Here is Schwab's early look at the markets for Thursday, June 11.
Round two of this week's inflation double-feature arrives before today's open, a day after Consumer Price Index data roughly matched expectations. That helped pare early losses in stocks before escalating tensions with Iran, rising oil prices, and continued selling of chip stocks drove the major indexes sharply lower.
The May Producer Price Index—which tracks prices at the wholesale level— is expected to show monthly gains in the headline and core indexes of 0.7% and 0.4%, respectively, according to Briefing.com. Core strips out food and energy. That would mark a slowdown from the increases reported for April, and stocks could suffer if the results top those estimates.
Last month's PPI data showed inflationary pressures building upstream, and not only due to higher oil prices. PPI gains often lead to higher consumer prices in the months that follow as companies pass along costs. But the results could also be driven by front-loading of products as wholesalers scramble to build supply ahead of expected price increases. This tends to raise demand and lead to higher prices.
CPI data for May arrived mostly as expected yesterday. Headline prices rose 0.5% from the previous month, while core CPI, which excludes energy and food, rose 0.2%. Annual inflation came in at 4.2%, with core inflation rising 2.9% annually.
The numbers reinforced expectations that the Federal Reserve will keep rates steady for the time being. Treasury yields retreated after the release.
Inflation continues to be driven by energy prices, said Cooper Howard, director of fixed income research and strategy at the Schwab Center for Financial Research (SCFR). "A bright spot—if you can call it that when year-over-year inflation is above 4%—is that it wasn't a surprise to the upside," Howard said.
WTI light, sweet crude oil rose more than 3% after President Trump said the U.S. was preparing new attacks on Iran.
CPI data also showed that inflation is now outpacing wage gains, which could affect economic growth ahead. The Atlanta Fed's GDPNow estimate for second-quarter gross domestic product growth is 3.3%, down from 3.8% a month ago.
Inflation and jobs data from the past week will give the Fed plenty to consider when it meets next week and formulates its mid-year view of the economy, including projections for interest rates and economic growth.
As of Wednesday afternoon, the futures market was pricing in 67% chance of at least one quarter-point rate hike by year-end, according to the CME's Fed Watch Tool. However, the market sees nearly a 100% chance that the Fed stays on pause next week. The Fed's last move was a rate cut in December.
Initial jobless claims, due at 8:30 a.m. ET today, are another data point to watch. Analysts expect claims to total 222,000, down slightly from the prior week but near the high end of recent reports, according to Briefing.com consensus.
Turning to the corporate world, Oracle lost more than 2% shortly after Wednesday's close, despite reporting quarterly results that topped expectations. The company said it earned $2.11 per share, versus expectations of $1.97, on revenue of $19.18 billion, compared to estimates of $19.09 billion. Cloud and software revenue, though, fell a bit short of expectations.
Oracle said it planned to add $20 billion to its capital raising, bringing the total for fiscal 2027 to $40 billion through debt and equity financing.
More earnings arrive after today's close. Both software giant Adobe and homebuilder Lennar report.
When Adobe reported in March, shares plunged by double digits even though the design software maker topped expectations for both earnings and revenue. The company's guidance then was near analysts' expectations but market participants may have been hoping for even better growth amid rising worries over AI competition. The company told investors then that its "infusing AI into its existing products," and that it's leading to new revenue streams, CNBC reported.
Treasury yields mostly rose, particularly at the longer end. A 10-year Treasury note auction Wednesday drew above-average demand. The 10-year yield hit 4.54%.
The European Central Bank's (ECB) rate decision this morning is the next mile marker for the Treasury market. Analysts expect the ECB to raise rates as it continues to fight energy-driven inflation, Reuters reported. Shifts in European interest-rate expectations can potentially impact U.S. bond yields because global fixed-income markets are closely interconnected.
The Bank of Japan meets next week with a rate decision expected early Tuesday U.S . time. Analysts polled by Reuters expect the BOJ to raise its key interest rate to 1% as inflation approaches the BOJ's 2% target and supply shortages hit the economy.
The S&P 500 Index briefly rose into positive territory early Wednesday before reversing to close near the low for the day, losing 1.6%.
The recent weakness reflects several factors, including a lack of near-term tech earnings catalysts after Oracle, the spike in Treasury yields, and possibly some liquidation of tech to raise capital for coming initial public offerings.
"The lack of progress in peace talks with Iran is just another overhang on sentiment," said Nathan Peterson, director of derivatives research and strategy at SCFR. "The fundamental story is still intact, and it's still an AI driven and capex backed market, but that doesn’t mean you can’t get a 5% to 10% pullback."
Eight of 11 S&P sectors fell on Wednesday. Industrials lost more than 3%. The energy sector gained nearly 2%.
Among individual movers Wednesday, tech stocks, especially the chip sector, remained under pressure. The worst performer was Super Micro Computer, down about 28% after the company announced a proposed $7 billion equity financing package to help handle rising AI orders.
Tech weakness hit memory and AI chip makers equally hard. Qualcomm fell about 7%, Arm Holdings lost more than 5%, and Micron dropped more than 4%. Advanced Micro Devices lost nearly 5% and Nvidia lost nearly 4%.
Today's early chip sector losses pushed the PHLX Semiconductor Index (SOX) to levels more than 10% below last Wednesday's all-time high close. The index closed below its 20-day moving average, in an area where it found support on Tuesday.
Taiwan Semiconductor Manufacturing fell more than 4% despite reporting that May revenue rose 30.1% year over year.
Casey's General Stores jumped more than 20% higher after reporting earnings per share that easily beat analysts' consensus. Revenue also topped estimates. The company also authorized a $1 billion share-repurchase program and raised its dividend.
Nike dropped more than 1% after RBC Capital downgraded it to "sector perform" from "outperform." The company's turnaround has been slower and narrower than expected, RBC said.
Chewy lost nearly 2%, reversing after early gains, after reporting earnings quarterly results that largely met expectations.
Biotech firm Illumina gained more than 1% after JPMorgan Chase upgraded the stock to outperform from neutral, citing satisfied customers.
Gold fell more than 4% Wednesday to an 11-week low below $4,200 per ounce. Strength in the dollar has weighed on the precious metal.
The Dow Jones Industrial Average® ($DJI) fell 1.87% to 49,918.78; the S&P 500 Index ($SPX) dropped 1.62% to 7,266.99, and the Nasdaq Composite® ($COMP) fell -1.98% to 25,169.50.