More Powell Ahead Along with Micron Results
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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 25th.

Coming off their best day in months and near all-time highs, major indexes face more comments today from Fed Chairman Jerome Powell, continued Middle East anxiety as investors warily eye the truce, and earnings later today from chip giant Micron before Nike reports tomorrow.

Yesterday saw the S&P 500 index return to highs seen last in February, and the tech-heavy Nasdaq 100 carve a new all-time closing high for the first time since February, as investors cheered what at least was a temporary decline in Middle East tensions. Positive reaction to remarks from Powell also propelled the rally, which was led by major growth stocks, especially in the tech sector.

This could suggest investors are more willing to take on risk after they veered toward the sidelines earlier this week. Powell appears before the Senate committee today after addressing a House committee yesterday. In his remarks to the House, he stayed cautious on rate policy, saying tariff-driven inflation remains possible. He added that the Fed is in a good position to wait, something many Fed policymakers seem to agree with.

The last dot plot of rate projections showed seven in the camp of no rate cuts this year. But he showed more flexibility under questioning from House members, saying he thinks tariff-driven inflation could show up this month and next, but if it doesn't, he might be open to the idea that perhaps the impact will be less than expected, which could help shape Fed policy.

If it turns out that inflation pressures do remain contained, then we will get to a place where we cut rates sooner rather than later, Powell said in response to a question about chances for a July rate cut, Bloomberg reported. But I wouldn't want to point to a particular meeting. I don't think we need to be in any rush because the economy is still strong.

As of late Tuesday, odds of a July rate cut were close to 19% according to the CME FedWatch tool. Odds of at least one rate cut by September reached 85%. That compared with 16% and 62% a week ago, respectively. Several policymakers have spoken in favor of rate cuts since last week's rate-setting meeting when the Fed kept rates unchanged at a target of 4.25% to 4.5%.

The benchmark 10-year Treasury note yield fell yesterday as Powell expressed flexibility and consumer confidence data missed expectations. June consumer confidence from the conference board was lower than expected at 93.0, another blow on the soft data front of surveys that measure sentiment. Consensus had been 99.0 up from 98.4 in May.

Notably, the report's expectations measure fell to 69.0. Typically, anything below 80 signals recession ahead, Briefing.com noted, and could reflect worries about the jobs market. On a positive note, one-year inflation expectations fell to 6% from 6.4%, but still historically elevated.

Here's an avalanche of jobs data next week, including the June non-farm payroll report next Thursday, a day early due to the July 4th holiday. The Fed is likely to closely parse those numbers for insights into whether the economy really needs a near-term rate cut. Though the Fed doesn't want to spark inflation, waiting too long to cut rates in a slowing economy could raise recession concerns.

Major market-sensitive deadlines loom, which could keep trading subdued before earnings season begins in mid-July. President Trump gave Congress until July 4th to settle on a budget bill, but the Senate and House measures have differences that need sorting out. The July 9th tariff deadline is approaching quickly with little sign of progress.

The SIBO Volatility Index, or VIX, a popular gauge of market fear, tumbled below 18 by late yesterday from peaks of around 22 early Monday. The historic average is near 20, and anything above that typically signals concern. Beyond the Fed and Iran, attention shifts to the halls of Congress this week in a pivotal stretch for the budget bill. The Senate is debating its version, which ultimately needs to be reconciled with the House bill.

There are a lot of issues that are dividing Republicans and still need to be resolved, including Medicaid cuts, green energy tax credits, the state and local tax or salt deductions, and more, said Michael Townsend, managing director of legal and government affairs at Schwab. Senate Republicans are also contending with the Senate parliamentarian who has been striking parts of the bill that do not meet the arcane rules for this legislation.

But Republicans remain optimistic that they can begin debate on the bill Thursday and finish with a marathon series of votes by the weekend. In earnings news, FedEx reported after the close yesterday, beating analysts' estimates on earnings, meeting consensus on revenue, but coming up short with its earnings outlook. Shares fell 2% in post-market trading.

Get ready for Micron after today's close. Shares of the company climbed substantially over the last month, along with other chip sector stocks, as investors' enthusiasm returned to the volatile sector. For Micron specifically, investors will likely monitor data center revenue growth after that segment tripled from a year earlier the last time Micron reported in March. At that time, Micron beat analyst estimates and offered better-than-expected guidance.

Earnings roll on tomorrow with Nike giving investors a fresh look at retail and perhaps clues into the impact of tariffs as Nike has a large market in China. Sector-wise, financials led the way yesterday with a nearly 2% gain. On the one hand, they benefited from Powell stating again he is in no hurry to lower rates. But they also rose on overall relief over the Middle East and hopes that business and consumer sentiment might improve.

Tech firms also caught the wave, led by Intel, Advanced Micro Devices, Taiwan Semiconductor, and Marvel Technologies. Crude retreated yesterday below $65 a barrel as tensions eased in the Gulf, while the benchmark 10-year yield fell below 4.3%.

Technically, the major indexes look solid on an intermediate-term basis, but are flirting with resistance between 6,050 and 6,100 on the S&P 500 and at the 200-day simple moving average for the Russell 2000 near 2,173. The Dow Jones Industrial Average climbed 507.24 points Tuesday, or 1.19%, to 43,089.02.

The S&P 500 index added 67.01 points, or 1.11%, to 6,092.18, and the Nasdaq composite rose 281.56 points, or 1.43%, to 19,912.53. This has been the Schwab Market Update Podcast.

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