Nvidia Results in Focus After Beating Consensus
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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, February 27th. AI chip giant Nvidia's earnings eagerly awaited all-week topped expectations, but shares vacillated in post-market trading as investors dug deeper into the data.

The path of this magnificent seventh stock might help determine which direction major indexes head today. NVIDIA's fourth quarter earnings per share of 89 cents beat the average analyst's estimate of 84 cents, and revenue of $39.33 billion topped the average estimate by $1.3 billion.

NVIDIA's fiscal first quarter guidance also slightly outpaced analysts' estimates. However, the company's outlook for margins appeared to miss analysts' estimates, cooling some investor enthusiasm at the outset. NVIDIA's results come after a wild session Wednesday for the broader market that featured the S&P 500 index surging in the early hours, only to fade into the red by late in the session as investors watched yields tumble on tariff worries.

The S&P 500 narrowly avoided a fifth straight day of losses, but recent weak economic data and geopolitical concerns have combined with trade policy to push Treasury yields to their lowest levels in two months. The move down in yields is much more reflective of concerns about growth rather than inflation, said Lizanne Saunders, chief investment strategist at Schwab, in a CNBC interview Wednesday. That's why we've seen this shift toward defensive sectors.

Saunders noted that U.S. policy uncertainty has filtered its way into a lot of the data. Buying intentions for big-ticket items are down, and companies seem more reticent about capital spending. The services sector is starting to roll back a bit after months of expansion, even as manufacturing data improved slightly in recent weeks. My fear is that this pickup in manufacturing could stall due to policy-related uncertainty, and you're certainly hearing that from companies, Saunders added.

There's also been a shift into treasuries as investors seek perceived safety. A five-year treasury note auction Tuesday and a seven-year note auction Wednesday both attracted solid demand. At this point, dips in treasury yields are getting a negative read from the stock market. That could help explain why stocks lost ground at midday yesterday after an early rally as the 10-year yield skidded to 4.25%, the lowest since December 12th.

Crude oil is also at two-month lows, below $70 per barrel, possibly reflecting growth worries. More tough talk on tariffs from President Trump at his midday cabinet meeting, with a warning that tariffs of 25% could go into effect against imports from the European Union also might have weighed on stocks yesterday and lifted Treasuries.

The market's slide yesterday got arrested after Trump said he now sees tariffs against Mexican and Canadian imports taking effect April 2nd, another delay. They had been expected to go into place next Tuesday. Later Wednesday, the administration went back to the deadline of early March. NVIDIA is in the rearview mirror, but earnings aren't over this week, and next week looks very busy. Today brings more tech results from Dell and HP.

Retail earnings accelerate next week with Costco, Foot Locker, and Target. Earnings season is 90% done, but it probably won't feel that way until mid-March. Salesforce also reported yesterday, and revenues came in just short of the fact-set consensus, though earnings per share beat consensus estimates. The company's outlook missed as well, and shares fell 4% in post-market trading.

Overseas, the European Central Bank publishes an account today of its January 30th policy meeting where it cut rates by 25 basis points. The next meeting is on March 6th, and futures trading builds in another 25 basis point rate cut with more expected later this year.

In data Wednesday, U.S. January new home sales came in lighter than expected at an annual rate of 657,000, but the previous month's data were upwardly revised. January's overall data for housing and beyond may reflect the Los Angeles wildfires and southern U.S. snowstorms that month.

Later today, investors brace for U.S. weekly initial jobless claims, which Briefing.com pegs at 220,000, almost unchanged from a week earlier. The government also is scheduled to release its second estimate of fourth-quarter gross domestic product growth, with no change expected from the first estimate of a seasonally adjusted 2.3 percent annual rate. That's down from 3.1 percent in the third quarter.

The GDP price deflator could be in focus too after rising to 2.2% in the first government estimate.

Friday's January Personal Consumption Expenditures, or PCE, price index is the market's next trail market, with NVIDIA and Salesforce earnings now in the rearview mirror. Analysts expect the report due at 8.30 a.m. ET tomorrow to show both headline and core PC up 0.3% monthly in January, with core stripping out volatile food and energy prices.

Annual PCE is expected to edge lower at 2.5% and 2.6% for headline and core PCE, respectively, compared with 2.6% and 2.8% in December. As of late Wednesday, the CME FedWatch tool put rate pause odds near 95% for next month's Federal Open Market Committee meeting, but chances of a rate cut by the June meeting approached 70%, up from less than 50% a week ago.

The May meeting looks less in play with 75% odds of a pause. Still, May pause odds were nearly 90% a week ago.

The S&P 500 index rose 0.81 of a point Wednesday or 0.01% to 5,956.06. The Dow Jones Industrial Average gave back 188.04 points or 0.43% to 43,433.12. And the Nasdaq Composite gained 48.88 points or 0.26% to 19,075.26.

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.