Stocks Still Near Records Despite War Concerns

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, April 23rd. With little data news, investors will likely spend today mulling Tesla's results, watching for any Iran updates, and awaiting earnings from chip giant Intel after the close. A ceasefire extended earlier this week by President Trump appeared to hold Wednesday, the progress toward ending the conflict remains slow. Major indexes still trade near record highs, despite rising crude oil and Middle East uncertainty, calling attention to the fact that there's lots of short attention span money in the market. Some investors appear to have a casino mentality when it comes to trading, and the market appears near-term overbought.

1:05This could set things up for a possible pullback in the next week or two as Magnificent Seven firms report earnings, especially if those earnings don't live up to lofty expectations, or if war reports worsen. The market recently took just 11 days to recover its losses since the war began, and while it's not a perfect track record, history shows markets are generally advancing over the next year following that kind of move, with some exceptions. Past isn't precedent, however, and I think we're still at the mercy of oil prices, narrative changes and postings, said Lizanne Saunders, chief investment strategist at the Schwab Center for Financial Research in a recent podcast.

1:49Trading volume at the New York Stock Exchange was lower than normal again Wednesday, sticking to the recent trend and raising questions about how much conviction is behind this rally. In Middle East developments Wednesday, tensions rose as Iran fired on three ships and escorted two to its coast, the Wall Street Journal reported. Crude edged higher and was above$93 per barrel by late in the day. The U.S. blockade, which Iran calls an act of war, continued. Though the market appears to no longer see war and oil as existential threats, perhaps investors shouldn't be too sanguine. That's especially true considering the Strait of Hormuz remains closed, European jet fuel supplies are dwindling, and U.S.

2:37airlines are cutting capacity as they grapple with higher costs. This could put summer travel plans into question for many, perhaps hurting revenue for hotels, theme parks, and restaurants. There's still a high level of uncertainty, and the stock market, at all-time highs, is basically putting a near 0 % probability of a prolonged war and or closure of the straits, said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research. Volatility remains elevated, he added, and technically the market remains overbought in the near term. The SIBO Volatility Index, or VIX, is known as the market's fear index, and late Wednesday traded just below 19, not far below the 20 level, generally considered the difference between low and higher uncertainty.

3:33Next week features results from five of the Magnificent Seven, and focus could be on data center spending, return on investment from that spending, expected iPhone strength in China, and the state of the online advertising business. The five stocks reporting next week, Apple, Alphabet, Meta Platforms, Amazon and Microsoft are generally working their way back up in the market after a relatively disappointing stretch in which investors tilted toward chip stocks and other sectors outside of tech. If the rally continued to push higher, I'd be concerned that stocks, mostly within the tech space, are going to be set up for a sell-on-the-news earnings reaction, Peterson said.

4:18The Federal Reserve remains in its quiet period ahead of next week's meeting. Chances of a rate move next Wednesday remain near zero, according to the CME FedWatch tool. Odds of any cut at all this year are also on the low side, near 30 percent, though it could be interesting to see if there's an impact on that next week when the government releases its first estimate for first-quarter gross domestic product or GDP growth. Analysts expect 1.8 % annualized GDP in the first quarter, up from 0.5 % in the fourth quarter, but a miss might get them worried again about economic pressure on employment.

4:57Treasury yields marched in place early this week, pivoting near 4.3 % for the 10-year note. Next week is a big one in terms of Treasury auctions, which could give investors a sense of demand for U.S. assets and whether current yields provide enough incentive to buy. The 10-year remains near the middle of its near-term 4 percent to 4.5 percent trading range, and it's likely to stay there a while amid concerns about oil prices and little chance of rate cuts. For most investors, whether or not the 10-year Treasury yield rises or falls by five basis points in a day shouldn't be driving the investment decision, said Colin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research.

