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, March 12th. Investors juggling recession and tariff concerns get a fresh look at inflation Wednesday morning with the release of the Consumer Price Index, or CPI, report for February at 8.30 a.m. ET.
The report, which analysts expect to show a slight moderation in price gains last month, comes a day after President Trump announced he was doubling import tariffs on Canadian steel and aluminum imports to 50%.
His comments about potential recession risks over the weekend led to a sharp drop in stocks Monday, and Tuesday's tariff announcement initially triggered another fairly decisive move lower before the major stock indexes regained some of their footing later in the session. Major tech players, including Tesla and Nvidia, recovered some lost ground, at one point lifting the Nasdaq composite more than 1% higher, though it later gave up those gains.
Oracle was down about 3% after its third quarter results fell short of expectations. Adobe reports Thursday potentially offering some clues about demand for artificial intelligence.
In the past couple of weeks, investors have watched the Atlanta Fed's GDP Now tracker drop into negative territory, the City Economic Surprise Index turn negative for the first time since September, and the ISM manufacturing PMI show higher prices paid, accompanied by lower employment and new orders.
On the inflation front, analysts expect headline CPI to have risen 0.3% in February from the month before, slowing slightly from January's 0.5% increase. Gasoline prices fell in February, which could help on that score. Core CPI, which excludes food and energy prices, has also seen rising 0.3% down from January's 0.4% reading.
On an annual basis, analysts expect CPI to have risen 2.9 percent in February from the same month last year. That would be down from a 3 percent increase in January. Core CPI is expected to have risen 3.2 percent, down from January's 3.3 percent increase. These minor improvements still leave price gains well above the Federal Reserve's 2 percent target.
The Federal Reserve's Rate Setting Committee also meets again next week and will release its own updated inflation projections. Those will be the first since December, when core CPI was seen rising 2.5% this year. It's still very early in the year, but core has a long way to go to reach that level by the end of the year.
As of late Tuesday, investors were pricing in a 97% probability of the Fed leaving rates unchanged at the meeting, according to the CME FedWatch tool. Investors increasingly look like they expect rates to remain on hold in May as well, though odds of a quarter-point cut were at roughly 40%.
Finally, Congress was working on a proposal to avoid an expiry of government funding this weekend. The plan would extend funding through September 30th at fiscal 2024 spending levels. The House was preparing to vote on the measure Tuesday night. It would then move to the Senate.
The major stock indexes ended mixed after a volatile session Tuesday as investors digested all the news out of Washington. The administration's aggressive trade moves and the receding expectations for a rate cut have undercut some of the rationale investors relied on earlier this year when they bought dips. All of the S&P 500 sectors were lower Tuesday, with industrials taking the biggest hit.
The Dow Jones Industrial Average, S&P 500, and NASDAQ all ended lower. The S&P 500 briefly fell into correction territory, meaning a drop of 10% from a recent peak on an intraday basis, but ended above that level. Only the small-cap-focused Russell 2000 posted gains. Bond yields were up, and Bitcoin gained nearly 6%.
On a technical basis, the S&P 500 index fell below its 200-day moving average this week for the first time since late 2023, a significant move because that trend line had long represented support in the market. The S&P 500 is down 4.8% so far this year.
Thursday brings the Producer Price Index, or PPI, report for February at 8.30 a.m. ET. Analysts expect the headline and core readings to have risen 0.3%. January's 0.3% rise in core PPI was considered a positive inflation signal, as many of the elements that filter through to the Federal Reserve's favored personal consumption expenditure, or PCE, prices report look benign.
Goods costs rose 0.6% mainly due to fuel, but growth in services prices slowed to 0.3% from 0.5% in December. Investors may be looking to see if that improvement continued in February. Most of the rise in services last time came from traveler accommodation services, so the question is whether that was a one-time bump.
Investors also got an update on the labor market Tuesday, with a job openings and labor turnover survey or JOLTS showing that job openings climbed to 7.74 million in January, surpassing the expected 7.6 million analysts polled by Bloomberg were expecting. This data may have also provided a bit of relief to investors worried about recession. Pretty solid job openings data for January, said Kevin Gordon, director and senior investment strategist at Schwab.
The S&P 500 index fell about 43 points Tuesday or 0.76% to 5,572.07. The Dow Jones Industrial Average shed 478 points or 1.14% to 41,433.48. And the Nasdaq Composite lost 32 points or 0.18% to 17,436.10.
The 10-year Treasury note yield gained 7 basis points to 4.283%. 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.