Here is Schwab's early look at the markets for Thursday, August 20:
Walmart earnings and initial weekly jobless claims are the next agenda items a day after the Treasury Department made a surprise move designed to cool down hot yields.
Yields slipped Wednesday after Treasury announced a plan to double the size of its government debt repurchases. The debt repurchase plan targets 10- to-30-year debt, with a promise to "at least double" the maximum size of its buyback operations.
Investors haven't aggressively bought longer-term notes and bonds in recent auctions, worried that with debt rising quickly, yields could climb further. The 30-year bond yield fell nine basis points to just under 5.2% by late Wednesday, still not far below 19-year highs posted earlier this week. The 10-year yield lost four basis points to 4.65%. The recent peak was close to 4.75%.
The program isn't large enough to change the broader supply backdrop, but it signals Treasury is aware of pressure in long-end yields and willing to provide liquidity support.
Volatility eased after the announcement, though hedgers appeared to step in earlier this week after the Cboe Volatility Index (VIX) hit its lowest point of the year.
A $16 billion 20-year U.S. Treasury bond auction Wednesday saw lackluster demand, Briefing.com noted. More auctions are ahead next week, including 2-year, 5-year, and 7-year notes. If demand weakens, it could send yields higher.
The Treasury's move appeared to slightly help stocks, which ran into yield-related headwinds this week not just from the U.S. but globally. Worries about rising sovereign debt and government spending around the world tightened like a vice earlier this week, arresting the rally that had lifted U.S. and overseas stocks most of the summer. Oil's climb exacerbated selling in Treasuries, which move opposite of yields.
Oil inched up again Wednesday, reacting to new Iranian threats and lack of progress resolving Middle East concerns. Ship traffic through the strait remained thin.
Fed minutes, released late yesterday, showed policymakers at the July meeting agreeing that a rate hike might be needed if inflation doesn't ease.
In a passage brimming with "Fed speak," the minutes noted, "With regard to the outlook for monetary policy, participants reiterated that their interpretations of incoming information would be a key component of their deliberations."
Most participants thought inflation would come down over the rest of the year as the effects of tariffs and earlier energy price increases wane, the minutes said.
Policymakers voted 9-3 then to pause rates. Since that meeting, in late July, data has softened and odds of a September rate hike edged lower. As of late Wednesday, chances of a hike next month were 34%, roughly the same as before the minutes came out, according to the CME FedWatch Tool. The market bakes in 68% odds of at least one hike by the end of the year, with 22% chances for two or more.
U.S. data was light Wednesday and remains so the rest of the week. Weekly initial jobless claims loom early today, and Briefing.com consensus is a low 206,000.
Checking overseas, recent strength in Japanese stocks contrasts with yields there that recently touched 40-year highs ahead of what many analysts expect will be a rate hike next month by the Bank of Japan (BoJ).
China's exports are strong but domestic demand is weak. Still, stocks climbed recently on hopes that internet giants there can capitalize on AI investments.
Today's calendar features Walmart before the open, with shares down sharply from spring highs. That followed earnings in May when Walmart gave a weaker-than-expected outlook, citing rising gas prices. Since then, gas prices fell and then rose, potentially keeping customers cautious.
That was the takeaway from Home Depot and Lowe's, which both reported earnings earlier this week. Customers aren't eager to fund big home projects, the companies indicated. Walmart, of course, is in a different business and may benefit from consumers seeking bargains.
Target shares initially fell but then jumped more than 4% on Wednesday. Target topped estimates and raised its fiscal year guidance. Other retail earnings yesterday were mixed--no surprise considering how it's hard to group all retailers into one silo. They all serve different types of customers and sell various types of products, though investors often see them as a monolith.
Looking ahead, next week brings key data with the Personal Consumption Expenditures (PCE) price index Wednesday morning, along with earnings from Nvidia that afternoon.
On the trade front Wednesday, President Trump delayed planned tariffs against Canada.
Major indexes galloped out of the gate Wednesday and then spent most of the day slowly declining until the S&P 500 Index ended barely above Tuesday's close and the tech-heavy Nasdaq 100 fell again.
Still, the SPX gain broke a three-day losing streak and the index managed to claw back above the 7,700 level, only about 100 points below its all-time high posted a week ago. The Russell 2000 small-cap index outpaced other major indexes as yields declined.
Seven of 11 S&P 500 sectors finished flat to higher Wednesday, led again by health care as Merck and Moderna soared. Consumer stocks fared well after the yield pullback. Industrials finished last and have struggled the last week amid concerns about AI construction demand. Financials also continued to struggle.
Stocks making big moves Wednesday included Lowe's reversing earlier losses to gain 2%. Earnings per share beat estimates and revenue was in line.
Moderna rose 177% and Merck rose almost 13%. The companies said a late-stage study of an experimental mRNA-based vaccine met its prime goal of extending the time before high-risk melanoma returns in patients. The dramatic gains in Moderna might reflect short covering, as shorts had previously targeted shares.
Strategy climbed 12% as its executives were among crypto leaders meeting Wednesday with President Trump, according to Brieifng.com. Circle Internet Group was another crypto stock that climbed. All this came as bitcoin jumped 6%, helped by the Treasury's bond buyback plan.
Gold and silver both climbed more than 3% on the Treasury's buyback, which dragged the dollar to its lowest close in three months. Analysts said the move is bearish for the dollar, and gold tends to strengthen when the dollar weakens. Mining stocks rose on the move by the metals.
Estee Lauder climbed 16% as earnings and revenue topped consensus. Guidance met expectations.
Marvell Technology jumped nearly 10% after saying in a filing that its recent commercial agreement with Alphabet includes a warrant for Google to purchase shares of Marvell at an exercise price of $206.58 per share, a discount to the current price.
Tech stocks fell after The Wall Street Journal reported that OpenAI, which isn't publicly traded, suffered "tepid" second-quarter sales growth compared with competitor Anthropic. This hurt Oracle, which has a large supplier agreement with OpenAI. Nvidia is another large company working with OpenAI.
Many other semiconductor and AI-related stocks slipped Wednesday after the report on OpenAI, including Broadcom, Lumentum, Dell, Western Digital, Advanced Micro Devices, and Sandisk.
The Dow Jones Industrial Average® ($DJI) rose 119.65 points (+0.22%) Wednesday to 53,463.05; the S&P 500 Index ($SPX) gained 16.22 points (+0.21%) to 7,707.98, and the Nasdaq Composite® ($COMP) climbed 41.38 points (+0.16%) to 26,331.09.