Warsh's First Fed Meeting, U.S.-Iran Deal 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 Wednesday, June 17th. Kevin Warsh is expected to take the stage this afternoon for his first press conference as Federal Reserve Chairman. While investors don't expect a policy change at this meeting, what Warsh and other policymakers put into their interest rate dot plot and economic projections could help reset market expectations. The last time the Fed offered a dot plot, which tracks policymakers' expected rate path over the coming years, it baked in one rate cut in 2026. That's likely to no longer be the case, as inflation has risen substantially since March when that data came out.

1:03The median dot plot in the dot plot will likely show no change in Fed policy by year end, said Colin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research. We know from comments from various officials that there is very little appetite for a cut in the near term. Another thing to watch is the policy statement due at 2 p.m. Eastern time. Last time out, three policymakers dissented on the pause decision, calling out what they said is easing bias in the statement. They wanted a more neutral bias, suggesting rates could go up or down depending on economic trends.

1:42The new statement could reflect that. Warsh's words and tone in his first press conference as Fed chairman will also be examined closely for clues on how he'll oversee the central bank's dual mandate of stable prices and maximum employment. Any comments on how Warsh will handle public communications will be particularly noteworthy. Warsh has said he thinks the Fed overcommunicates. He is not a fan of the Fed's forward guidance, which he thinks makes it harder for committee members to pivot if economic circumstances change, said Michael Townsend, Managing Director of Legal and Government Affairs at Schwab, noting that Warsh is not even committed to holding a press conference after every FOMC meeting.

2:27I do not expect dramatic announcements tomorrow, but it will be interesting to see what signals Warsh sends. The odds of the Fed's standing pat on rates today are over 99 percent, according to the CME FedWatch tool. However, looking farther out, futures trading puts the chance of a hike by the end of the year near 60 percent. That's down slightly from last week before the news of a possible U.S.-Iran peace deal. The expected formal signing of the peace deal with Iran is scheduled for Friday, when U.S. markets are closed for Juneteenth. This deal is key to reopening the Strait of Hormuz and allowing the flow of oil to eventually return to normal.

3:13Crude oil futures trading has prices falling from here through the end of the year, though it's questionable how quickly trapped supplies can get where they were originally headed. Even if the strait reopens on Friday as planned, it will take time before things return to normal, said Townsend. Mines must be cleared from the strait, shipping companies will need to restart their vessels, and oil production in the region will need to ramp back up. It's likely to be months before things are back to the way they were before the war began in February. Also, European and U.S. oil stockpiles are quite low and likely need to be refilled over the coming months.

3:55This extra demand could slow the expected decline in prices, even if the Middle East stays calm. Futures trading projects crude oil to fall about 10 percent from current levels to near$72 per barrel by next winter.

4:13Turning away from geopolitics, the Bank of Japan announced a 25 basis point rate hike to 1 % on Tuesday, an expected move that pushed Japanese rates to their highest level since 1995. Japan continues to fight inflation and a weak yen, and the BOJ made clear it's ready to hike again if necessary. The Bank of Japan hiked rates but paused the tapering of bond purchases, said Michelle Ghibli, director of international equity research and strategy at the Schwab Center for Financial Research. Pausing the taper was expected. Meanwhile, hiking rates while continuing to purchase bonds sends a mixed signal.

4:54Continued yen weakness indicates that the market may believe the BOJ needs to be more aggressive in tightening policy. Ghibli noted that there are signs BOJ officials view inflation as more of a risk than economic weakness, which could lead to a quicker pace of hikes moving forward. In Economic News Tuesday, May housing starts and building permits provided a mixed picture. A 15 percent monthly decline in May housing starts was well below consensus views. Building permits also fell 0.7 % month-over-month, but slightly topped analysts' expectations. Separately, import prices rose 1.9 % in May, but were up just 0.8 % after subtracting oil prices.

