Here is Schwab's early look at the markets for Thursday, December 18:
A European Central Bank rate decision and fresh U.S. inflation data take center stage early today while investors await key earnings after the close. And an anticipated Bank of Japan rate hike to 30-year highs early Friday could keep pressure on the U.S. Treasury market, especially if November Consumer Price Index, or CPI, data appear hot.
On Wall Street, caution persists after tech shares pulled back Wednesday from Tuesday's light gains. Market participants appear to be balancing constructive longer-term trends against near-term macro uncertainty. Conviction is selective, rather than broad, though market breadth remains relatively healthy. Still, the pickings this week have been slim with the S&P 500 index now down about 2.5% from last Thursday's all-time high close.
Tech stocks hit the skids again Wednesday, with Oracle in a deep freeze down 5% after Bloomberg reported that Blue Owl Capital, a partner in Oracle's AI infrastructure build-out, isn't contributing equity. This raised new concerns about debt used to fund AI projects and helped capsize related names including Nvidia, which fell more than 3%, and Broadcom, which dropped 4%. As a sector, semiconductors fell nearly 4% Wednesday and are down more than 10% from their high close set December 10, meaning a "correction" in just a week.
Recent post-earnings rallies in tech haven't stuck, as anyone who watched Broadcom out of the gate last week could tell you. The next test is today with Micron.
On Wednesday, Micron shares catapulted more than 6% initially in post-market trading after earnings and revenue easily topped consensus views and fiscal second quarter guidance left analysts' consensus far behind. Though Micron plays in a somewhat different ballpark than Nvidia and Advanced Micro Devices, the high-bandwidth memory chips it makes are used in AI data centers, meaning Micron is an AI barometer. Still, with shares up nearly 170% so far this year, some of the bullish results could be built in.
Turning to data, today's CPI, due at 8:30 a.m. ET, is expected to show headline and core prices up 0.3%, with core excluding food and energy, according to Briefing.com. That compares with 0.3% and 0.2% in September. There were no data in October due to the shutdown. Any numbers above expectations could be painful for Treasuries and the dollar.
Yesterday, Federal Reserve Governor Christopher Waller said he doesn't expect inflation to re-accelerate, but annual price growth remains well above the Fed's 2% goal. An annual 3% rise is expected for both core and headline CPI.
The ECB announces its rate decision early today and is expected to hold steady. Still, investors might want to check for any changes in economic growth expectations after recent firm data. If the ECB sees solid growth next year, it could hasten the return of rate hikes. Any hikes there might hurt the U.S. dollar, as the Fed is expected to continue cutting rates.
Possibly more meaningful for U.S. markets is the Bank of Japan's anticipated rate hike early Friday. This is one reason U.S. long-term Treasury yields remain elevated despite the Fed's dovish policy and signs of U.S. economic struggles. A Japan rate hike raises the risk of investors there pulling out of U.S. investments to put their money to work at home. When this happened in mid-2024, it caused a sell-off for info tech stocks, though the set-up now isn't similar. Back then, speculative traders had a large bearish position in the yen that quickly reversed, which isn't the case today.
The 10-year Treasury yield appears to be more stable near 4.16% after last week's rapid rise to three-month highs above 4.2%
"Global yields are mixed, with Japan’s government bonds heading toward 2% while other country bonds are easing," said Kathy Jones, chief fixed income strategist, Schwab Center for Financial Research, or SCFR. "Comments from various Fed officials show there is still a wide range of views. Our long-term outlook continues to be one to two rate cuts in 2026 and a steeper yield curve with upward pressure on ten-year yields as the Fed eases due to rising fiscal deficits and inflation concerns."
Chances of a Fed rate cut in January reached 24% late Monday, according to the CME FedWatch Tool. Watch this metric after CPI for clues into the market's reaction. A bad CPI reading likely would send rate cut odds down.
