Here is Schwab's early look at the markets for Wednesday, February 25.

Nvidia's earnings later today arrive at an anxious time for the market, which continues to trade in back-and-forth fashion.  

Though major indexes advanced yesterday as slumping software shares climbed 1% on what appeared to be technical buying and possibly short covering, the S&P 500 Index didn't make much of an attempt to exit its tight near-term range.

The Cboe Volatility Index, or VIX, also stayed just below the key 20 level Tuesday, potentially indicating more choppiness ahead for equities. Investor uncertainty is a "pick your poison" that could include Iran, AI substitution, tariffs, private credit troubles, mega-cap debt, a suddenly hawkish Fed, or a host of other issues. While markets are often said to "climb a wall of worry," that's arguably reached a new level so far this year, and it hasn't been accompanied by much of a "climb" lately.

Nvidia's quarterly earnings, due right after the close, potentially provide focus at least for one afternoon but don't promise a reprieve from the market's anxiety. In fact, whatever the outcome, anxiety could increase. If Nvidia reports very strong revenue growth and raises guidance—as analysts expect it to do—it could trigger fears that Magnificent Seven spending and debt levels might continue to rise. That outcome means investors might continue embracing more defensive sectors.

If the opposite happens and Nvidia falls short, it could suggest that the AI spending spree is slowing, possibly a pain point for the entire economy.

Zeroing in on Nvidia, analysts expect 72% annual earnings growth to $1.53 a share and 68% annual revenue growth to $66.1 billion.

Though AI spending shows little sign of easing, Nvidia and fellow chip firms face higher bandwidth memory costs amid sector shortages, which could affect projected margin growth. Last year, investors chipped away at shares of Nvidia after earnings when they saw margin guidance fall below expectations.

"It's difficult to predict how long the recent memory price surge will persist, but right now, there doesn't appear to be any signs of an inflection point," said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research.

Data center revenue, as usual, will be front and center, as will overall revenue guidance. Nvidia remains under pressure every quarter not to just exceed quarterly consensus, but to guide for growth exceeding analysts' average estimates.

Another area to watch is any update on Nvidia's recent massive chip deal with Meta Platforms and comments on another deal inked with Meta yesterday by Nvidia competitor Advanced Micro Devices. Any updates on new chip development timelines also could affect shares. However, some of these announcements might not come until mid-March when Nvidia presents at its GTC conference.

Nvidia shares the spotlight with software firms Salesforce and Snowflake. These bow at an inauspicious time for the slumping software sector, dogged for weeks by AI substitution fears. Investors gravitated away from these stocks in droves this month, but hiding places were scarce as the same concerns spilled into sectors as diverse as financial services and trucking.

Whatever Salesforce and Snowflake say today, it's not likely to be the end of the story. Other firms in software reported strong results and guidance recently only to get dragged down anyway. Workday initially dumped 7% after Tuesday's close despite earnings that beat estimates and revenue that matched consensus.

"Fears of potential AI encroachment into the software space have led investors to shoot first, rather than wait for earnings results to find out if the concerns are justified," Peterson said.

Though their individual stories may not lift these two firms from the general carnage, things to watch include how both expect to benefit from AI, something their cohorts in the sector have emphasized recently in a push-back to the substitution worries. One line of thinking is that these companies own so much data they're somewhat protected from AI companies that may intrude.

Software forged some gains yesterday, perhaps as investors sought perceived "bargains." The sell-off in software isn't a valuation-led one, as price-to-earnings ratios for some of the biggest software firms approach multi-year lows. The bigger driver could be fear of the unknown. Will AI improve processes or subtract jobs?  The independent Citrini report published Monday foreshadowed a not-so-distant future where that was a strong possibility, and spooked Wall Street.

Data is a bit sparse this week, but Federal Reserve speakers are out and about. Chicago Fed President Austan Goolsbee sang from the hawkish hymnal early Tuesday, saying the Fed needs to address inflation before it can cut rates. Friday brings the January Producer Price Index, or PPI. The December report was hotter than analysts had expected and appeared to spill over into last week's warm December Personal Consumption Expenditures, or PCE, price data.

