Here is Schwab's early look at the markets for Tuesday, August 18:
Home Depot earnings this morning put "Big Orange" at the vanguard of retail earnings season after a disappointing Monday on Wall Street. Rising oil prices and Treasury yields kept markets in check amid little progress resolving the Middle East conflict as the 60-day ceasefire expired.
Though it came out after the close yesterday and didn't affect trading, Monday's monthly Treasury International Capital (TIC) report has a chance to move markets today. The report tracks flows into and out of U.S. assets. Heading into the data, concerns arose that lower inflows could ultimately lead to a weaker U.S. dollar and higher Treasury yields.
Those concerns strengthened Monday when Japan's 10-year yield rose to 2.93%, the highest since September 1996. Analysts expect a rate hike next month from the Bank of Japan (BOJ) and yields are also up in Europe. This feeds into higher U.S. yields as competing governments chase investors for funds and debt issuance remains heavy on the corporate and government side. That's one reason there may be no near-term break for U.S. consumers and businesses struggling with borrowing costs.
Speaking of which, today brings July housing starts and building permits, often a signal of underlying hardiness. Both readings flattened the last few years after a long rise that accelerated after the pandemic. Starts rose monthly to a seasonally adjusted annual level of 1.427 million in June, helped by multi-unit starts. Building permits, a leading economic indicator, declined in June by 3% to 1.367 million.
For today's report, due at 8:30 a.m. ET, analysts expect starts of 1.36 million, down from June, and permits of 1.39 million, up from June, according to Briefing.com consensus.
The housing data precedes Federal Reserve minutes tomorrow afternoon and follow an unexpected drop in retail sales. That could reflect lower gas prices and the changed date of Amazon's Prime Day event. It also suggests that high prices and slowing wage growth kept consumers cautious.
Last week's relatively benign consumer and wholesale inflation readings appeared to have little impact on Treasury yields, which rose above 4.7% again Monday for the 10-year note and 5.3% for the 30-year bond. Even last week's decent demand for notes and bonds sold at Treasury auctions couldn't arrest the gains.
Yields partially reflect rising oil prices, and that was the case again Monday as oil jumped more than 2% to above $84 per barrel following a weekend of little progress on the geopolitical front, whether it was in Iran or Ukraine. Oil remains well below the spring highs, but that's not something to take for granted. China's been a very light buyer, and if that changes, oil might go up again in a hurry.
Weak Chinese and Japanese economic data early this week, however, didn't kindle any warning signs. If their economies struggle, oil demand there might stay muted. China's July industrial production and retail sales came in below expectations.
"Soft inflation and jobs data have pulled down the implied probability of a hike next month to just 30%," said Collin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research (SCFR). "We continue to expect the Fed to remain on hold, but the risk of a hike has not disappeared. The recent data hasn’t likely changed the mind of the nine FOMC members who voted for a hold last month, but any hotter-than-expected data over the coming months could still give them a reason to hike."
Fed minutes due tomorrow afternoon from the last meeting could provide more clues. As for yields, the 10-year is up more than 75 basis points from its February low, a relatively quick gain historically.
Turning to earnings, Home Depot is at the starting gate. Shares soared last spring when many investors anticipated rate cuts that might shake up the sleepy housing market. The stock flattened this summer as hopes for a cut turned into worries about a hike. Last time out, Home Depot beat expectations and reaffirmed guidance, but said shoppers are cautious about larger projects, CNBC reported at the time.
Consensus for earnings per share is $4.73 on revenue of $166.59 billion. Those earnings would be slightly up from the year-ago $4.68. Any remarks about consumer sentiment on the earnings call might be noted by market participants.
Technically, the S&P 500 Index fell under support at 7,755 Monday. The next technical support level is at the old high of 7,620.
"The intermediate-term uptrend is intact and the technicals are bullish, but on a very near-term basis, a modest pullback or digestion period wouldn't surprise at some point this week," said Nathan Peterson, director of derivatives research and strategy at SCFR.
On Monday, Wall Street turned red across the board, haunted by a jump to fresh 19-year highs above 5.3% for the 30-year bond yield and another higher finish for crude.
Ten of 11 S&P 500 sectors ended lower, with only energy up as oil and diesel prices kept climbing. Info tech came closest to finishing higher, falling just a bit as semiconductors added 1.6%.
The worst performing sectors Monday included consumer stocks as oil and yields rose, along with communication services. Meta Platforms dove 3.5% despite light news.
In a possible sign of caution, the Cboe Volatility Index, or VIX, advanced Monday from recent 2026 lows. This could mean investors pricing in some risk with markets close to record highs and a seasonally weak period ahead. Traditionally, September is the worst month on Wall Street, though past isn't precedent.
Stocks moving Monday included Sandisk rising 9% following last week's 35% surge. Other memory chip stocks also rose, including Micron topping $1,000. One tailwind was Commerce Secretary Howard Lutnick telling Apple not to buy memory chips from China, Barron's reported.
SpaceX rose more than 5% despite facing more shares becoming available to trade later this week.
Constellation Brands fell more than 6% after Berkshire Hathaway announced it had exited its position in the stock.
Software stocks fell as the tug-of-war with semiconductors continued. When one rises, the other often falls. ServiceNow was one of the hardest hit, down more than 5%. A major investor announced last week he had reduced holdings of that stock.
Strategy climbed 4% after the Treasury Department said it seeks public comment on the GENIUS Act, designed to establish rules for stablecoins.
Snap fell 4.5%, hurt by last week's court ruling that allowed lawsuits against large social media companies to proceed, Yahoo Finance reported. A large recent insider sale of shares also weighed.
Nike lost 4% and is down 39% year-to-date, partly due to rising competition and a recent JPMorgan Chase downgrade, CNBC noted.
The Dow Jones Industrial Average® ($DJI) slid 272.63 points (-0.51%) Monday to 53,459.78; the S&P 500 Index ($SPX) shed 40.70 points (-0.52%) to 7,745.06, and the Nasdaq Composite® ($COMP) lost 84.25 points (-0.32%) to 26,644.91.