Reporting continues after today's close from consumer giants FedEx and Nike. Both bring important updates on demand during the leadup to holiday season. FedEx is also a key barometer for business health. Nike, on the other hand, can send messages about how U.S. products are faring in China after a year filled with trade skirmishes and tariffs. China's recent weak economic data have some participants worried about growth there.
Conagra reports early tomorrow after a tough year for packaged food makers amid changing consumer trends. And that about wraps up 2025 earnings. Stay tuned, though, because fresh fourth quarter results begin soon after the holidays, starting with big banks.
Tomorrow also brings the final December University of Michigan Consumer Sentiment reading after the preliminary report edged up slightly but remained near historic lows. Briefing.com consensus for tomorrow's headline sentiment is 53.3, unchanged from the preliminary but down sharply from 74.0 a year ago.
Stocks dropped again on Wednesday, with the S&P 500 index finishing down for the fourth straight session and losing its hold on the 50-day moving average near 6,765. That line, long a support level on the charts, could continue to be a measuring stick for the bulls. While a single close under it doesn't say much, several in a row could suggest a slowing upward trend. When the S&P 500 index fell below the 50-day average for a week in mid-November it eventually rebounded, but, the market never found much traction once it stabilized and hasn't tested the all-time late intraday high of 6,920 posted nearly two months ago.
Slowing momentum appears in the slumping S&P 500 Relative Strength Index, or RSI, which slipped below 43on Wednesday, the lowest in almost a month.
Stabilizing yields and falling bond volatility still support equities, and the steepening yield curve has boosted financial stocks, with the sector up over 11% in the past three weeks. It’s also the sector with the best current breadth, as 83% of shares in the sector trade above their 50-day moving averages.
The Cboe Volatility Index, or VIX, remains subdued, signaling no immediate systemic stress. Hedging activity remains contained.
Sector-wise, the rotation out of tech names tests market leadership. By late Wednesday, energy, staples and real estate led all sectors for the session, with financials in the top five as well. The market has favored cyclicals like financials and materials over the last month, but if focus turns to defensive areas like staples and utilities, it could signal more caution.
Meanwhile, the S&P 500 Equal Weight Index, which weighs all components the same, not by market cap, has easily outperformed the S&P 500 index over the last month, up 3.4% versus less than 1% for the S&P 500.
Checking individual names Wednesday, Warner Brothers Discovery fell 2.3% Wednesday after the company's board urged shareholders to reject Paramount Skydance's bid due to concerns about financing and other terms, Barron's reported. This could help clear the path for Netflix to nab WBD with its $72 billion offer, Bloomberg said. Paramount Skydance fell 5.5% on the news while Netflix rose modestly.
Stocks associated with AI, including GE Vernova, CoreWeave, Constellation Energy, and Super Micro Computer, were some of the worst performers Wednesday.
Amazon fell slightly yesterday after Bloomberg reported the company is in talks to invest more than $10 billion in OpenAI and supply its chips.
Medline, which had its initial public offering Wednesday, rose more than 30%.
Lennar fell 4.5% following what investors saw as disappointing first quarter guidance from the home building firm. Fourth quarter results exceeded consensus for revenue but missed on the bottom line. Competing home builder stocks also dropped.
Tesla's rally stalled Wednesday after its recent all-time highs. Shares fell 4.6%.
Crude oil futures climbed 2.6% Wednesday on news that the Trump administration plans to block sanctioned oil tankers going into and out of Venezuela. Exxon Mobil and Chevron both rose around 2% Wednesday.
Bitcoin futures dropped almost 2% yesterday but stayed above weekly lows. Crypto-related stocks also slipped.
The Dow Jones Industrial Average® ($DJI) fell 228.29 points Wednesday (-0.47%) to 47,885.97; the S&P 500 index (SPX) descended 78.83 points (-1.16%) to 6,721.43, and the Nasdaq Composite® ($COMP) dropped 418.14 points (-1.81%) to 22,693.32.
