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cover of episode Fed in Spotlight but May Get Eclipsed by War Fears

Fed in Spotlight but May Get Eclipsed by War Fears

2025/6/18
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Schwab Market Update Audio

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Cooper Howard
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Kathy Jones
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Keith Lansford
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Nathan Peterson
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Keith Lansford: 我认为,市场目前面临双重不确定性。一方面,美联储的利率决议即将公布,投资者们都在密切关注美联储对未来经济和利率路径的展望。另一方面,中东紧张局势的升级也让市场感到担忧,特别是特朗普政府可能采取的行动,这给市场带来了额外的风险。此外,美国零售销售数据疲软,也加剧了市场对经济放缓的担忧。 Nathan Peterson: 我认为,中东紧张局势确实对市场产生了一定的影响,导致波动性上升。但是,目前的波动性水平仍然可控,尚未达到过度水平。不过,如果美国真的卷入战争,那么波动性可能会进一步上升,市场可能会出现更大的动荡。 Cooper Howard: 我认为,五月份的零售销售报告好坏参半,控制组数据好于预期,但初步数据下降。这表明消费者支出可能正在发生变化,美联储可能会更加关注控制组数据,因为它对GDP有更大的影响。 Kathy Jones: 我认为,消费者正在减少可自由支配的支出,但仍然在网上购物。餐厅和酒吧的销售额下降,表明服务业需求可能正在放缓。这可能意味着经济正在降温,美联储可能需要采取行动来刺激经济。

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The Federal Reserve meeting is scheduled for today, but concerns about potential U.S. involvement in the Middle East conflict are dominating investor attention. While a rate cut is unlikely, investors eagerly await the Fed's economic projections and rate path guidance. President Trump's social media posts further fueled market volatility.
  • Fed meeting on June 18th
  • Concerns about Middle East conflict and potential US involvement
  • Little chance of a rate cut
  • Investor focus on economic projections and rate path
  • Increased market volatility due to Trump's posts

Shownotes Transcript

Translations:
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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 Wednesday, June 18th. First, an important note. U.S. markets are closed Thursday, June 19th in observance of the Juneteenth holiday. The Schwab Market Update will return on Friday, June 20th.

Today's Federal Reserve meeting could play second fiddle to Middle East developments amid concerns the U.S. might become involved in the fighting. There's little chance of a rate cut when the Fed meeting ends at 2 p.m. Eastern time, but investors are on the edge of their seats awaiting fresh projections on the economy and rate path from the central bank.

They're also on tenterhooks after President Trump's social media posts late yesterday spooked Wall Street and sent stocks and treasury yields sharply lower. Trump hinted at possible U.S. involvement, and Vice President Vance said Trump may decide the U.S. needs to take further action to end Iranian enrichment, the Wall Street Journal reported.

Rising Iran-Israel tensions persist and are generating a lift in volatility, but not excessively so, at least not yet, said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. The SIBO volatility index, or VIX, climbed 10% yesterday to above 21 from lows below 19 late last week. But as Peterson said, those aren't excessive levels.

As recently as April, the VIX was above 50. However, a U.S. role in the war could conceivably raise the VIX and potentially bring more volatile trading. The U.S. market week is shortened by Thursday's Juneteenth holiday with no trading tomorrow. The one-day break affects the data calendar, with weekly initial jobless claims expected at 8.30 a.m. ET today rather than Thursday.

Claims have been near 250,000 recently, up from their previous range of 220,000 to 230,000. Analysts expect initial claims to rise to 253,000 from 248,000 the prior week, according to Briefing.com. Continuing claims are also being tracked after reaching new three-year highs above 1.95 million last week.

May U.S. retail sales plunged a worse-than-expected 0.9%, reviving worries about consumer demand in a report that was mixed under the hood. The week headline data, along with war fears, helped send the benchmark 10-year Treasury note down seven basis points Tuesday to 4.39%. Analysts had expected a 0.6% drop, and retail sales excluding autos fell 0.3%.

The government also lowered April retail sales figures. However, the so-called control group that's included in the government's gross domestic product, or GDP calculation, rose 0.4% in May, compared with a 0.3% expectation. It was a mixed report, said Cooper Howard, director of fixed income strategy at the Schwab Center for Financial Research. The control group was up more than expected, but the advanced figure fell.

