue doing in coming weeks, CNBC reported.

7:21Constellation Brands, a beer, wine, and spirits marketer also reports today. The rest of the week is a bit light on the earnings front. First quarter earnings accelerate next week, starting with Goldman Sachs on Monday and followed by JPMorgan Chase and several other major banks the next day. Tuesday's slight rise in the yield curve might have helped bank shares gain slightly in that session. FACSET pegs overall first quarter S &P 500 earnings per share growth at a healthy 13.2 percent and expects 10 of 11 sectors to report year-over-year earnings growth in the first quarter, led by technology.

8:00Only energy is expected to be read. Checking market activity, Schwab clients turned slightly bearish in March, sending the Schwab Trading Activity Index, or STAX, down 2.23 percent from February's long-term high. As markets retreated last month, Schwab clients appeared to spend less time trying to pick individual names, concentrating instead on diversified exchange-traded funds, or ETFs. Retail trader sentiment became more bearish last week, Bloomberg reported, with previous dip buying no longer prevalent. Sometimes poor sentiment can suggest the market is close to a bottom, though past isn't precedent.

8:43Institutional positioning has also grown more defensive, Bloomberg noted, though that began earlier. Technically, price action over the three to four sessions before Tuesday had been relatively bullish. Tuesday's strong close appeared to extend that stretch, though it was based on last-minute hopes for de-escalation. Reaction to higher oil prices has been muted, and indices are closing at or near the highs of the session rather than at the lows, Peterson said, writing early Tuesday. If the S &P 500 index moved up to its 200-day moving average, that might be a good technical test to see if it gets rejected and turns lower or is able to eclipse it, which would be a bullish shift.

9:30The Russell 2000, which is above its 200-day simple moving average, is now pressing up towards its 100-day moving average, so this could result in a technical test as well, Peterson said. U.S. market indexes ended mixed Tuesday, with only the Dow Jones Industrial Average falling slightly. Major indexes are little changed this week, heading into Wednesday. Six of 11 S &P sectors climbed Tuesday, led by communication services. Homebuilders, cruise lines, automakers, and other discretionary stocks fell 3 % to 4 % Tuesday, clipped by worries about the economy as oil prices continued to soar. In individual performances Tuesday, Apple lost more than 2.5 % following a media report about manufacturing problems, possibly leading to shipment delays of its foldable iPhone.

10:26In addition, UBS reported that its analysis of App Store growth was 7 % in March, weighed down by relatively flat U.S. growth. Humana, UnitedHealth Group and CVS climbed sharply, with Humana up almost 9%. at. The Centers for Medicare and Medicaid Services released its 2027 Medicare Advantage and Part D rate announcement, which analysts said improved significantly for the health industry. Broadcom got a 5 % boost on news that the chip designer agreed to expanded chip deals with Alphabet and Anthropic that will include Broadcom developing Google's custom AI chips, Reuters reported. And Arm Holdings shed almost 4 percent following a downgrade by Morgan Stanley to equal weight from overweight.

11:16The analysts said Arm's transition into chip making will take time to ramp commercially with near-term execution risks.

11:27The Dow Jones Industrial Average slid 85.42 points Tuesday, or 0.18%, to 46 ,584.46. The S &P 500 index added 5.02 points, or 0.08%, to 6 ,616.85. And the Nasdaq Composite gained 21.51 points, or 0.10%, to 22 ,017.85. 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.

12:25For important disclosures, see the show notes and schwab.com slash market update podcast.