I'm Colette Auclair, and here is Schwab's early look at the markets for Friday, February 27.
Critical inflation data this morning could move markets and influence the Federal Reserve's next rate decision. Next week features a heavy dose of jobs reports, along with big-box earnings and results from chip giant Broadcom.
Tech stocks took it on the chin Thursday, dragging down the S&P 500 Index and Nasdaq Composite after Nvidia shares couldn't capitalize on a solid earnings beat and impressive guidance. However, the market held its own as measured by the S&P 500 Equal Weight Index, which weighs all components equally rather than by market capitalization.
January's Producer Price Index, or PPI, is due at 8:30 a.m. ET today and follows a hot reading for December. If that cooled in the January frost, it might indicate less pressure for companies at the wholesale level. The cold and snow across much of the country last month might indeed have slowed spending, which could hint at quieter inflation.
For PPI, consensus is 0.3% monthly growth in both headline and core readings, with core excluding food and energy. Expected annual PPI growth of 3% would be down from 3.3% in December but still way above the Federal Reserve's preferred 2% pace.
PPI precedes next week's full menu of jobs data, including ADP monthly jobs growth, Challenger monthly job cuts, and next Friday's February nonfarm payrolls report. Taken together, the data forms a basis for the Fed approaching next month's rate-setting meeting, though February inflation data also comes out before that gathering. January saw a slight monthly revival in jobs growth, and recent weekly jobless claims—including yesterday's 212,000—have been on the light side.
Fed speakers this week made the case to keep rate policy on pause after not changing it at the January meeting, and futures trading indicates almost no chance of a rate cut at the March 17-18 meeting. Looking further ahead, odds of a mid-year rate cut retreated slightly over the last week but remain near 50-50 for the June Fed meeting.
Investors generally expect two-to-three rate cuts later this year, according to the CME FedWatch Tool, especially with a new chairman expected to take over when Jerome Powell's term ends in May and President Trump's regular calls for lower rates. If annual inflation remains at 3%, though, it could augur more conflict between hawks and doves.
The U.S. 10-year Treasury note yield continued its descent Thursday to just above 4%, the lowest in almost three months. This could reflect concern about slowness in the economy, but did appear to help housing as the 30-year mortgage rate fell below 6%.
Two Treasury auctions earlier this week drew soft demand, while Thursday's 7-year auction saw "solid" buying, according to Briefing.com.
After earnings from the tech trio of Nvidia, Salesforce, and Snowflake soaked up most of the oxygen late Wednesday and into Thursday, the market grapples with some smaller companies' reports today. These include results from tech firms like Dell and Autodesk, providing insights into AI and software demand.
Next week brings retailers to the forefront as investors await results from a wide array of consumer giants including Target, Costco, Best Buy, and Kroger. Also, Autozone provides a deeper look at after-market auto demand, a barometer of overall consumer sentiment. U.S. car sales are seen slowing this year, which could be good news for companies that sell replacement parts to drivers trying to keep their jalopies on the road.
AI earnings aren't over, yet, either, with semiconductor giant Broadcom due next Wednesday. This could be an opportunity for investors to learn the latest on its chip development partnership with OpenAI that brought so much attention last October when it was announced.
Warner Bros. Discovery shares could be on the move today after announcing late yesterday that it deemed a bid by Paramount Skydance superior to one by Netflix.
On Thursday, major indexes lost ground as Nvidia fell more than 5% in what appeared to be a technical selling spree following its earnings. This has been a pattern with Nvidia, as shares fell after three of its previous four earnings reports, and may also reflect concerns that AI spending could eventually slow.
"Nvidia failing to push to new heights on strong results translates into a poor near-term risk-reward set-up for the AI trade," said Nate Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research, or SCFR.
Peterson added that the Nasdaq and Nasdaq 100 both encountered resistance at the 100-day simple moving average, which along with Nvidia's pain weighed on tech in general and overall investor sentiment.
Nvidia may have another bite at the apple in a couple of weeks when it holds its GTC AI conference March 16 through 19. That's when the company often provides updates on new technology.
Though the Nasdaq remained under heavy pressure toward the end of Thursday's session despite a rebound by Salesforce after it initially dipped despite solid earnings, the broader market clawed back from midday lows. Late-day improvements might have reflected news reports of positive developments in nuclear talks between the U.S. and Iran.
Financials, industrials, small-caps and other cyclical sectors were beneficiaries of late buying, and the S&P 500 Equal Weight Index climbed more than 0.6% to close at a new all-time high. Airline, cruise ship, apparel, delivery services, home builders, and resort companies were among the market's leaders. Banks also revived from weakness earlier in the week.
For the week, the S&P 500 Index is just about flat, with Thursday's close only about one point below last Friday's.
Generally, the S&P 500 has stayed in its near-term lane between 6,800 and 7,000. Though volatility declined this week, recent flirtations with 20 and above for the Cboe Volatility Index, or VIX suggest that the next move out of that range may be downward.
While a VIX of 20 traditionally marks the divide between relative calm and choppiness, VIX has averaged just 17.5 year-to-date, putting it below average annual levels for all years this century. VIX bounced back Thursday from recent lows to approach 19, and its direction today could have an impact on equities trading.
On a technical basis, yesterday's late recovery to a close for the S&P 500 Index above 6,898—the 50-day moving average—may give the market a boost heading into Friday's session.
Just four of 11 S&P 500 sectors rose Thursday, though info tech was the only one to fall more than 1% (it finished down almost 2%). Financials led with gains of more than 1%, with industrials, energy, and real estate in the green.
In individual trading Thursday , Nvidia plunged more than 5% despite earnings and guidance that easily exceeded Wall Street's expectations. Some of the positive news may have been factored in, as Nvidia climbed over the last week heading into earnings. Also, the $200 level could be a psychological barrier for shares.
Salesforce added 4%, turning around earlier losses after easily exceeding analysts' earnings per share consensus and matching consensus on revenue. A cautious outlook appears to be the culprit. Its guidance for first quarter earnings and revenue narrowly beat consensus from FactSet.
Snowflake popped more than 2% after earnings and revenue topped analysts' estimates and the company delivered an outlook that generally appeared to impress. This marked a reversal from initial losses after the company reported. While sentiment across the software industry remains negative due to AI substitution fears, Nvidia's CEO Jensen Huang said yesterday those fears are overblown, CNBC reported.
IonQ, a quantum-computing firm, soared 22% after quarterly revenue appeared to impress. Shares of Rigetti Computing, also in the quantum arena, rose 5.6%.
Universal Health Services fell 11% on an earnings miss related partly to lower medical care demand.
Stellantis revved up 4% despite reporting a $26.3 billion annual loss thanks to an EV-related charge. Guidance for an improved operating profit margin in 2026 appeared to cheer investors, Barron's reported.
J. M. Smucker stirred up a nearly 9% gain following an impressive earnings report. Numbers beat analysts' estimates for the jam maker.
Bitcoin dropped nearly 3% Thursday. Some bitcoin investors are starting to talk of capitulation, and more than a few key metrics are at long-term lows.
The Dow Jones Industrial Average® ($DJI) added 17.05 points Thursday (+0.03%) to 49,499.20; the S&P 500 Index (SPX) fell 37.27 points (-0.54%) to 6,908.86, and the Nasdaq Composite® ($COMP) plunged 273.69 points (-1.18%) to 22,878.38.