5:42We think there could be modest upside for the 10-year Treasury yields. Also on the Treasury front, a 20-year bond auction captured decent interest yesterday, though the 20-year is of lesser importance than some other durations, and the auction was relatively small. Bottom line results generally impressed on Wednesday as Tesla, IBM, Texas Instruments, and LAM Research exceeded Wall Street's earnings per share estimates after the close. Tesla initially climbed nearly 5 percent in post-market trading, with LAM up 4.4 percent. Texas Instruments soared nearly 8 percent. The strength in LAM and Texas Instruments could mean another boost for semiconductors today ahead of Intel, which has soared this year.

6:29Tesla reported that robo-taxi miles doubled during the quarter, but energy generation and storage revenue fell 12 percent year-over-year. Key companies reporting before today's open include American Express and Lockheed Martin. Intel is due later after shares of the chip firm skyrocketed this year. The companies made a bigger splash with AI and made progress with its chip fabrication business. Major indexes charged higher again Wednesday, though action was bifurcated. The largest and smallest stocks performed best, but the S &P 500 equal weight index that weighs all components equally rather than by market capitalization lagged the S &P 500 index dramatically, ending flat compared with a 1 % gain for the S &P 500 index.

7:21This implies a less balanced market. The percentage of S &P 500 stocks trading above their 50-day moving average fell back to around 52 % by late Wednesday, down from above 60 % earlier this week. The Russell 2000 Index small caps, the Magnificent Seven and chip stocks have accelerated lately, while many other names haven't kept up. The PHLX Semiconductor Index made another new all-time high Wednesday, carried along by arm holdings rising 11 percent, Taiwan Semiconductor Manufacturing up 5 percent, and a nearly 5 percent rally for Broadcom. Reuters reported that TSM on Wednesday showed its newest generation of chip technology that the company says won't rely on an expensive tool from ASML.

8:12And Alphabet, which rose 2 % Wednesday, might have given chips another boost after updating investors about its cloud partnerships. Seven of 11 S &P 500 sectors rose Wednesday, led by mega-cap-dominated sectors, infotech and communication services. Energy gained amid tensions in the Middle East, but cyclicals like financials and industrials fell. The Dow Jones transportation average took a dramatic dive, down 8.4 percent, hurt by airline weakness, and by a 30 percent drop in shares of car rental company Avis, which appeared to reflect technical trading rather than fundamentals. The stock had been up more than 300 % this month in what the Wall Street Journal called a short squeeze.

9:01In other trading Wednesday, Boeing climbed 5 % getting some wind under its wings from a narrower-than-expected quarterly loss. Its order backlog grew to a record$695 billion. The commercial airlines segment grew revenue 13 % year-over-year in the first quarter, while defense, space, and security revenue rose 21%. GE Vernova soared nearly 13 % to new highs after earnings and revenue surpassed consensus estimates, and the company raised its fiscal 2026 guidance. Strength reflected heavy demand from data centers for power equipment, Reuters reported. United Airlines chopped up and down before losing about 6.5%.

9:47Quarterly results surpassed Wall Street's average earnings and revenue estimates. However, guidance for second quarter earnings per share was below the FACSEC consensus. Full-year guidance was in line with consensus, but the company wrestles with high fuel costs and targets flat to 2 % annual capacity growth in the third and fourth quarters. That's down from 3.4 % gains in the first quarter. And Best Buy dropped nearly 5 % after announcing that Jason Bonfig, the company's chief customer product and fulfillment officer, will succeed Corey Berry as CEO at the end of the third quarter. Shares of Best Buy are down 36 % since their late August peak and recently got downgraded to sell by Goldman Sachs, which cited higher costs.

10:40The Dow Jones Industrial Average climbed 340.65 points Wednesday, or 0.69%, to 49 ,490.03. The S &P 500 Index added 73.89 points, or 1.05%, to 7 ,137.90. and the Nasdaq Composite rose 397.60 points or 1.64 % to 24 ,657.57. 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.

11:41For important disclosures, see the show notes and schwab.com slash market update podcast.