Stocks Rebound Post Rout, Inflation Still In-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.

0:17I'm Keith Lansford, and here is Schwab's early look at the markets for Tuesday, June 9th. Key inflation data due this week will set the tone ahead of the Federal Reserve's policy meeting next week, offering the latest clues to whether higher oil prices are starting to show up in core inflation. Both the headline Consumer Price Index, or CPI, due Wednesday, and the Producer Price Index, or PPI, due Thursday, have risen sharply since the Iran war started more than two months ago. Analysts expect 0.5 % growth month-over-month in headline CPI and a 0.3 % month-over-month rise in the core CPI, which excludes food and energy.

0:59Both numbers would represent slower growth than seen in April. Headline annual CPI is expected to rise for 0.3%. If inflation exceeds expectations, the market could see some additional selling pressure as investors recalibrate their interest rate expectations. A reading that shows core inflation accelerating beyond expectations would be especially important since it would indicate high energy costs are filtering through to prices of everyday items and services. PPI data has shown price pressures and not just from higher oil prices are building upstream from consumer prices. And the PPI index for trade services for final demand rose at the fastest pace in more than a decade in April, indicating businesses were beginning to pass along price increases.

1:50Initial jobless claims due Thursday will be another data point to watch. The employment picture has been mixed lately. Claims hit a three-month high in the week ending May 30th, according to data released last week. In addition, Challenger Gray and Christmas reported 97 ,000 layoffs in May, up from around 83 ,000 in April. That was the highest figure for the month of May since 2020. Yet, the economy added a healthy 172 ,000 jobs in May, about double the number expected by analysts. While there's no expectation of the Fed making any rate moves at its June 16th and 17th meeting, the combined weight of Friday's jobs data and this week's inflation reports could help shape Fed thinking for the meetings after that.

2:37In a vacuum, high and rising inflation and the recent strength in the labor market support the case for a hike at some point. But the inflation outlook has been driven a lot by the conflict with Iran, said Colin Martin, head of Fixed Income Research and Strategy for the Schwab Center for Financial Research. A possible de-escalation could mean the recent inflation could turn to disinflation and therefore lower the pressured hike rates. The Fed will likely be patient, but some policymakers have raised the prospect of potential hikes. As of Monday afternoon, the futures market was pricing in more than a 70 % chance of a rate hike by year-end, according to the CME FedWatch tool.

3:21In corporate news, after months of delays, Apple unveiled an AI-upgraded version of its virtual assistant Siri that's built on Alphabet's Gemini technology at its annual Worldwide Developers Conference yesterday. Apple also launched a standalone Siri app, announced new AI features for its iOS 27 operating system, and revealed new Safari updates. Markets weren't overly impressed by the conference updates, however, with Apple stock falling 1.9 % on Monday. With Treasury yields rising across the curve on Friday and Monday, Treasury auctions may draw extra attention moving forward. This week features a three-year note auction today and a 10-year note auction Wednesday.

4:09Both could come under scrutiny after recent auctions found tepid demand. Weak demand for U.S. Treasuries threatens to send yields even higher. The European Central Bank, or ECB's, rate decision Thursday morning could also move yields in the U.S. Analysts expect the ECB to raise rates as it tries to fend off inflation, Reuters reported. Shifts in European interest rate expectations can potentially impact U.S. bond yields because global fixed income markets are closely interconnected. As far as earnings highlights for the week, investors will be closely watching Oracle after the close tomorrow. The AI bellwether could swing more weight than usual, coming so soon after Friday's chip sell-off and amid concerns of a possible top in AI spending.

5:00Software giant Adobe and homebuilder Lennar also report after the close on Thursday. Technically, now that the 7 ,500 area, a key pivot point in the S &P 500 index, has been breached, the 7 ,330 low from mid-May represents a possible support level. Below that lies the 50-day moving average around 7 ,180. Friday marked the first time the S &P has closed below its 21-day exponential moving average since early April when the ceasefire in Iran began. It might be constructive for stocks if the index can reclaim and stay above that level, currently around$7 ,450. It also might be constructive if shares of Apple could reclaim and surpass last week's all-time high of around$316.

5:53Meanwhile, the S &P remains above its 50-day moving average, which is currently around$7 ,180. Holding above 7 ,330, a low from mid-May, could also be read constructively if breadth doesn't deteriorate significantly. Breadth held up relatively well Friday despite the sell-off. This suggests that what occurred wasn't a liquidation as much as a rotation away from tech and into sectors like health care that haven't been as closely correlated with the broader market lately. Investors may be trying to move to calmer waters while remaining in the market. Both the S &P 500 and NASDAQ held on to most of their early gains Monday, while the Dow closed slightly lower.

6:36But three out of 11 S &P 500 sectors ended the day in the green. Infotech led the charge as investors bought the dip after Friday's rout. Utilities and real estate lagged. Healthcare and Staples stocks, two areas that advanced during Friday's sell-off, faded Monday in a sign that the flight to so-called defensive sectors may not last. Among individual movers Monday, Intel's shares surged more than 11 percent after the information reported the chipmaker inked a deal with Alphabet to make more than 3 million specialized AI chips. Marvell Technology and Micron, which were hit hard Friday, Both rose more than 9 % on Monday as semiconductor and AI-linked stocks rebounded.

7:23Marvell got a boost from news. It's being added to the S &P 500 index on June 22. NVIDIA climbed more than 1%. The chip giant announced a partnership with South Korea's SK Hynix in a collaboration that NVIDIA said will support next-generation memory co-development with NVIDIA's AI infrastructure roadmap. The agreement is also designed to improve supply for advanced memory Corning jumped more than 5 % on news of a multi-billion dollar fiber optic agreement to power Amazon AI data centers in the U.S. Campbell's fell less than 1 % Monday after reporting that earnings beat consensus and revenue met estimates The company reaffirmed previous guidance, but said organic net sales fell 4%, with meals and beverage net sales and snack net sales falling year over year.

8:19Bitcoin futures rebounded about 5 % to above$63 ,000 by late afternoon, lifting associated stocks like Strategy and Coinbase. The CBO Volatility Index, or VIX, which topped 21 Friday, retreated Monday, falling about 12 % to around 18.8. Anything approaching 20 suggests heightened uncertainty, but current levels are well above last week's low under 16. The VIX is in contango, meaning futures farther out on the curve are priced above today's spot level, potentially suggesting more uncertain times ahead.

8:58The Dow Jones Industrial Average fell 80.77 points Monday, or 0.16%, to 50 ,786.01. The S &P 500 Index rose 21.99 points, or 0.30%, to 7 ,405.73. and the Nasdaq Composite jumped 220.23 points or 0.86 % to 25 ,929.66. 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.

9:57For important disclosures, see the show notes and schwab.com slash market update podcast.