Taiwan Semiconductor, Netflix, Retail Sales Ahead

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, July 16. Taiwan Semiconductor Manufacturing and Netflix report today as investors mole a fresh set of U.S. retail sales data. Strong earnings and improving inflation data put the market in a positive frame of mind by midweek, but gains are limited due to rising crude prices as attacks and threats continue to rattle the Middle East. The fresh earnings follow two days of congressional testimony from Federal Reserve Chairman Kevin Warsh and encouraging words yesterday from influential New York Fed President John Williams, who said there are encouraging reasons to expect that inflation has peaked and should edge down in coming quarters.

1:04Warsh, testifying before the Senate Wednesday, didn't say anything that appeared market-moving. Yesterday's June Producer Price Index, or PPI, followed a tame Consumer Price Index, or CPI, and appeared to reinforce what Williams said. Headline PPI dropped 0.3 percent, and core PPI, excluding food and energy, rose 0.2 percent, undercutting consensus of 0.1 percent and 0.4 percent, respectively. odds of a july rate hike fell to 10 percent by late wednesday according to the cme fed watch tool down from 31 percent a week ago chances of a hike by september eased to 48 percent down from 67 a week ago we continue to expect the fed to take a wait and see approach and these reports by the committee some time said colin martin head of fixed income research and strategy at the schwab Center for Financial Research.

2:03Falling energy prices were a key driver of the monthly drop in headline PPI, but a look under the hood suggests the underlying trend could be slowing. Some components of PPI factor into the Personal Consumption Expenditures or PCE Price Index. The Fed's favored reading on inflation due July 30th and several rose in June. Treasury yields backtracked yesterday but didn't fall meaningfully from recent highs. Yields cooled slightly after the tame PPI data and weaker-than-forecast Chinese second-quarter GDP growth of 4.3%. Crude didn't provide much refreshment for hot yields, staying near$80 per barrel amid continued clashes in the Middle East.

2:50The next data point is June retail sales due at 8.30 a.m. ET. time today. With these, it's important to check beyond the headline for the closely watched control group, which excludes items like gas station sales and factors into the government's gross domestic product or GDP figures. Briefing.com consensus is 0.3 percent. Retail sales don't adjust for inflation, so large growth might reflect higher prices to some extent, not rising demand. Initial jobless claims are also due this morning and seen at 219 ,000, not changed much from 215 ,000 a week ago. Next week is extremely light on data. That should give investors more time to focus on earnings, and they've impressed.

3:40It's still early in the season, however, and Taiwan Semiconductor Manufacturing this morning and Netflix this afternoon capped the week. TSM pre-announced 36 % quarterly revenue growth, so its results are somewhat telegraphed. There's always a chance for surprises in the guidance, however. TSM's strong revenue might give its guidance a higher bar to clear. For Netflix, analysts expect earnings per share of 79 cents, up 9.6 % annually, according to data gathered by Schwab. Expected revenue of$12.6 billion would be up 13.6 % from a year ago. Shares of Netflix have fallen after its last four reports, CNBC noted, but the options tone was bullish heading into today's results.

4:30Analysts told CNBC that Netflix hasn't had a breakout hit this year. Late Wednesday, United Airlines posted earnings per share that beat estimates and revenue that met consensus, but issued negative guidance for the third quarter as fuel costs climb. Shares initially tumbled nearly 4 % in post-market trading. Earlier Wednesday, Morgan Stanley's earnings and revenue easily surpassed consensus thanks to a 69 % surge in equity trading. This rounded out a big bank earnings season in which all the major Wall Street banks blew past expectations, Bloomberg noted. Major U.S. indexes spent much of Wednesday narrowly in the green, but not challenging recent peaks.

5:19Relatively benign inflation data this week, along with solid earnings from banks and ASML, provided some lift, though investors seemed a little more cautious Wednesday, backing away from the chip sector. Volume remained below average, a trend lately that could suggest conviction is lacking, while advancing stocks outpaced declining ones through midday quite easily. Chip equipment maker ASML climbed 1.6 percent Wednesday after quarterly results exceeded consensus, and the company provided better-than-expected revenue and margin guidance for the third quarter and full year. ASML's news didn't translate into the rest of the chip sector, which suffered a 2 percent retreat for the PHLX Semiconductor Index, or SOX.

6:05Some of the worst performers included memory chip makers SK Hynix, Micron, and Western Digital, after Barron's reported that a Chinese memory chip rival, Cheng Xing Memory Technologies, is preparing an initial public offering in China. Funds from the IPO could help make the Chinese company more competitive. With the chips down, Magnificent Seven stocks picked up the pace ahead of their earnings starting next week, led by Apple, Amazon, Alphabet, and Meta. Apple appeared to gain traction after The Information reported the company could be mulling AI chip acquisitions. Apple is also raising subscription prices for its customer care service, Bloomberg reported, the most recent in a series of price increases by the company that could be followed by iPhone price increases this fall.

6:57Only three of 11 S &P 500 sectors managed to post gains Wednesday, led by communications services thanks to the strength in Alphabet and Meta. Consumer discretionary and financials also advanced, but tech slipped just slightly on the chip pressure. The worst-performing sectors Wednesday were also some of the smallest from a market capitalization standpoint, energy and utilities. Among individual movers Wednesday, PayPal surged 17 percent. Reuters reported that payments company Stripe and private equity firm Advent International have made a joint offering to buy PayPal for$60.50 per share, putting the value at more than$53 billion.

7:42Later, Bloomberg reported that PayPal is working with bankers to consider its options. BlackRock climbed 6.6 % as earnings topped Wall Street's expectations. Assets under management climbed 22 % to$15.34 trillion in the second quarter, and the company said strong fundamentals predominate. Yum! Brands dropped 3.5 % as food sickness fears centered on Taco Bell. Dell, Super Microcomputer, and Hewlett Packard Enterprise all fell sharply. This came after UBS downgraded Dell to neutral from buy earlier this week, but there wasn't any fresh news Wednesday. And SpaceX slipped 0.6%, falling below its initial public offering price of$135 per share for the first time.

8:34There's concern about launch competition from Chinese firms. The Dow Jones Industrial Average climbed 150.37 points or 0.29 % Wednesday to 52 ,658.64. The S &P 500 Index added 28.81 points or 0.38 % to 7 ,572.40. and the Nasdaq Composite gained 162.22 points or 0.62 % to 26 ,269.23. 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.

9:39For important disclosures, see the show notes and schwab.com slash market update podcast.