Intel Results Impress After Tough Day for Tech

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 Fuletto Claire and here is Schwab's early look at the markets for Friday, April 24th.

Just before the busiest week of the quarter, investors face one of its least busy days.

Friday's calendar is relatively empty, with no major earnings and little data, putting

focus squarely on the Middle East events ahead of the weekend.

This could bring more caution, especially if crude oil ticks up, with there's any sign

of an end to the tenuous ceasefire.

Still, tech and chips in particular might be boosted today by Intel.

The chipmaker shares catapulted double digits in post-market trading yesterday, after earnings

and revenue easily topped Wall Street's consensus.

Intel's guidance also appeared to impress, and the key metric of Foundry Revenue climbed

16% year over year, data center and AI revenue rose 22%.

Geopolitics remains the market swing factor, along with oil, though $100 per barrel oil

didn't break equities.

It keeps inflation sensitivity high, and could quickly cause a rise in rates and risk premium,

if the price rises from current levels near $96 per barrel.

Beyond a negative impact on consumers, rising crude can threaten businesses with oil-related

margin squeezes and rising capital costs.

Crude prices are at their highs for the week, and more than $10 above last Friday's

and month lows, one of the headwinds per stock's laid this week.

Software shares slumped Thursday, another pressure point.

The big news beyond geopolitics comes next week, when three major central banks, including

the Federal Reserve, decide on rates, and five of the Magnificent 7 report, Wednesday's

a big day as four mega-caps report and the Fed concludes its meeting.

No rate moves expected, though Chairman Jerome Powell's press conference could be interesting

ahead of his terms and on May 15th.

There's no guarantee the Senate will have approved a successor by then, and President Trump

has threatened to fire Powell if he stays in his role.

Whether Trump has the power to do that could be decided by the Supreme Court at any time.

It's ruling on Trump's effort to fire Governor Lisa Cook likely has implications for

Powell's future as chairman.

News are expected to block confirmation of Kevin Warsh, Trump's choice to succeed

Powell, until a criminal investigation into Powell ends.

Next week includes a boatload of data, including housing starts and building permits, the

government's first to look at first quarter-grossed domestic product or GDP, and the Fed's favorite

inflation reading, personal consumption expenditures, or PCE prices.

Today isn't completely quiet, as investors get the final April reading on University

of Michigan consumer sentiment at 10 a.m. Eastern time.

The briefing.com consensus is 47.6 unchanged from the preliminary figure.

Long-term inflation expectations, which rose to 3.4 percent in a preliminary report from

3.2 percent in March, are a key metric, and the uptick might attract the Fed's attention

as it's concerned about keeping long-term inflation expectations anchored.

Yesterday's data included initial-weekly jobless claims of 214,000, roughly in line with

the briefing.com consensus, and still historically low.

In Middle East developments Thursday, the ceasefire continued to hold, despite midday

news reports of new attacks on Iran that send stocks lower, but were later disproven.

No progress was made on peace talks, and the U.S. re-emphasized its blockade strategy

that Iran has called an active war.

The European Union is dangerously low on jet fuel stocks, the Wall Street Journal reported,

but U.S. jet fuel supplies are only slightly below the seasonal average.

Earnings from several firms across different industries on Wednesday and Thursday reflected

geopolitical unease, including the rising price of oil.

For instance, Railroad CSX raised its guidance, but said that it only applies with the

futures curve for crude, which now points significantly lower for the rest of the year, plays

out as the market now expects.

Next week features results from five of the Magnificent Seven, the five Magnificent

Stocks, Apple, Alphabet, Meta Platforms, Amazon, and Microsoft could help determine the

market's direction with their results in guidance.

In recent quarters, Magnificent Seven stocks often declined after earnings, a tradition

Tesla continued Thursday, as investors grew concerned about its spending.

With major indexes near record highs, there's pressure on for mega-caps to deliver even

better than expected earnings and guidance, setting up possible profit-taking, even if

they simply match or slightly exceed expectations.

As the Magnificent part of earnings season starts, there's been a move toward more buying

of individual stocks, especially in tech, as investors sell index premium, call buying

into mega-cap earnings can raise the odds of larger post-print moves.

