Here is Schwab's early look at the markets for Wednesday, May 14:
Tech earnings are back this week, highlighted by Ciscolater today and Applied Materials tomorrow. Cisco is often seen as a proxy for global business spending trends on technology, and Applied Materials can be a useful barometer for semiconductor demand.
Speaking of semiconductors, President Trump and tech CEOs are focused on U.S. AI chip technology on a presidential trip through the Gulf region this week. Nvidia and Advanced Micro Devices shares advanced again yesterday after an announcement by CEO Jensen Huang that Nvidia will supply AI chips to Saudi Arabia's AI company Humain for a data center project. Advanced Micro Devices will also be a supplier.
Beyond chips, earnings from Walmart early tomorrow along with weekly jobless claims could help set the tone following this week's ignition from lower U.S. and Chinese tariffs. The market got another boost yesterday as U.S. consumer price growth dropped to four-year lows.
The April U.S. Consumer Price Index (CPI) rose 0.2% for both headline and core inflation. That was better than analysts' average expectations of 0.3% for each, and annual inflation dropped to 2.3%, below the 2.4% Wall Street forecast. Core excludes volatile energy and food prices.
Annual CPI of 2.3% was the lowest since February 2021 and down from 2.4% in March. Analysts had expected 2.4%. Core annual inflation rose 2.8%, also the slowest pace in four years but in line with analysts' thinking and unchanged from March.
Despite the mild inflation report, the benchmark 10-year Treasury note yield rose again Tuesday and ended at 4.5%. That's the highest in more than a month and one potential worm in the apple of an improved overall market since early April.
"The bond market and the Fed have to consider the impact of tariffs and expansive fiscal policy longer-term," said Kathy Jones, chief fixed income strategist at Schwab. "I wouldn't expect a significant down move in yields or change in Fed policy now. Later in the year, we look for lower yields and two rate cuts."
Jones also noted that household debt in delinquency surged across all categories last month, and student debt is on the rise now that payments have resumed. Generally, higher levels of debt in delinquency can squeeze borrowing and spending ability, a potential speed bump for an economy highly dependent on consumer spending.
Fed speakers this week continued to focus on managing inflation, which remains above the central bank's 2% goal. Today features an early speech by Fed Governor Christopher Waller, followed around the time of the market open by Fed Vice Chair Philip Jefferson making remarks about the economic outlook.
Fed Chairman Jerome Powell speaks at 8:40 a.m. ET Thursday. The subject of his talk is "Framework Review," so it's unclear if he'll discuss monetary policy or the economy, but it's something to keep in mind tomorrow.
As of late Tuesday, odds of a June rate cut were down to 8%, according to the CME FedWatch tool. Chances of a July cut were roughly 37%. The odds didn't rise despite yesterday's mild CPI reading. Thursday brings the April Producer Price Index (PPI) and April retail sales.
Lower rate cut odds didn't seem to bother tech sector investors early this week. The Nasdaq Composite climbed back into a bull market Monday, up more than 20% from recent lows, and took out its 200-day moving average. That was a quick reversal from the recent bear market for the tech-heavy index. The S&P 500 index also closed above its 200-day moving average Tuesday for the second straight day after more than a month below it. A string of such closes might support the market from a technical angle.
Looking ahead to Cisco, the firm's revenue popped last time out after several quarters of declines, and the company delivered a positive forecast. Large firms reporting earlier this earnings season said they aren't planning to slow spending on technology, which could bode well for Cisco's AI infrastructure business. Cisco made several AI-related announcements yesterday.
In trading Tuesday, the major indexes kept flexing their muscles following Monday's trade-driven 3% rally. They were helped in part by AI enthusiasm related to Nvidia and Advanced Micro Devices, as well as the cool inflation reading.
The exception was the Dow Jones Industrial Average, which slumped after UnitedHealth suspended its 2025 outlook amid growing care demand and higher costs. Other big health care peers like Humana and CVS Health fell sharply in the wake of UnitedHealth's struggles. This made health care Tuesday's biggest laggard on the sector list with a worse than 2% decline, while other defensive areas like staples and real estate also fell.
Dividend-paying stocks may be suffering in part due to rising Treasury yields, which provide competition. But info tech, communication services, and consumer discretionary plowed ahead Tuesday to build on Monday's gains as "Magnificent Seven" shares kept outperforming. When this happens, their immense market capitalizations tend to give the major indexes a big lift that might be out of proportion with how much average-sized stocks are climbing.
That was the case yesterday, as the S&P 500 index was up more than 1% at one point late in the session while the S&P 500 Equal Weight Index, which weighs all stocks equally, was up only 0.5%. A month ago, when the magnificent seven capsized, tables were turned and the equal-weight index outperformed the better-known S&P 500 index. The S&P 500 closed off its highs, but the Nasdaq Composite again led sector gains.
The Cboe Volatility Index, meanwhile, fell below 18 at times yesterday for the first time since March 27, indicating traders expect less choppiness in the near term. Even futures prices months from now don't rise much above the historic average of around 20, though VIX hit 50 last month.
The Dow Jones Industrial Average® ($DJI) fell 269.67 points Tuesday (-0.64%) to 42,140.43; the S&P 500 index (SPX) added 42.36 points (+0.72%) to 5,886.55 , and the Nasdaq Composite® ($COMP) rose 301.74 points (+1.61%) to 19,010.09.