Motor vehicles and parts were a big contributor to the decline. It's possible the weakness in automobiles could reflect demand getting pulled forward to earlier this year ahead of expected tariffs. The Fed may be more likely to watch the control group figure from the retail sales report, not the headline, due to the control group's impact on GDP. The control group excludes sales from auto dealers, building materials stores, and gas stations.

Interestingly, restaurant and bar sales fell 0.9%, the worst for that category since February of 2023, and another sign of possible slowing services industry demand. It looks like consumers are pulling back on discretionary spending but still shopping online, said Kathy Jones, chief fixed income strategist at Schwab.

Shorter-term treasuries are worth watching after the Fed meeting to see if they react to the updated Fed summary of economic projections. These will outline the central bank's thinking on inflation, economic growth, and the possible rate path. Fed Chairman Jerome Powell's press conference could also help shape investor sentiment.

Obviously, no rate cut is expected, but markets are expecting two 25 basis point cuts this year, so any changes to the dot plot will likely be the focus, Schwab's Peterson said, referring to the so-called dot plot that maps individual Fed policymakers' predictions of where rates will be over the next few years.

All it would take is two policymakers who predicted two rate cuts in the March dot plot to change their projections to one cut, and the overall average would fall to one from two. Investors may also examine the Fed's inflation projections after recent data uncovered signs of disinflation. Goods inflation, for instance, is up modestly even with the impact of tariffs, and services inflation has slowed.

New evidence of services weakness popped up in yesterday's retail sales report as May sales at bars and restaurants sank 0.9%, the worst decline there since February of 2023. This follows signs of services disinflation in recent government inflation reports.

In March, the Fed's median projection for U.S. 2025 gross domestic product, or GDP, growth fell to 1.7% from 2.1%. Its inflation estimate rose to 2.7% from 2.5%, and its core inflation estimate, which extracts volatile food and energy, climbed to 2.8% from 2.5%. Any drops in these numbers today would likely be welcomed by the market.

Odds of a rate cut in July were around 15% late Tuesday, according to the CME FedWatch tool. Investors seem more certain the Fed could cut rates in September, building in roughly 62% chances. Futures trading shows a strong likelihood of two rate cuts before the year ends. Odds could change quickly based on the Fed's new projections today.

Crude oil rebounded almost 5% Tuesday as tensions rose in the Middle East and energy led all S&P 500 sectors. Aside from the energy sector, investors generally stepped back from riskier positions and appeared to seek perceived safety in assets like the dollar and treasuries, sending 10 of 11 S&P 500 sectors lower.

Solar energy stocks plummeted Tuesday after the U.S. Senate's version of the budget bill kept provisions to cut renewable energy incentives. But defense and energy company firms did well Tuesday, and some semiconductor companies also rose. Magnificent Seven stocks, however, dropped across the board. The sharpest drop there was Tesla, down nearly 4%. Travel stocks that rose Monday on hopes for peace talks slumped.

Technicals remain bullish on an intermediate-term basis, but near-term momentum is slowing, as evidenced by RSI, and near-term resistance on the S&P 500 index appears to be in the 6,050 to 6,100 area, so it may be tough to push to fresh all-time highs without some kind of a bullish catalyst, Schwab-Peterson said.

RSI, or the Relative Strength Index, is a closely followed momentum indicator and has been slipping lately for the S&P 500. One possible technical support area could be last Friday's intraday S&P 500 low near 5,963. The old support resistance line of 5,900 is another potential support point, and below that there's a 200-day moving average of 5,810.

The S&P 500 hasn't been below that moving average in more than a month. It may be positive from a technical standpoint that the S&P 500 didn't make much of an attempt to test last week's low Tuesday, but if the war situation worsens, technical matters may play less of a role.

The Dow Jones Industrial Average dropped 299.29 points Tuesday, or 0.70%, to 42,215.80. The S&P 500 Index fell 50.39 points, or 0.84%, to 5,982.72. And the Nasdaq Composite eased 180.12 points, or 0.91%, to 19,521.09.

This has been the Schwab Market Update podcast. To stay informed, visit www.schwab.com slash market update or follow us for free in your favorite podcasting app. And if you like what you've heard, please consider leaving us a rating or a review. It really helps new listeners find the show. Join us for another update tomorrow. For important disclosures, see the show notes and schwab.com slash market update podcast.