Treasury yields rose moderately Thursday, with steeper gains for longer-term yields

more tied to economic growth trends.

The 10-year yield touched 4.35%, the highest level since April 13th.

Yields may look range-bound, but the market remains sensitive to upside-rate shocks.

Yields also got a boost Thursday from stronger than expected S&P Flash US PMI manufacturing

data for April, which came in at a headline level of 54.0 above the 52.5 consensus.

Next week is busy for treasuries.

Several key auctions take place, which could give investors a sense of demand for US assets

from overseas buyers that typically make up an important customer contingent.

Any perceived weakness in bids might send yields up further, though the benchmark 10-year

yield is likely to remain in its near-term range between 4 and 4.5%.

Yields might also take dictation from rate decisions next week by the Bank of Japan or

B.O.J. and the European Central Bank or ECB.

The Iran War put pressure on central banks to at least consider higher rates to blunt

the impact of inflation caused by rising crude prices.

This price in low odds of an ECB hike this coming Thursday, but still see two hikes this

year according to the Financial Times.

The B.O.J. is likely to avoid raising rates next week, Reuters reported, but a June hike

can be ruled out, according to Bloomberg.

Earnings on Thursday generally topped Wall Street's expectations, and 81% of S&P 500

companies reporting through Wednesday had beaten consensus on earnings per share.

However, first quarter reporting season isn't even 20% complete.

The mostly solid earnings to date are what's driving the market toward record highs,

with geopolitical risk less of a factor for participants now.

Companies that disappoint with earnings have been getting crushed in the market, as IBM

and ServiceNow shareholders found to their Shagrin Thursday.

But those delivering positive surprises were rewarded amply.

Texas Instruments jumped double digits after results yesterday.

Major indexes fell across the board Thursday, but the S&P 500 index managed to close

above 7,100, after dipping below it earlier, the second day and the last three that's

happened.

Technically, it's in a tight range between the psychological 7,000 level and the recent

interday high of just below 7,148.

It tested that level Thursday and couldn't find fresh buying interest.

Investors tilted toward caution Thursday, sending defensive stocks like utilities, staples,

and real estate higher, while issuing infotech and discretionary.

Five S&P 500 sectors finished up and six fell.

In individual trading Thursday, Tesla lost nearly 4%, despite beating analysts earnings

expectations and roughly matching consensus for revenue.

The company expects a significant increase in capital expenditures and gross margin compression.

The increased spending is for robotics and self-driving technology.

ServiceNow plunged 17%, the revenue and earnings per share were roughly in line with expectations.

In revenues rose 22% year over year in the first quarter, exceeding consensus but lower

than expected due to deals delayed by the Middle East War.

Shares of IBM's S&P 8%, despite topping analysts quarterly earnings and revenue expectations,

as guidance apparently failed to impress.

Other software stocks taken heat included Adobe, Microsoft, and Salesforce.

Microsoft fell 4% amid the general software weakness, and also after the Wall Street Journal

reported that the company had offered buyouts to 7% of its workforce.

Texas Instruments soared 18% to new all-time highs after impressing with earnings and receiving

upgrades from two Wall Street firms.

Earnings far exceeded expectations and revenue also topped consensus while the company issued

better than expected guidance.

The chip company reported a recovery in its industrial market and data center revenue

rose 90% year over year.

Supermicrocomputer shares toppled 8%, according to Yahoo Finance, there are reports that the

company lost a significant contract with Oracle.

Louis Levin fell almost 13% after announcing a new CEO.

The report Macmarine lost 11% despite a earnings beat.

Negative news was hard to glean from the report, so this could represent profit-taking after

the stock rallied into earnings.

Railroads Union Pacific and CSX climbed 8% and 7% respectively on Thursday.

CSX got a friendly reaction to earnings, which showed quarterly volume broke up 3% in

improving operating margin.

The company also raised guidance.

Union Pacific reaffirmed guidance after an earnings beat.

The Dow Jones industrial average dropped 179.71 points Thursday for 0.36%, to 49,310.32.

The S&P 500 index lost 29.50 points or 0.41%, to 7108.40, and the NASDA composite fell

219.06 points or 0.89%, to 24,438.50.

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