Stocks Stagnate as AI Companies Consolidate

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, September 25th. U.S. stocks eroded their early gains on Wednesday as AI stocks pulled back. The Nasdaq 100 retreated 0.31%, stretching its two-day pullback to negative 1.14%. NVIDIA dropped 0.82%, while Oracle tumbled 1.71%. However, Alibaba announced plans to increase its AI spending beyond its original target of$50 billion, which caused the stock to rally more than 8 % on the day. New home sales surged 20.5 % month-over-month in August, which was the strongest month since January of 2022. The surge occurred ahead of the September drop in mortgage rates.

1:07Homes over$800 ,000 saw the largest uptick, which took the average price of homes sold higher. Homebuilders including Lennar and Pulte Group rallied 1.98 percent and 0.65 percent respectively. The homebuilder rally helped to lift the consumer cyclical sector higher for the day, but the energy sector slid further ahead as crude oil futures rallied 2.26 percent. The rally pushed oil prices above its 50-day moving average. However, the oil's 200-day moving average trades just shy of$67, which could be the next level of resistance. Utilities and consumer staples were also positive on the day. However, tech and communications mega-cap companies weighed down the major indexes.

1:58Manufacturing and services input prices remained sticky and elevated in September for the U.S. per the S &P Global PMI report. Stubborn inflation numbers continue to be a bane for the Fed who just started its rate-cutting cycle. The Fed's summary of economic projections is projecting higher GDP, lower unemployment, and higher inflation, yet it's still cutting rates. In fact, the market is expecting two more rate cuts by the end of the year. If the Fed is right and the economy does improve, lower rates could cause bubble conditions. But if the Fed is wrong and the economic situation deteriorates, there's risk of recession.

2:39The Bank of Japan announced plans last week to start selling its ETF holdings of approximately 79.5 trillion yen, or$537 billion. The Bank of Japan plans to sell at a pace of 620 billion yen or 4.2 billion dollars per year, which would take it over 100 years to unload its holdings. The selling could be a drag on Japanese stocks, but Michelle Gibley, director of international research at Schwab, said this is only 0.5 percent of trading value on the Tokyo Stock Exchange prime market, so it's unlikely to make a dent in trading. Defense stocks rallied on President Trump's suggestion that NATO countries should defend against Russian aircraft that violate European airspace amid a broader shift in its tone toward NATO's helping Ukraine win the war against Russia.

3:34American aerospace manufacturer Redwire rallied 1.41%, which manufactures drones and other military equipment for European countries that may benefit if the war escalates. Northrop Grumman also rallied 1.59 % on the day. The SIBO Volatility Index futures are elevated from their September lows around the 15.5 level, currently trading at 17.31. A level of resistance appears to have formed at 18.5, which could be a pivotal signal for investors because a break of resistance signals greater volatility in stocks and potential pullback. Bitcoin traded lower on the day, coming close to its recent support level of$110 ,000.

4:18However, it rallied off its trading session lows to close above 1.7%. Bitcoin treasury company Strategy failed to find the same enthusiasm and extended its losing streak to four days after closing 1.36 % lower on Wednesday. The Dow Jones Industrial Average fell 171.5 points, or 0.37%, to 46 ,121.28. The S &P 500 Index pulled back 18.95 points, or 0.28%, to 6 ,637.97. and the Nasdaq Composite dropped 75.62 points or 0.33 % to 22 ,497.85. 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.

5:21And 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.

5:36For important disclosures, see the show notes and schwab.com slash market update podcast.