Here is Schwab's early look at the markets for Tuesday, August 25:
Markets will likely remain in wait-and-see mode today with Nvidia's earnings and key updates on inflation and economic growth still looming. Consumer confidence and housing data highlight today's economic calendar, while earnings from multiple leading Canadian banks and Intuit headline the earnings slate.
Major indexes are coming off a rocky start to the week after chip stocks sold off on Monday ahead of Nvidia's highly anticipated results. Trade tensions added to the anxious environment.
After U.S.-Canada trade negotiations broke down late Friday night, the U.S. imposed 50% tariffs on about $20 billion of Canadian goods over the weekend. President Trump then revealed on Monday that he will also increase tariffs on Canadian imports of cars, trucks, and auto parts to 50% starting January 1. Canadian Prime Minister Mark Carney warned he will retaliate "dollar for dollar" against the new U.S. tariffs, sparking fears about an extended North American trade war.
Adding to the trade and geopolitical tensions, the Trump administration Monday announced a plan dubbed "Operation Economic Outcast" intended to isolate Iran’s economy . The sweeping campaign will impose secondary sanctions on the so-called "enablers" of the Iranian regime. Treasury Secretary Scott Bessent suggested China—Tehran's biggest trading partner—would not be exempt from the proposed sanctions despite the fragile trade truce between the U.S. and Beijing.
Stocks struggled Monday amid the revival of trade tensions, even as Treasury yields took a breather from their recent rally. Yields fell after CNBC reported the Treasury Department may tap its roughly $950 billion General Account to help fund expanded buybacks of long-dated government debt. This approach could give the Treasury more firepower to quell the rise in long-term yields without the need for additional short-term borrowing.
If the Treasury goes through with its plan to use the General Account to buy government debt, some argue it would amount to a form of quasi-quantitative easing. That blurs the lines between traditional monetary and fiscal policy just as Federal Reserve officials prepare to gather at the Jackson Hole Economic Policy Symposium later this week. It could also complicate the Fed's job by easing financial conditions while the central bank is still trying to keep inflation in check.
Investors will be hoping the traditionally tight-lipped Fed Chair Kevin Warsh offers more clarity on the path of monetary policy this year at his Friday morning address from Jackson Hole.
"[Warsh] has made it a point not to provide any forward guidance...That trend seems likely to continue," said Collin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research. "However, he may try to clarify what his, or the Fed's, reaction function is. That is distinct from forward guidance. Markets are looking for insights into how he plans on getting inflation down, since he has so far not provided any clear plans."
Futures trading priced in a roughly 42% chance of a rate hike at the Fed's mid-September meeting on Monday, according to the CME FedWatch Tool. That was up from 36% a week ago. These odds will be closely watched after this week's inflation report and Fed commentary.
Turning to today's economic data, investors will be tracking June's S&P Cotality Case-Shiller Home Price Index at 9:00 a.m. ET. Consensus expects the 20-City Composite Index to show a 1.8% year-over-year rise in home prices, up slightly from the 1.6% jump seen in May.
New home sales data and the Conference Board's Consumer Confidence Index will then be in focus at 10:00 a.m. ET. Consensus expects 620,000 new homes sales in July, down slightly from 628,000 in June.
August's Consumer Confidence Index is expected to dip slightly to 90.6, from 90.8 in July. Consumers' 12-month inflation expectations—which have moderated in recent months after spiking earlier in the year—will be closely watched in this report amid rising energy prices.
The Bank of Montreal and Bank of Nova Scotia highlight today's earnings calendar. Expectations are high. Strong capital markets activity and solid loan demand have boosted Canadian bank shares year-to-date, but some analysts warn valuations are lofty, and loan loss provisions could edge higher this quarter.
Investors will also be tracking earnings from names like Intuit, Zoom Communications, and Dick's Sporting Goods today. However, many will be looking ahead to Wednesday.
Nvidia is expected to report earnings per share of $2.09 on revenues of $92 billion after the bell tomorrow. Both figures represent year-over-year growth of nearly 100%. Forward guidance will be particularly important with Nvidia shares sinking after recent earnings reports despite strong results. Updates on data center demand, the adoption of Blackwell architecture, and the roadmap for the upcoming Vera Rubin architecture will also be in focus.
The earnings report comes as investors continue to show signs of concern about AI spending. Chinese tech giant Alibaba saw its stock plunge in Hong Kong trading on Monday after it announced a $10.2 billion share sale meant to fund its AI development.
Investors will have plenty to monitor outside of Nvidia's earnings tomorrow, with the Fed's favorite inflation gauge and gross domestic product, or GDP, data also on the menu.
The personal consumption expenditures, or PCE, price index is expected to fall slightly to 3.6% on a year-over-year basis. Core PCE—which excludes more volatile food and energy prices—is seen holding steady at 3.3%. Meanwhile, the second estimate of second-quarter GDP is expected to come in at 1.5%. That would be down from the 2.1% seen in the first quarter but in-line with the first estimate.
Any significant surprise in either of these figures could lead to market volatility on Thursday. The Cboe Volatility Index, or VIX, rose roughly 5% on Monday amid the chip selloff and brewing trade tensions. But the market's "fear gauge" remains near its year-to-date low.
Looking at Monday's individual market movers, Visa rose 3.2% to a 52-week high after Bill Ackman’s Pershing Square Capital Management disclosed a new stake in the company worth over $1.1 billion.
Sandisk and Micron Technology plunged 6.5% and 5.8%, respectively, amid rumors that the Trump Administration will allow Apple to purchase memory chips from Chinese suppliers.
PDD Holdings sank 1.5% despite topping Wall Street's earnings per share estimates. The Chinese parent of Temu saw its net income sink 12% from a year ago, while revenues came in slightly below consensus forecasts.
Overall, eight out of 11 S&P 500 sectors ended Monday in the green. Consumer staples led the pack as investors largely took a risk-off approach ahead of this week's potential market catalysts. Info tech lagged amid the chip selloff.
The Dow Jones Industrial Average® ($DJI) rose 140.15 points (+0.26%) Monday to 53,417.16; the S&P 500 Index ($SPX) fell 21.51 points (-0.28%) to 7,652.86, and the Nasdaq Composite® ($COMP) dropped 200.26 points (-0.77%) to 25,980.19.
