Warsh to Take Over Fed with Stocks at Record Highs

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 Colette O 'Claire, and here is Schwab's early look at the markets for Friday, May 15th. As Kevin Warsh takes the reins at the Federal Reserve following the end of Chairman Jerome Powell's term today, Wall Street's schedule looks quiet on the earnings and data front. Only industrial production is on the calendar ahead of next week's flurry of retail earnings, and the Keystone quarterly results next Wednesday from chip giant NVIDIA. Warsh arrives with major indexes at all-time highs, but Treasury yields also near their 2026 peaks thanks to oil prices that show no sign of easing as the Iran conflict persists.

0:58The AI-powered tech rally continued Thursday, with chip stocks up a cumulative 65 % since the start of April. Nvidia reached new all-time highs as investors awaited earnings, and Cisco piled on 13 % gains after solid quarterly gains. President Trump was still in China, meeting with President Xi as of late Thursday, and discussions centered on trade and the war. Both sides put a positive spin on the discussions, media reports said, with the U.S. making efforts to open China to chip exports, while China cautioned the U.S. about its Taiwan policy. The war made it into Trump and Xi's conversations Thursday, as both agreed the Strait of Hormuz shouldn't have tolls on it imposed by Iran, an ally and trade partner of China.

1:48However, U.S. officials didn't ask China for help reopening the strait, media reports said. Though crude has been relatively flat the last few days, near$100 per barrel in the U.S., the supply situation is worsening. With traffic in the Strait of Hormuz restricted for more than 10 weeks now, crude supply losses are depleting global oil inventories at a record pace. Despite rising crude exports from the United States, Brazil, Canada, Kazakhstan, Venezuela, and Russia, global oil supply has contracted by 12.8 million barrels per day since February, according to the International Energy Agency, or the IEA.

2:35Surging energy prices were the main culprit behind red-hot April inflation data earlier this week, but rising food prices added to the pain. The closure of the strait has led both fuel and fertilizer prices to spike this spring, pushing food prices higher globally. Dozens of fertilizer plants in the Middle East were damaged or otherwise affected by the conflict, according to corporate fertilizer executives. The high energy prices also showed up in Thursday's U.S. April Retail Sales Report, but not to the extent some feared. This might have helped ease Treasury yields slightly, though they remain close to their 2026 highs and pose possible challenges to the rally continuing next week.

3:23April retail sales rose 0.5 percent above Briefing.com's consensus of 0.4 percent. The data doesn't adjust for inflation and should be taken in context. Gas station sales rose most, which might not be a big surprise. Excluding gas stations, retail sales climbed only 0.3 percent from March. The closely watched April Control Group retail sales, which strips out food services, auto dealers, building materials stores, and gasoline stations, rose 0.5 percent in April after a 0.8 percent gain in March. The data is used to help calculate gross domestic product, or GDP. Retail sales show the consumer is holding up, though spending is turning selective as households focus more on essentials and value.

4:14The report suggests demand has not broken down, but consumers appear to be prioritizing necessities over more discretionary purchases. For markets, that points to an economy that is still growing, though perhaps at a more measured and uneven pace. As of Thursday, second quarter U.S. GDP is seen rising 4 % annualized, according to the Atlanta Fed's GDPNow calculator that compares with the prior estimate of 3.7%. Treasury yields initially eased after retail sales data. This could reflect relief that retail sales weren't even higher, which would have reflected a larger inflation impact. Still, yields across the curve remain near their 2026 highs and could pose a challenge for the stock market this coming week.

5:04Fed rate hikes are now being priced in rather than cuts, said Colin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research, or Skiffer. Checking other data, weekly initial jobless claims Thursday came in at 211 ,000, a bit above the briefing.com consensus of 208 ,000 and recent decades-long lows. Still, it's not a number that's likely to cause much concern, as it's low historically. Import and export prices for April climbed 1.9 % and 3.3%, respectively, reflecting overall inflation and likely not a surprise after the Hot Consumer Price Index, or CPI, and Producer Price Index, or PPI, earlier this week.

