After Weak Tesla Earnings, Trade Update Awaited
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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, April 23rd.

Earnings season rolls on following a trade-related mood shift Tuesday that clawed back most of Monday's sharp losses. Investors continue to mull weaker-than-expected earnings from Tesla released late yesterday and look for any further news on the tariff front.

Markets are still waiting on deal announcements, and this is an overhang on stocks, said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. VIX at 30 still conveys the high uncertainty around a trade and the potential economic impact. The SIBO volatility index, or VIX, hovered near 30 late Tuesday, down from recent highs near 60, but still well above the historic average of 20.

U.S. Treasury Secretary Scott Besson told a closed-door investor summit that the tariff standoff with China is unsustainable and he expects the situation to de-escalate, Bloomberg reported Tuesday. That followed headlines earlier citing progress in U.S.-India trade talks and then word that Besson will speak today at 10 a.m. ET on the state of the global financial system.

Depending on his tone and any nuggets he shares, especially regarding China, the speech might move markets. On the less hopeful side, the International Monetary Fund warned Tuesday that the swift escalation of trade tensions and extremely high levels of policy uncertainty are expected to have a significant impact on global economic activity. Also less hopeful were results from Tesla that missed analysts' revenue and earnings per share estimates by quite a bit.

The company's earnings per share of 27 cents compared with consensus of 40 cents, while revenue of $19.34 billion was below the consensus $21.2 billion. Tesla now has missed average earnings and revenue estimates in several recent quarters. Still, shares didn't initially move much in after-hours trading, perhaps because they are already down 40% from the last time Tesla reported.

Quarterly operating margin fell to 2.1% from 5.5% a year ago. Tesla blamed reduced vehicle prices, declining vehicle deliveries, and an increase in operating expenses. Investors await quarterly results today from Boeing, AT&T, Philip Morris, IBM, and Texas Instruments.

That's a healthy mix of sectors that could provide color on macro trends in tech, telecommunications, and industrial parts of the economy. Boeing came under pressure recently as China instructed airlines not to buy the jet maker's planes. First quarter deliveries for Boeing's Defense, Space, and Security Division totaled 26, up from 14 during the same quarter a year earlier.

IBM could be watched for an early read on quarterly cloud market conditions ahead of earnings later this week and next from leading cloud providers. Alphabet, another major cloud name, reports this Thursday, but focus there is likely to be on how it resolves its case with the Justice Department as the government looks to break up parts of the company.

Today also features March new home sales soon after the open, and analysts expect a seasonally adjusted annual rate of $684,000 up from $676,000 in February. Last week was a challenging one for the housing market as March housing starts came in well below analysts' expectations, and homebuilder D.R. Horton said spring demand was off to a slow start.

S&P Global U.S. manufacturing and services data might also get a close look today. The Fed's Beige Book on Economic Conditions Around the Country is due this afternoon. It might give early indications on whether the many businesses surveyed by regional Fed banks have seen any trade-related weakness in demand for their products and how they plan to approach hiring.

Tomorrow's initial weekly jobless claims will be watched, as always, for any signs of tariff-related economic struggles showing up in the labor market. Recent readings have been light, below 230,000. Anything 240,000 or above might catch attention. The Briefing.com consensus is 220,000.

The benchmark 10-year Treasury note stayed below 4% yesterday, but remains well below recent lows near 4%. Chances of a May rate cut slipped below 10% late Tuesday, according to the CME FedWatch tool, as investors appear convinced recent hawkish Fed talk means little chance of a trim. June rate cut odds fell to 66%.

The IMF now sees global growth at 2.8% this year, down from 3.3% in 2024. The estimate was down from 3.3% in January. The projection for 2026 growth fell to 3% from 3.3%. The weak IMF data handed some early support to Treasuries on Tuesday, but that diminished later following weak demand for a $69 billion two-year Treasury note auction.

Foreign demand for two-year notes auctioned yesterday was the weakest in two years, Briefing.com said, adding to worries about foreign interest in U.S. assets. A five-year note auction comes today, with results due at 1 p.m. ET. Poor auction demand typically pressures treasuries and lifts yields, which move the opposite direction.

As major indexes rose yesterday on sunnier trade talk, it's illuminating to see which companies and sectors led the way. The one day isn't a trend. It's presumably useful to highlight positive performance related to trade in case progress continues. Industrials and financials had a good day, and so did consumer discretionary subsectors like homebuilders.

These are cyclical parts of the market that tend to perform better when the economy improves. Leading names Tuesday included mining company Freeport-McMoran, steelmakers Alcoa and Cleveland Cliffs, industrial conglomerate 3M, homebuilders Pulte Group, KB Home and Toll Brothers, and financial names like Morgan Stanley, Visa and MasterCard.

Defense contractors saw their stocks head different directions as investors scrutinized their earnings and how they expect tariffs to hit their businesses. Lockheed Martin rallied after reporting better-than-expected first-quarter earnings and revenue. Lockheed said it's confident it can achieve the financial guidance it shared in January. Northrop Grumman shares tumbled, however, as earnings per share fell far short of analysts' expectations and the company cut full-year guidance.

Sales fell 7% year-over-year. Higher manufacturing costs and a previously disclosed wind-down of work on certain space systems programs partly accounted for the weak core, the company said. So far, 81 of 500 S&P companies have reported and average revenue growth is 4.62%.

Average earnings growth is 6.06%, but six of the magnificent seven report this week and next, and many are seeing growing earnings per share by double digits. Analysts expect technology firms to grow earnings on average more than 14% for the quarter, Fax has said, and they report in earnest starting this week.

Technically, the S&P 500 index appeared to get support after testing 5,100, a level that represented the intraday low from last August's sell-off, Schwab's Peterson said. Above the market, 5,500 remains key intermediate-term resistance.

While the near-term technicals may be contributing to today's bounce, we're still in intermediate-term bearish downtrends essentially across the board, so there is some work to do here for the bulls, he added. For the S&P 500, 4,835 is key intermediate-term support, and 5,500 is key intermediate-term resistance.

The Dow Jones Industrial Average added 1,016.57 points, or 2.66%, to 39,186.98. The S&P 500 Index rose 129.56 points, or 2.51%, to 5,287.76.

and the Nasdaq Composite gained 429.52 points, or 2.71%, to 16,300.42. This has been the Schwab Market Update Podcast.

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