Retail Sales, More Bank Results Next After Rally
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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, January 16. Now that investors know how much prices rose last month, they'll find out today how much people shopped during the holiday season.

December retail sales come out before the open, along with a new batch of bank earnings after the market enjoyed its best session since November yesterday on cooling inflation data and solid quarterly results from big banks. Retail sales due at 8.30 a.m. ET are seen up 0.5% in December. That's down from 0.7% in November, but still solid.

Several major retailers shared holiday results early this year, and tidings were mixed. The strong December jobs report last week may support retail sales, as people tend to shop more if they feel secure about their employment. Also, gas prices began climbing in December, which could play into retail sales growth. However, rising borrowing costs late last year might have muted consumer enthusiasm for bigger ticket items.

More big banks are ahead this morning, too, as investors prepare for results from Morgan Stanley and Bank of America. The question going in is whether they, like the banks that reported yesterday, also enjoyed growth in trading and investment revenue last quarter. As Briefing.com pointed out, the bar has now been raised for earnings reports from banks competing with those that let off earnings Wednesday.

Results yesterday from JPMorgan Chase, Goldman Sachs, Citigroup, and Wells Fargo topped analyst estimates for the most part, despite drops in the important net interest income category that often fuels profit growth. Initial and continuing weekly jobless claims are due at 8.30 a.m. ET today, and analysts expect initial claims to stay low at 212,000, according to consensus from Briefing.com.

The U.S. 10-year Treasury note yield fell 14 basis points to 4.65% following yesterday's December Consumer Price Index, or CPI, data that showed an improvement in core inflation from November. Still, the CME FedWatch tool builds in 97% chances of a Fed rate pause this month and only around a 27% chance of a rate cut this quarter. Those aren't changed much from before CPI.

Yields are pulling back decisively from the recent rise to around 4.8 percent, said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. If that number can remain a near-term high watermark, then this will help bullish momentum as we move into fourth quarter earnings season.

He added that a 0.3% monthly and a 4.6% annual rise in shelter prices in yesterday's CPI were the lowest since January of 2022, and another positive element of the report. Just about every sector muscled to healthy gains Wednesday, with the exception of traditionally defensive consumer staples.

Consumer discretionary, communication services, financials, and infotech all climbed 2% or more amid falling yields and on signs of banking industry health. Bank shares powered financial sector gains and semiconductor stocks climbed 2%.

Technically, the S&P 500 index found support earlier this week at its 100-day moving average, now near 5,828, and sailed upward to test the 50-day moving average near 5,857 intraday Wednesday. A push above that level might generate some short covering and possibly trigger new buying as well.

The S&P 500 index climbed 107 points Wednesday, or 1.83%, to 5,949.91. The Dow Jones Industrial Average jumped 703.27 points, or 1.65%, to 43,221.55. And the Nasdaq Composite gained 466.84 points, or 2.45%, to 19,511.23.

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