5:50The Hot Import and Export Price reports appeared to bring yields back a bit from their lows, and the two-year yield, more directly responsive to near-term Fed policy, rose one basis point by late in the session before finishing flat just below 4%. Chips, and NVIDIA in particular, got a boost from President Trump's trip to China, with Reuters reporting that the U.S. has cleared 10 Chinese firms to buy NVIDIA's lower-level H200 chip. NVIDIA once had a 95 % grip on China's advanced chip market, Reuters noted, accounting for around 13 % of the company's revenue. However, China has urged domestic companies not to buy U.S.

6:35chips, even those that aren't prevented from export by U.S. laws. This is part of China's effort to boost its domestic chip industry. NVIDIA rose 4 % Thursday. After Cisco's strong earnings and guidance buttressed the tech sector Thursday, semiconductor equipment maker Applied Materials reported late that afternoon, and shares climbed 4 % in initial post-market trading. The company's earnings, revenue, and guidance all came in above consensus views. All major indexes climbed again Thursday, including new records for several and the first-ever close above 7 ,500 for the S &P 500 index. Volatility eased, and the Dow Jones Industrial Average reclaimed 50 ,000.

7:23The broader market has climbed in seven of its first 10 May sessions, up 4 % month-to-date. Major index leadership is still narrow below the surface. That means a relatively small group of stocks continues to do much of the heavy lifting. Narrow rallies can persist, but they also tend to leave the market more vulnerable if leadership begins to fade. For the second straight day, six of 11 S &P 500 sectors finished higher Thursday, this time led by Infotech instead of Communication Services. Financials and Industrials, two sectors that probably have to improve their performance for the rally to broaden, climbed 0.6 % and 0.4 % respectively.

8:09The Philadelphia Semiconductor Index finished off its highs, despite NVIDIA's strength, still rising nearly to 0.5 % and posting a new all-time intraday peak. Checking the technical picture, the S &P 500 Index has tested resistance near 7 ,450 to 7 ,500, while support sits near 7 ,030. With only about half of stocks above their 50-day moving average, the rally remains somewhat narrow. In practical terms, this suggests the market can continue to grind higher, but upside may become more selective unless participation broadens across more sectors and stocks. Among individual movers Thursday, Cerebris skyrocketed 68 percent as AI enthusiasts piled into the company on its first day of trading, closing in on$100 billion in valuation for a company with little more than$500 million in 2025 revenue.

9:13The company is what CNBC called the biggest pure-play AI IPO to hit Wall Street and the first notable tech company IPO in a few months. Versant Media Group soared nearly 10 % after results topped Wall Street's expectations. Though results were better than expected, they were still down from a year ago, the Wall Street Journal noted, hurt by a drop in revenue from pay TV distributors as subscribers and advertising declined. Bullish dropped 5.8 percent after the crypto exchange posted results that disappointed investors. Boeing sank more than 4 percent despite President Trump telling Fox News that China will buy 200 Boeing jets.

9:57Analysts had expected a larger order, CNBC reported. Other leading chip and AI names Thursday included AppLovin, up 7 percent, Broadcom, up 5.5 percent, Taiwan Semiconductor Manufacturing, up 4.5 percent, and Arm Holdings, up 3.3 percent. The memory chip side had a tough session, but software shares climbed. Intel dropped 3.6 percent after the company lost central processing unit market share to advanced microdevices and arm holdings in the first quarter, Barron's reported, citing analysts at UBS. Bitcoin-linked stocks rose ahead of a meeting of the Senate Banking Committee to discuss crypto legislation.

10:44The Dow Jones Industrial Average jumped 370.26 points Thursday, or 0.75%, to 50 ,063.46. The S &P 500 index added 56.99 points, or 0.77%, to 7 ,501.24. And the NASDAQ composite rose 232.88 points, or 0.88%, to 26 ,635.22. This has been the Schwab Market Update Podcast. To stay informed, visit schwab.com slash market update or follow for free in your favorite podcasting app. And if you like what you've heard, please consider leaving us a rating or review. It really helps new listeners find the show. Join us for another update Monday.

11:45For important disclosures, see the show notes and schwab.com slash market update podcast.