After Back-to-Back Gains, Fed and Nvidia Awaited
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Welcome to the Schwab Market Update podcast, where we prepare you for each trading day with a recap of recent news and a look at what's ahead. I'm Keith Lansford, and here is Schwab's early look at the markets for Tuesday, March 18th. Housing data and NVIDIA's GPU technology conference featuring a keynote speech tonight from CEO Jensen Huang are likely Tuesday highlights for Wall Street.

The NVIDIA conference comes as semiconductors pick themselves off the floor following a long month of losses. Investors will likely listen for any updates on the company's new Blackwell platform and the latest AI demand signals. Stocks are coming off back-to-back gains for the first time in nearly a month.

The Federal Reserve also takes the spotlight today as its Federal Open Market Committee meeting begins, possibly keeping the market slightly range-bound as investors await tomorrow's 2 p.m. Eastern time rate decision. That's also when the Fed issues updated economic projections and a new dot plot for the future rate path. Fed Chairman Jerome Powell then takes the podium for his post-meeting press conference, with his tone likely to be monitored closely for hawkish or dovish notes.

We don't expect any surprises at this week's FOMC meeting, with the Fed likely holding the federal funds rate in the 4.25% to 4.5% range, said Colin Martin, director of fixed income strategy at the Schwab Center for Financial Research. With growth concerns now making the most headlines, Fed Chair Powell will likely be asked about the balance of risks given that all of the uncertainty out there could weigh on the labor market. We still expect rate cuts later this year, likely in the second half.

Before the Fed, February housing starts and building permits are due at 8.30 a.m. Eastern time today. Analysts expect a slight jump in starts to a seasonally adjusted annual rate of 1.375 million, with permits falling to a seasonally adjusted annual rate of 1.45 million. The numbers in January were 1.366 million and 1.483 million, respectively.

Monday's February retail sales didn't reassure investors, rising less than expected at 0.2%. Analysts had expected a 0.5% increase, according to Briefing.com. However, the report wasn't all bleak, as control group retail sales, which are closely watched by traders and don't include some of the more volatile categories, rose 1% month over month after a 1% decline in January.

The control group is used in calculating gross domestic product. Overall, it was a soft report, said Cooper Howard, director of fixed income strategy at the Schwab Center for Financial Research. The prior month was revised lower, too. There's weakness in motor vehicles and parts, as well as non-store retailers, among other categories.

Separately, Monday's March Empire Manufacturing Index sank to negative 20 versus the market's estimate of negative 1.9 and positive 5.7 in February, with new orders, employment and shipments down while prices paid rose. Overall, the report looked quite weak and reinforced worries of rising prices amid slowing economic activity. Any level below zero indicates contraction.

The Atlanta Fed's GDP Now for the first quarter GDP growth got updated to negative 2.1% on Monday, up from as low as negative 2.8% earlier this month, but still negative. Most analysts believe GDP will grow slightly when all is said and done.

The labor market is showing signs of softness. The pace of job growth has slowed and the participation rate has fallen, and low consumer confidence and sentiment can hold back spending, Schwab's Martin said. Uncertainty around tariffs and other policies out of Washington will likely be just as important as actual economic data releases for the time being.

The SIBO Volatility Index, or VIX, slipped below 21 Monday after nearly touching 30 early last week. Furthermore, the SIBO VVIX Index, which measures volatility of the VIX itself, has fallen from recent highs, a sign that hedgers are pulling back from some of their expectations for outsized market moves.

Chances for a May rate cut fell to 18% by late Monday, according to the CME FedWatch tool, down from almost 50% a week ago. But chances for at least a 25 basis point cut by June remain near 70%. Corporate earnings pick up later this week, and Thursday is a big day that includes FedEx, Micron, and Nike.

Monday's session started off bumpy, but stocks gained traction late in the day following a Bloomberg report that President Trump's top trade negotiator, U.S. Trade Representative Jameson Greer, is attempting to inject order into a number of new tariffs expected to come online April 2nd. Uncertainty around the tariff process contributed to recent selling on Wall Street, but tariff announcements have quieted a bit lately, possibly bringing back some investors.

By late Monday, almost every sector was a St. Patrick's Day green, led by energy, industrials and staples. The languishing infotech and communications services sectors rose but were in the bottom of the pack, and consumer discretionary finished last. It's the worst performer of the last month, mainly on pressure from Tesla. That laggard fell another 4.8% Monday and is down 50% from recent highs.

The PHLX Semiconductor Index, or SOX, which rose last week for the first time in a month, extended its wins Monday with a 1.5% rise. Another rally for Intel helped chip stocks as investors appeared pleased with the company's recent CEO hire. Micron, which reports later this week, also had a strong Monday.

Technically, $5,560 for the S&P 500 index could be a level to watch on any pullbacks based on certain aspects of the options market. If the S&P 500 falls towards that level, it would be interesting to see if buyers re-enter or if selling accelerates. Conversely, $5,750 looks like key upside resistance just above the 200-day moving average.

The S&P 500 broke through the key near-term resistance point Monday at around 5,660.

The S&P 500 index climbed 36.18 points Monday or 0.64% to 5,675.12. The Dow Jones Industrial Average gained 353.45 points or 0.85% to 41,841.63. And the Nasdaq Composite added 54.58 points or 0.31% to 17,808.67.

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