As of late Tuesday, chances of a Fed rate cut next month were practically nil, according to the CME FedWatch Tool. By mid-year, futures trading builds in 50-50 chances of at least one rate cut, but that's down from a week ago, possibly due to last week's stubborn inflation data and hawkish Fed speech since then.

In data Tuesday, the Conference Board's Consumer Confidence reading for February was a bright spot in what's been a rough patch for so-called "soft" data based on surveys. It rose to 91.2 from January's revised 89.0, and above the Briefing.com consensus of 86.0. Also importantly, 12-month inflation expectations dipped slightly to 5.5% from 5.6% in January, though that remains in thin air, and economic expectations worsened.

In trading activity over the past week, investor inflows were largest for global exchange-traded funds and outflows were largest for U.S. large-caps. Still, the S&P 500 Index remains just below 7,000 and recent price action is consistent with consolidation in range-bound conditions between 6,800 and 7,000.

The elevated VIX, however, could reflect weariness among investors, and suggests the next break out of this range could be to the downside. Demand for downside protection remains high and investors are paying up for this. Any move below the 6,780 to 6,800 range could lead to deeper sell offs.

A 5-year note Treasury auction takes place this morning. Yesterday's 2-year auction demand was "slightly soft," Briefing.com noted, sending short-term yields higher Tuesday but keeping the 10-year unchanged at 4.03%. That's the lowest since late November and has helped the yield curve flatten noticeably over the last week. This might be one source of pressure on financial stocks.

On Tuesday, major indexes reversed Monday's dismal performance, led by tech. Software, as mentioned, helped key the gains. So did Advanced Micro Devices, which climbed more than 8% on news that it signed a multi-year deal with Meta Platforms. In a press release, AMD said the deal will deploy six gigawatts of AMD's graphics processing units (GPU) to "power Meta's next generation of AI infrastructure." The deal comes a week after Meta announced a deal with Nvidia on AI.

Nine of 11 S&P 500 sectors finished up Tuesday, keeping market breadth relatively healthy even as indexes generally march in place. The consumer discretionary, industrials, and technology sectors led, pushing back the defensive utilities and staples that had finished near the top during Monday's market retreat. By late Tuesday, nearly 62% of S&P 500 stocks traded above their 50-day moving averages, still historically robust.

In individual trading Tuesday, Home Depot built a nearly 2% rally after earnings per share of $2.72 easily beat the FactSet consensus of $2.53. Revenue and guidance met analysts' expectations, while sales at stores opened a year or more rose 0.4%. The company expects comparable sales growth to be flat to up 2% this year, and it approved a dividend increase.

Lowe's, a competitor of Home Depot that reports this morning, advanced almost 1.5% Tuesday, possibly helped by Home Depot's results.

Whirlpool fell nearly 14% after the company announced what it called a "strategic recapitalization" that includes the selling of $800 million in new shares as part of an effort to fight debt, The Wall Street Journal reported.

PayPal moved up 7% Tuesday after Bloomberg reported that payments processor Stripe had expressed interest in PayPal. Stripe is a private firm.

Constellation Energy climbed more than 6% after Constellation beat Wall Street's quarterly estimates. However, it delayed guidance to late March.

Salesforce led software names with a 4% rise ahead of its earnings later today. Other software names on the climb Tuesday included Adobe and AppLovin.

The small-cap Russell 2000 Index rose as Treasury yields continued probing nearly three-month lows but remains more than 2% below its all-time peak recorded a month ago.

The Dow Jones Industrial Average® ($DJI) climbed 370.44 points Tuesday (+0.76%) to 49,174.50; the S&P 500 Index (SPX) advanced 52.32 points (+0.77%) to 6,890.07, and the Nasdaq Composite® ($COMP) gained 236.41 points (+1.05%) to 22,863.68.