After Inauguration, Focus Turns to Netflix, TikTok
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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 Colette O'Clare, and here is Schwab's early look at the markets for Tuesday, January 21st.

After two heavy weeks of data, investors get a slight break in coming days with little in the way of potentially market-moving numbers. Earnings, on the other hand, accelerate this week as Netflix and transport companies line up.

Politics could also play into trading in the wake of Monday's inauguration of President Donald Trump, who's emphasized tariffs on imports. The old week ended with intrigue around the Supreme Court's unanimous decision allowing a ban on TikTok, raising questions about what the new administration might do in terms of enforcement and if any U.S. communications firm might emerge as a possible buyer of the short-form video platform.

Last Friday saw major indexes on the comeback trail from lackluster trading at the turn of the year, fueled by a 20 basis point drop in the benchmark 10-year Treasury note yield following benign December inflation data. Stocks also found support from robust big bank earnings.

Tumbling yields gave rate-sensitive sectors, including real estate and financials, a lift last week, with both up 4% or more. Consumer discretionary and materials also performed well, but the weekly rally was broad as roughly 9 out of every 10 S&P 500 or SPX stocks advanced and breadth improved.

By late Friday, 41% of S&P 500 stocks traded above their respective 50-day moving averages, up from 19% the prior week. Tomorrow, be on the lookout for December leading indicators from the conference board after a rare gain the previous month. This report is often parsed for signs of possible recessionary trends. Analysts expect the index to dip back into the red, falling 0.1%, according to Trading Economics.

The 10-year yield stabilized near 4.61% on Friday, well below the recent 14-month peak of 4.8%. Later today, the U.S. Treasury holds several short-term debt auctions.

Some of Friday's market strength might have reflected policy optimism related to potential corporate-friendly initiatives such as tax cuts and deregulation under the new administration. Still, the prospect of tariffs might have slowed the yield retreat Friday.

Given the potential for tariff announcements from the Trump administration, along with the near-term overbought technical setup, I think we could see some weakness in the early part of the week, especially if yields begin to move higher on any such announcements, said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research.

Today's earnings calendar includes D.R. Horton, United Airlines, 3M, and Netflix. The week ahead also features earnings from Union Pacific and CSX. Airline and railroad earnings can shed light on travel demand, as well as demand for goods from companies and consumers. Last week's Consumer Price Index, or CPI, showed air travel prices up sharply in December, suggesting strength for the airlines.

Focus when Netflix reports later today could be on the company's recent move into live sports broadcasts and any plans for more. Subscriber growth trends are almost always a key element when Netflix unveils results.

FactSet now sees fourth-quarter earnings growth of 11.7% for the S&P 500, which would represent the highest year-over-year growth since the fourth quarter of 2021. Though it's still early, 42 of 500 S&P 500 companies have reported and revenue growth is currently 7.1%. EPS growth is 21.9%.

As of late Friday, the CME FedWatch tool built in nearly 100% chances of a Fed rate pause this month and only around a 28% chance of a rate cut this quarter. However, odds of a rate cut taking place in the first half stood at close to 66% by the end of last week, up slightly from 55% a week earlier.

Technically, the SPX initially had some trouble last week pushing past the 50-day moving average near 5,967. However, Friday saw the index easily climb above that to close at three-week highs just below 6,000. The SPX hadn't closed above its 50-day moving average since January 6th.

The SPX climbed 59.32 points Friday, or 1.00%, to 5,996.66, up 2.91% for the week.

The Dow Jones Industrial Average added 334.70 points or 0.78% to 43,487.83, up 3.69% on the week. And the Nasdaq Composite climbed 291.91 points or 1.51% to 19,630.20, up 2.45% for the week.

U.S. markets were closed yesterday to observe the birthday of the Reverend Dr. Martin Luther King Jr. This has been the Schwab Market Update podcast. To stay informed, visit schwab.com slash market update or follow for free in your favorite podcasting app. And if you like what you've heard, please consider leaving us a rating or review. It really helps new listeners find the show.

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