Here is Schwab's early look at the markets for Wednesday, July 16:
It may feel like Groundhog Day today with investors preparing for another round of inflation and bank earnings. It was the same drill Tuesday, with mixed results and outcomes for the market. Most notably, Treasury yields surged yesterday as the market pulled back on expectations for a September Federal Reserve rate cut, and the stock market slumped outside of technology.
June U.S. consumer prices yesterday didn't show much impact from tariffs, but there was apparently enough to help send Treasury yields to one-month peaks. The 10-year note yield approached 4.5% and the 30-year bond yield hit 5%. Today's June Producer Price Index (PPI), which measures wholesale costs, could better reflect any tariff trouble brewing since it measures prices companies pay for goods closer to the source. If prices of materials used in manufacturing went up due to tariffs, today's data might be an early indication.
The headline June Consumer Price Index (CPI) rose 0.3% month-over-month growth, and core CPI (which excludes food and energy) rose 0.2%, compared with the Briefing.com estimates of 0.2% CPI and 0.3%. Headline annual inflation jumped to 2.7% from 2.4% in May, and core rose to 2.9% from 2.8%.
"Under the surface, most categories increased from the prior month," said Cooper Howard, director, fixed income strategy, at the Schwab Center for Financial Research. "Core services continues to be the primary driver of CPI, but core goods also ticked higher, which could be due to the impact of tariffs. A September rate cut is roughly a coin flip now. Even though CPI was slightly tamer than expected, concerns about tariffs likely mean the Fed can wait to cut rates for now."
PPI is generally considered a step below CPI in terms of importance. For PPI at 8:30 a.m. ET, analysts expect a slight monthly rise to 0.2% for both headline and core readings in June.. Both were 0.1% in May. On an annual basis, expectations are for headline PPI growth of 2.5% and core PPI growth of 2.7%, down from 2.6% and 3% in May.
Today also includes several more major banks reporting after the big banks out with earnings yesterday generally exceeded Wall Street's expectations. Bank of America, Goldman Sachs and Morgan Stanley all present results ahead of the opening bell, along with Johnson & Johnson. United Airlines pulls up to the gate after the close following Delta's solid performance last week. The Dow Jones Transportation Average climbed most of the early summer but declined in recent days
Yesterday saw mixed action among the major banks that reported. Citigroup found some buyers, but Wells Fargo and BlackRock declined. JPMorgan Chase wavered between light gains and losses. The key banking businesses, including markets, wealth, and investment banking appeared healthy at companies reporting yesterday, though net-interest income wasn't all that bullish. JPM and Citigroup reported solid growth in loans, a metric often associated with a growing economy and healthy consumer and business credit.
As banks report today, investors are likely to watch loan activity, consumer and business credit trends, and updates on investment banking and trading demand. Morgan Stanley and Goldman Sachs are big in trading and investment banking, while Bank of America has a huge consumer banking business.
Even as investors tracked inflation data and bank earnings, last week's focus on trade didn't fade. Instead, there was good news f rom Nvidia, which said it would soon be able to sell its H20 chip in China. Back in April, Nvidia said it would stop selling the chip there due to U.S. export restrictions, a move that has already cost it billions of dollars. Nvidia CEO Jensen Huang is now in China and expected to deliver a media briefing today.
Semiconductor stocks drove higher yesterday as Nvidia led the way with a 4% rise to new record highs. Chip equipment maker ASML reports early today and Taiwan Semiconductor Manufacturing reports early tomorrow. Broadcom, and Advanced Micro Devices both rode Nvidia's coattails amid ideas that the market in China might be cracking slightly open. The PHLX Semiconductor Index climbed more than 1.2%.
Banks didn't get their usual first-day-of-earnings lift, hurt in part by a 5% decline in Wells Fargo after that company reduced its forecast for net interest income. Home builders, shippers, trucking firms, and travel companies skidded Tuesday as Treasury yields climbed to their highest levels since mid-June. This isn't just a U.S. phenomenon, with longer-term yields rising across much of the globe recently in part on worries about tariff-driven inflation. Japan's yields are up sharply this year.
From a sector perspective, only info tech gained yesterday, with all other sectors down. Though the S&P 500 index fell, losses were kept minimal mainly by strength in mega-caps Nvidia, Alphabet, Microsoft, and Apple. But Tesla fell after The Wall Street Journal reported the departure of one of the company's sales executives. Also, Cox Automotive reported a second quarter U.S. dip in EV sales of 6.3% from a year earlier.
The influence of the rising mega-caps was notable at midday yesterday when the S&P 500 traded in the green with just 89 of its members in positive territory, Briefing.com noted. The percentage of S&P 500 stocks trading above their 50-day moving averages dropped to 60% Tuesday from as high as 80% two weeks ago, a sign positive sentiment that helped broaden the rally may be declining.
Tuesday's U.S. yield climb Tuesday morning began around the time U.S. Treasury Secretary Scott Bessent said the Trump administration has begun its search for a new Fed chair to replace Chairman Jerome Powell, who's faced a heavy diet of criticism from President Trump for not lowering rates.
Though Bessent said there are no plans to fire Powell before his term ends next May, it appeared his announcement increased anxiety about Fed independence. Influential JPMorgan Chase CEO Jamie Dimon called Fed independence "incredibly important" in his post-earnings comments Tuesday, The Wall Street Journal reported.
Chances of a July Fed rate cut fell under 3% late Tuesday, while odds of at least one cut by September dropped to around 54%, from 64% a week ago, according to the CME FedWatch Tool. Expectations are 93% for at least one cut before the end of the year, and 62% for at least two cuts.
Technically, there are some warning signals. Seasonally, the market is entering a historically weak time of year, though past isn't precedent. Another technically weak signal is the S&P 500 index closing lower yesterday after earlier making a new all-time intraday high just above 6,300. The 20-day moving average is 6,158, an area that may form technical support on any pullback. Momentum, tracked by the Relative Strength Index, or RSI, for the S&P 500 index, has fallen this week.
The Dow Jones Industrial Average® ($DJI) fell 436.36 points Tuesday (-0.98%) to 44,023.29; the S&P 500 index (SPX) lost 24.80 points (-0.40%) to 6,243,76, and the Nasdaq Composite® ($COMP) added 37.47 points (+0.18%) to 20,677.80, a new all-time closing high.
