Apple Results, PCE Prices Take Center Stage
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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 Friday, January 31st. The busiest earnings week of the quarter is almost over, but investors remain on alert, digesting Apple's results and awaiting pivotal inflation data.

Apple earnings released late Thursday were even with to slightly better than analysts had expected. Earnings per share of $2.40 exceeded the consensus of $2.35, while sales of $124.3 billion basically met expectations. However, iPhone revenue of $69.1 billion was below Wall Street's average estimate of $71 billion and down from a year ago.

Perhaps no less urgent this morning brings the Federal Reserve's favorite inflation reading as the December Personal Consumption Expenditures Price Index, or PCE,

Comes out at 8.30 a.m. ET. Consensus is for 0.3% monthly headline and 0.2% monthly core PCE growth. Core excludes food and energy prices. Producer and consumer price readings released earlier this month pleased investors with signs of progress but offered a mixed picture for PCE. Some categories that filter into PCE, like airfares, rose sharply.

Analysts expect annual core PCE to rise 2.8%, equal to the increase in November and not progressing toward the Fed's 2% goal. A reading at or above that could reinforce ideas that the Fed might be content to wait longer on any future rate cuts. The Fed held rates steady this week, and Fed Chairman Jerome Powell seems in no hurry to cut again anytime soon. The

The current target range of 4.25% to 4.5% likely won't come down until the Fed sees more inflation progress, Powell said, but the economy appears to be growing at a decent pace despite current rates well above pre-pandemic levels.

The 10-year Treasury note yield dipped four basis points yesterday to 4.52%, the lowest close in more than a month, after the weaker-than-expected headline GDP rating. This benefited interest-sensitive parts of the market like real estate and small caps. The Russell 2000 small cap index had a very strong session Thursday and touched technical resistance at its 50-day moving average near 2,313.

It hadn't closed above the 50-day moving average since before the bearish December Fed meeting when policymakers walked back hopes for a series of 2025 rate cuts. Odds of a rate cut in March remained low despite the GDP reading at around 18 percent, according to the CME FedWatch tool. Futures trading still builds in high odds of one rate cut by mid-year and one to two rate cuts overall in 2025.

Beyond PCE, today's calendar includes Chicago PMI for January, providing a look at manufacturing health in the Midwest. This weekend features the Cakes in China General Manufacturing PMI, but the Chinese government's official PMI readings won't be released with the government closed for a holiday.

Analysts expect a cakes and manufacturing PMI headline reading of 50.5, equal to the previous month and just above the 50 level that denotes expansion, according to Trading Economics.

Market breadth improved Thursday, with advancing shares on the New York Stock Exchange and Nasdaq easily outpacing declining ones. Wider breadth is typically a positive sign of investors embracing stocks across many sectors rather than just a handful of the largest names. Breadth capsized earlier this month but has clawed slightly back.

Momentum in the S&P 500 index, or the SPX, however, has slipped from a week ago, with a Relative Strength Index, or RSI, at 56.8. That's well below the 70 level it approached last month when stocks were near current levels. Generally, an RSI near 70 can indicate oversold conditions, and the SPX remains far from that level.

Major indexes slumped late Thursday but rebounded relatively fast after President Trump announced he'd impose 25% tariffs on imports from Canada and Mexico starting Saturday. This wasn't unexpected, however. U.S. automobile, pharmaceutical, energy, homebuilding, and agricultural firms are among those that might be hurt by tariffs on products from the two countries.

Defensive sectors like utilities, real estate, and healthcare led the way Thursday, all helped by lower yields. Infotech has struggled all week and was the only sector to fall, clipped by a sharp drop in Microsoft after investors were disappointed by the company's guidance. However, shares of Tesla and Meta Platforms both rose yesterday as investors found things to like in their earnings and guidance.

Earnings from AbbVie and ExxonMobil are due this morning. Production is a key area to watch at Exxon, according to Briefing.com, after third-quarter oil equivalent output rose 5% from the previous period.

The SPX climbed 31.86 points Thursday, or 0.53%, to 6,071.17. The Dow Jones Industrial Average added 168.61 points, or 0.38%, to 44,882.13, and the Nasdaq Composite rose 49.43 points, or 0.25%, to 19,681.75.

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. Keith Lansford will be back with another update Monday. For important disclosures, see the show notes and schwab.com slash market update podcast.