Here is Schwab's early look at the markets for Tuesday, November 25.
Though today's September inflation and retail sales data passed their sell-by dates a while ago, they're what's left on the shelves after the lengthy government shutdown and may affect early action on Wall Street along with a cartful of earnings reports.
Both the Producer Price Index, or PPI, and retail sales reports, due at 8:30 a.m. ET, may also have an impact on Treasury yields, which have been stuck in a range for some time. That may be changing, however, as the benchmark 10-year Treasury note yield slipped to a three-week low of 4.04% Monday on fresh rate cut hopes.
For PPI, analysts expect an increase of 0.3% overall, and 0.2% for the core reading excluding food and energy, according to Briefing.com. A 0.3% month-over-month rise in wholesale prices tracked by PPI probably wouldn't be enough to ease concerns about stubborn inflation. And anything higher would potentially push down hopes of a rate cut next month, though one report isn't the entire story. The next data on consumer prices won't be out until after the mid-December Federal Reserve meeting, while the September Personal Consumption Expenditures, or PCE, price report has been re-scheduled for December 5.
Retail sales are seen up 0.4%, according to Briefing.com. This reflects a late-summer market of back-to-school shopping and Labor Day vacations that vanished with the leaves on the trees. It will arguably be more interesting to see retail sales from October, when layoffs picked up and the government shut down, capsizing consumer sentiment.
The Cboe Volatility Index, or VIX, remains front and center after soaring last week and staying elevated above 20 by late Monday. It's worth checking again after investors absorb this morning's data.
Any sign of VIX testing 25 again or climbing toward recent highs just below 30 would likely signal headwinds for stocks.
Technically, the higher VIX and the broader market's failure to advance over the last two months indicate that the long up-trend starting back at the April tariff lows may be slowing. It's not necessarily over, but it's losing steam and possibly setting the market up for more volatility. Monday's rally notwithstanding, one or two days generally isn't enough to say things have turned around, though it is positive that the S&P 500 index turned higher after testing technical support last week at the 100-day moving average near 6,550.
Stocks got a lift late last week when rate cut hopes galloped on encouraging words from New York Federal Reserve President John Williams. As of late Monday, odds of a 25-basis point easing in December stood at 80%, according to the CME FedWatch Tool. That was up sharply from below 40% at the lows last week, though still beneath the nearly 100% chance seen a month ago.
"The New York Fed president is the vice chair of the Federal Open Market Committee and a permanent voter, so their views generally hold a bit more water than those of rotating voting members," said Collin Martin, head of fixed income research and strategy, Schwab Center for Financial Research. "We still expect the Fed to hold rates steady next month, but regardless of what the decision is, there will likely be some dissents."
Even if the Fed cuts 25 basis points, it's not necessarily a panacea for housing and other rate-sensitive sectors. The benchmark 10-year Treasury note yield descended sharply last spring and summer ahead of the anticipated cuts, but since the Fed cut rates it's been vacillating in a narrow range between 4.05% and 4.15%.
Part of this reflects lack of government data during the shutdown. Still, it reinforces ideas that the Fed has little control over long-term rates that play a large role shaping business and consumer borrowing. Tomorrow morning's MBA Mortgage Association weekly applications index is a timely look at appetites for one type of borrowing. It fell 5.2% during the week that ended November 14 as 30-year mortgage rates rose to their highest level in four weeks at 6.37%.
Tomorrow also features weekly initial jobless claims before the open, a day early due to Thursday's Thanksgiving closure. Last week's September jobs report was mixed, with stronger-than-expected job gains but slightly higher unemployment and a downward revision that took August jobs growth into negative territory.
"Last week's jobs report confirmed the trend that existed before the government shutdown--a cooling of the labor market but not a sharp deterioration," Schwab's Martin said.
Today features a packed earnings schedule, highlighted by Alibaba, Dick's Sporting Goods, and Best Buy this morning followed by Dell, HP, and Workday after the close. None of these have Nvidia-like market impact, but they do provide a sweeping look across several industries before the markets close Thursday and return on a shortened schedule Friday.
Stocks leaped out of the gate Monday and, unlike last Thursday's reversal, managed to hold gains and even build on them. The S&P 500 index hit a new intraday high with only about half an hour left in the session, and the Nasdaq Composite climbed more than 2.5% in its best day since May. Both appeared to get extra confidence late in the day when San Francisco Fed President Mary Daly said she supports a December rate reduction. She's not a voting member of the FOMC this year, however.
For a second straight session, most sectors finished green Monday, this time led by communication services, info tech, and consumer discretionary. Those happen to have the most exposure to the Magnificent Seven. Alphabet soared 6% Monday to another new record high. Excitement about its Gemini 3 AI launch last week was a factor, and Alphabet is up 69% so far this year.
Semiconductors had a big day, too, rising nearly 5% and led by a double-digit gain for Broadcom, a major chip supplier for Alphabet. Market leader Nvidia, however, pressed the gas late in the session to post a 2% gain, but remains down double-digits from all-time highs posted late last month. Tesla, another member of the Magnificent Seven, gained nearly 7% Monday on excitement about its AI chips.
Only energy and staples ended lower Monday, and the health care sector was mid-pack after leading earlier this month on rotation away from the tech market. Bitcoin futures climbed 5%, lifting shares in the crypto sector and possibly signaling a move back toward "risk-on" trading after a couple weeks of hesitancy.
Despite the relatively broad gains that followed two weeks of pressure on equities, the market's breadth indicates some fractures. Just 43% of S&P 500 stocks trade above their 50-day moving averages, below the near-term 55% average. This suggests the recent sell-off had a widespread impact beyond just the biggest chip names. Some selling in tech may have represented profit taking or position squaring as year-end approaches. The S&P 500 index fell 2% last week and remains down for the month.
Checking individual stocks, Novo-Nordisk slipped 5% Monday after the company announced that its Ozempic drug for diabetes and weight loss didn't appear to slow Alzheimer's disease progression.
Alibaba, which reported early today rose 5% Monday following strong early demand for its new chatbot app, Barron's reported. This could potentially benefit stocks in the wider AI landscape, showing firm consumer demand for the technology.
The Dow Jones Industrial Average® ($DJI) gained 202.86 points Monday (+0.4%) to 46,448.27; the S&P 500 index (SPX) added 102.13 points (+1.55%) to 6,705.12, and the Nasdaq Composite® ($COMP) rose 598.92 points (+2.69%) to 22,872.0.