Digesting Fed Minutes and Nvidia, Market Eyes GDP
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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 Thursday, May 29th. Get ready for a mini earnings season that starts and finishes today. A long list of closely watched companies report even as investors digest results from Salesforce and NVIDIA out Wednesday afternoon.

Earnings begin before the bell today with Best Buy, Foot Locker and Kohl's, then continue after the close with Dell, Marvell Technology, Ulta Beauty and Gap. Most of these are retailers, continuing the theme after impressive results earlier this week from Macy's, Abercrombie & Fitch and Dick's Sporting Goods.

Though several retailers were reluctant to give guidance and others paired their outlooks due to the complex macroeconomic environment, overall retail demand last quarter generally looked strong.

Results from NVIDIA and Salesforce late Wednesday also play into the earnings mix and its potential impact on stocks today. NVIDIA reported earnings per share and revenue that beat Wall Street's thinking, but neither were as impressive in terms of upside as some of the company's past quarterly results.

In addition, its fiscal second quarter guidance of $44.1 billion to $45.9 billion came in below the $45.92 billion fact-set consensus, reflecting struggles in the China market after U.S. export licensing requirements caused a loss in revenue from the H-20 chip. Shares initially climbed in post-market trading, perhaps reflecting investor expectations of a possible guidance hit from the H-20 issue.

Salesforce beat analysts' earnings per share and revenue expectations, bouncing back from a revenue miss the previous timeout. Shares popped about 5% initially after the news in post-market trading. Digging deeper, revenue in the first quarter of its fiscal 2026 rose 8% annually to $9.8 billion, a record. A closely monitored subscription and support service revenue climbed 8%.

Interestingly, Salesforce now expects a currency tailwind from a weakening U.S. dollar. It raised its full revenue guidance and released second quarter guidance above Wall Street's estimates. Looking beyond the earnings calendar, today includes the second government estimate for first quarter gross domestic product, or GDP. The first estimate was negative 0.3%, and analysts expect no change in the second one.

This is backward-looking data and was pulled down by the high level of imports as businesses rushed to bring products in from overseas ahead of expected tariffs. The quarterly GDP deflator, which tracks prices, was 3.7 percent last time out and may also get a look.

A more up-to-date economic checkup is weekly initial jobless claims due at 8.30 a.m. Eastern Time, the same time as GDP. Analysts expect 230,000 in the realm of recent reports. Jobless claims can offer a better sense of current job market and economic trends, though no single week captures everything. The near-term average has been in the 220,000 to 230,000 range, historically low.

Anything above 240,000 might draw attention, but it would probably take weeks above that to make the Federal Reserve take notice in a major way. Continuing claims for another data point today and topped 1.9 million last week, a nearly three-year high. This number provides insight into how difficult it is to find jobs for laid-off workers.

Another recent reading in the May Consumer Confidence Report from the Conference Board, the labor differential deteriorated to its lowest level since September. This can imply a worsening climate for people seeking work. Friday brings the closely watched April Personal Consumption Expenditures, or PCE, price index, with analysts expecting a mild reading of 0.1% for both headline and core PCE, with core excluding food and energy.

Next week offers key labor market data including job openings, layoffs, and the May non-farm payrolls report. Treasury yields rose Wednesday after closely watched Japanese bond yields climbed following lackluster investor demand at a 40-year Japanese bond auction. Rising yields around the world could mean more competition for U.S. treasuries where yields have long held a premium to foreign bonds.

The Federal Open Market Committee's, or FOMC's, minutes from the Fed's May meeting released late yesterday didn't hold much surprise, confirming that policymakers plan to stay cautious amid economic and trade turbulence. Officials expressed concerns that the economy might weaken, hurting jobs growth, even as inflation might jump due to tariffs. That's the potential monetary policy conundrum Fed Chairman Jerome Powell addressed earlier this month after the meeting.

The Fed has kept its target range at 4.25% to 4.5% since last December, and the futures market as of late Wednesday predicts less than 3% odds of a rate cut at the June meeting, according to the CME FedWatch tool.

In other rate-related news Wednesday, a $70 billion auction of U.S. five-year Treasury notes met decent demand, according to Briefing.com, but that didn't prevent yields from rising across the spectrum. The benchmark 10-year yield finished yesterday up five basis points at 4.48%, staying just below the psychological 4.5% mark, while the 30-year bond yield remained just under 5%.

The Fed minutes didn't appear to influence yields much, but rising yields may have hurt stocks. Trading Wednesday was lackluster as investors awaited earnings, data and the Fed minutes. Investors were in a cautious mood as opposed to Tuesday when every sector gained. Almost every sector lost ground yesterday with materials, energy and utilities winding up at the back of the pack.

For energy and utilities, this continued a pattern that's seen both in the bottom half of sectors in terms of monthly performance. Homebuilder stocks also performed poorly yesterday following more signs of weakness in the mortgage market and the slight comeback in yields following Tuesday's retreat. Technically, the S&P 500 index remains well above its 200-day moving average near 5,780 but hasn't retested May's highs near 5,960.

With the market's forward price-to-earnings, or P-E, ratio back above 21, historically high, and analysts' earnings growth projections generally sliding from a robust first quarter for the remainder of the year, it may be tough to find catalysts that push the market past its old highs from February for the S&P 500 and December for the Nasdaq Composite.

First quarter S&P 500 earnings growth was nearly 13 percent, according to Faxat, in data released before NVIDIA and Salesforce reported. But analysts expect only 5.1 percent in the second quarter and 9.1 percent for the calendar year. Those are historically decent numbers, but not a breakneck pace.

Yesterday's close was technically uninspiring for the S&P 500 index as it fell below near-term support at 5,900 in the final minutes. This might have reflected caution ahead of the afternoon's earnings and today's data. A report late in the day by the Financial Times that the Trump administration had told semiconductor software design firms to stop selling to China might also have hurt the market as yesterday's closing bell approached.

The Dow Jones Industrial Average fell 244.95 points Wednesday or 0.58% to 42,098.70. The S&P 500 Index lost 32.99 points or 0.56% to 5,888.55. And the Nasdaq Composite gave back 98.23 points or 0.51% to 19,100.94.

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