Start the Engines: Airline, Trucking Firms Up Next
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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 Tuesday, April 15th. A host of earnings loomed today, both before and after the open. Johnson & Johnson, Bank of America, and Citigroup lead the morning rush, followed by United Airlines and J.B. Hunt Transport this afternoon.

Bank earnings season got off to a strong start Friday and Monday, while earnings from transport firms can help investors get a sense of overall consumer and business confidence amid the recent tariff turbulence.

Falling airlines in last week's March producer price index, or PPI, and a cautious outlook from Delta Airlines put United in the hot seat today. Some airlines have been canceling flights from Canada to the U.S. as travel from that key tourist source appears to weaken amid anger over tariffs. Business travel is another point of possible weakness, with companies confused over uncertain tariff policy, likely looking to cut expenses where they can.

However, the main theme this earnings season could be less clarity around company outlooks. Earnings are okay so far, mostly from financials, but expect that more companies might withdraw guidance for analysts covering their stocks, said Lizanne Saunders, chief investment strategist at Schwab.

She added the Wall Street year-end targets for the major indexes have the widest span in at least 25 years, a testimony to uncertainty. But said lower Treasury yields likely helped stocks yesterday. Tariff uncertainty amid conflicting messages from administration folks is likely to persist, Saunders added.

Later this week brings key results from semiconductor industry firms ASML tomorrow and Taiwan Semiconductor Manufacturing Thursday, with chips at center stage of the Trump administration's tariffs against China. The White House is expected to put out its tariff policy specifically concerning semiconductors at some point soon.

The administration is prioritizing trade deals with Australia, South Korea, India, Japan and the U.K., the Wall Street Journal reported this afternoon. As the earnings calendar heats up, data remain relatively quiet with few major numbers due today. Tomorrow brings a Bank of Canada meeting followed by a European Central Bank interest rate decision Thursday.

The majority of analysts expect a rate pause from Canada, Reuters reported, but many expect the ECB to cut by 25 basis points. Data Monday included a soft negative 12 reading for the April Empire State Manufacturing Index, though it was above the negative 20 in March. Anything below zero implies contraction.

And the New York Federal Reserve said March U.S. consumer inflation expectations reached 3.6 percent, the highest since October of 2023, and up from 3.1 percent in February. Mean unemployment expectations hit the highest level since April of 2020. Key data ahead include March retail sales tomorrow and March housing starts and building permits Thursday.

Analysts expect a large monthly jump of 1.3% in retail sales, perhaps helped partly by people buying ahead of what they believed might be tariff-related inflation. That sort of pre-tariff demand likely played into a large jump in exports from China last month, which rose 12.4% year-over-year.

We will get March retail sales later this week, and that should provide some helpful evidence of the pace of consumer spending, Fed Governor Christopher Waller said in a speech today. Adding the weak readings through February may have reflected seasonal factors like harsh winter weather and cited continuing strength in the labor market.

Waller may have cheered the market and kept Treasury yields under pressure Monday by hinting the Fed might need to cut rates under two different tariff scenarios. Sector-wise, Monday, an early tech rally quickly lost steam as investors juggled conflicting messages from the White House about tech tariff exemptions. But strength in other sectors, including defensive ones like real estate, utilities, and staples, helped pick up the slack as the session continued.

Financials also had a strong day and technology bounced back. Hopes for a long-term exemption on tariffs for tech products made in China got dashed when administration officials said they'd be temporary. NVIDIA announced an initiative to produce more of its products in the U.S., and Apple has shifted additional iPhone production to India, CNBC reported.

Unlike last week, when many S&P stocks surged or fell by double digits on a given day, most of the main stocks watched by investors stayed in a negative 5% to positive 5% range Monday in terms of losses and gains, with signs of life from auto companies, tech hardware firms, semiconductors, and banks.

Consumer products and fast food also had relatively positive sessions, and the closely watched 10-year Treasury yield fell 11 basis points. While it remained above 4.3%, it didn't test last week's highs near 4.6%. Monday marked the second straight higher session for Wall Street, but investors appeared unwilling to push the market back toward last Tuesday's intraday high near 5,480 for the S&P 500 index.

Stocks retreated from their peaks in both the morning and afternoon yesterday, but the S&P 500 had a technical victory of sorts in closing above 5,400 for the first time since last Wednesday's historic rally. The S&P 500 is now up 8.5% from the closing low of 4,982 posted last Tuesday before Trump delayed tariffs 90 days for most countries.

The tech-heavy Nasdaq 100 is up 10% from last Tuesday's low close. Still, both are down double digits from February's peaks. Meanwhile, the S&P 500 Relative Strength Index, or RSI, a momentum indicator, rallied back above 45 yesterday after falling well below 30 early this month to its lowest levels since the pandemic, a move that had indicated oversold conditions.

Odds of a rate cut at the Federal Reserve's May meeting fell to around 16 percent on the CME FedWatch tool Monday. Rate cut odds are close to 75 percent for June. The market's pricing in three 25-basis point rate cuts this year, but if inflation moves higher or proves to be sticky, we believe three cuts is aggressive, said Cooper Howard, director of fixed income strategy at the Schwab Center for Financial Research.

The SIBO Volatility Index, or VIX, retreated Monday from recent highs and at one point slipped under 30 for the first time intraday since April 4th. It closed just above 30 and remains well above its historic average, a sign that sharp moves might not be over for stocks.

The Dow Jones Industrial Average gained 312.08 points Monday or 0.78% to 40,524.79. The S&P 500 Index added 42.61 points or 0.79% to 5,405.97. And the Nasdaq Composite rose 107.03 points or 0.64% to 16,831.48.

The Russell 2000 small cap index, sometimes seen as a leading indicator for the market, outpaced all the others with a 1.3% gain. 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.