5:41That's down from an upwardly revised 2 % in April. Export prices rose by 1.3 % in May, down from 3.5 % in April, but slightly ahead of expectations. Retail sales for May arrive at 8.30 a.m. ET today and could show if higher gas prices have hurt spending in other areas. Analysts expect a 0.5 % monthly rise in headline retail sales, helped partly by rising inflation which isn't adjusted for in the report. A key data point to watch is control group retail sales, which extracts some of the more volatile categories and filters into the government's gross domestic product or GDP estimates. In Data Monday, May industrial production edged up less than expected at just 0.1%.

6:32Consensus was for a 0.3 % gain. However, this might reflect a natural pullback after April's sharp 0.9 % rise and no single month is a trend. Industrial production is a key metric for assessing recession risk. Chinese economic data was also in focus early this week. Retail sales in China fell 0.6 % euro-over-year in May, the National Bureau of Statistics reported on Tuesday. It was the first drop since the reopening from COVID lockdowns in late 2022. Home prices in China also sank at a quicker-than-expected pace last month, while fixed asset investment shrank 4.1 % year-over-year in the first five months of 2026.

7:19U.S.-listed Chinese stocks faced a difficult trading day after the bearish news. Earnings are sparse this week, but CarMax reports this morning, providing a look at consumer trends in the used car market. Last time out, investors punished the stock despite better-than-expected results. On Thursday, investors will be watching earnings from the consulting giant Accenture and the supermarket operator Kroger. Shares of Accenture have plummeted more than 35 percent year-to-date, and the company has faced multiple ratings downgrades from Wall Street amid concerns its AI-related spending hasn't demonstrating meaningful returns.

8:04Major indexes had a mixed performance Tuesday, with the Dow Jones rising 0.64 percent, while the S &P 500 and NASDAQ composite fell 0.5 percent and 1.15 percent, respectively. Seven of 11 S &P 500 sectors ended the day in the green, led by financials and industrials. After a spike on Monday, Infotech lagged the broader market as investors rotated out of chipmakers and into cyclical stocks. Volatility has eased early this week, but that could change quickly following the Fed meeting and ahead of Thursday's quarterly options expiration. This was traditionally called triple witching day and tends to be accompanied by choppy trading.

8:50That could be exacerbated this time by the heavy bullish tilt in the options market. And treasury yields fell across most of the curve on Tuesday, continuing their recent slide amid the retreat in the price of oil. Among individual movers yesterday, SpaceX climbed to 4.8 % on its third day as a publicly traded company, jumping above$200 per share. Elon Musk's space giant is now the sixth largest publicly traded U.S. company, just behind Amazon. Qualcomm climbed as much as 2 % before pairing its gains to end the day in the red. After the information reported, the company is in discussions to acquire AI chip design startup TenStorrent for between$8 billion and$10 billion.

9:39Southwest Airlines jumped nearly 3 % after announcing a partnership with Singapore Airlines to offer travelers single-ticket trips to and from the U.S. Jeffries also raised its price target for Southwest, citing improved cost controls and network optimization. While many chip and chip infrastructure stocks, which had resumed their ascent Monday, struggled on Tuesday. High-flying memory makers like Western Digital and Seagate Tech managed to post games. Moderna also surged 6.3 percent after U.S. Food and Drug Administration staff reviewers said the company's mRNA-based seasonal flu shot demonstrated an immune response, paving the way for an accelerated approval for adults 65 and older.

10:30Roku fell 2 percent after climbing sharply Monday on news that Fox plans to buy the streaming device maker for approximately $22 billion. Shares of Fox fell another 4 % after tumbling 15 % on Monday when investors learned of the planned acquisition. And Tesla fell almost 2 % despite a positive analyst note from Goldman Sachs which said it expects Tesla's second quarter vehicle deliveries to total$420 ,000 up from the prior forecast of 405 ,000 based on strength in Europe and China. Tesla is expected to report deliveries early next month. The Dow Jones Industrial Average rose 328.64 points or 0.64 % Tuesday to 51 ,999.67.

11:24The S &P 500 index fell 42.94 points or 0.57 percent to 7 ,511.35. And the Nasdaq Composite sank 307.60 points or 1.15 percent to 26 ,376.34. 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.

12:13For important disclosures, see the show notes and schwab.com slash market update podcast.