Here is Schwab's early look at the markets for Thursday, February 19.
Walmart kicks off the big box retail part of earnings season early today after shares spiked to start the year. Deere also reports this morning with its shares also on an impressive run before this week. The two corporate updates follow a third-straight day of gains on Wall Street, though rallies haven't gathered much traction yet.
Last time out, Walmart—part of the staples sector that's enjoyed 13% gains so far this year--impressed investors by topping Wall Street's consensus views and raising guidance. Lack of a repeat might raise questions about consumer demand, especially after December's U.S. retail sales came in flat and U.S. jobs growth barely climbed last year.
Also on investors' minds is whether customers pulled back as health care premiums rose. Walmart and other retailers like Lowe's and Home Depot reporting next week might be able to provide color around that. If the economy slows that could give Walmart a boost as more shoppers head there looking for possible bargains. Earnings per share for Walmart are seen at $0.72.
Consensus for Deere's earnings per share is $2.05. Deere, along with some other big industry players like Caterpillar, has been on a roll early this year as investors rotate out of tech and into manufacturing firms. However, Deere has pointed to tariffs hurting results and might provide more insight on that headwind today. Company leaders said in November they think 2026 will be the bottom of the large agriculture cycle.
Last time it reported, Deere easily exceeded analysts' expectations, but the stock initially dropped.
Minutes issued yesterday from January's Federal Open Market Committee meeting initially halted what had been an impressive rally, coming in more hawkish than investors had expected. The minutes showed many policymakers willing to wait longer for inflation to die down before cutting rates. While that's been the theme for a while, the new element last month was a contingent of Fed officials who wanted to have the central bank's statement feature a "two-sided" message implying rates could go up as well as down if inflation isn't tamed.
The Fed has lowered rates by 150 basis points in the last year and a half and hasn't hiked rates since the inflation struggles earlier this decade. To some market participants, the very fact that some policy makers would even consider a hike at some point soon likely sent a bearish message and accounted for late selling yesterday that took major indexes down from their intraday highs.
"Fed minutes point to more cuts if there is inflation progress, but caution around disinflation being slower than expected," said Kevin Gordon, head of macro research at the Schwab Center for Financial Research, or SCFR.
The minutes came at an auspicious time, just a couple days before tomorrow morning's Personal Consumption Expenditures, or PCE, price index for December. PCE is the Federal Reserve's favored inflation metric and is seen coming in a bit warm.
For headline PCE, the Briefing.com consensus is 0.3% month over month. Core PCE—excluding food and energy—is seen up 0.4%. Both would advance from 0.2% the prior month. Year-over-year numbers also stand in the spotlight after rising 2.8% in November, well above the Fed's 2% goal. Several services readings in the Producer Price Index, or PPI, that pull through to PCE, led analysts to suspect that PCE could remain stubbornly high with another 2.8% annual gain.
Gross domestic product, or GDP, is also due tomorrow and represents the first official government estimate of fourth quarter growth. The Atlanta Fed's GDPNow meter puts GDP growth at 3.6% on a seasonally adjusted annual basis. That's down from 5% a few weeks ago, with soft retail sales and housing data contributing to the pullback. Analysts see 3% growth, down from 4.3% in the third quarter. The slowdown from a quarter earlier partly reflects last fall's government shutdown, which likely took some growth off the table.
In data Wednesday, December housing starts and building permits easily topped the Briefing.com consensus, up 6.2% and 4.3% month over month, respectively. The tallies were 1.404 million on a seasonally adjusted annual basis for starts and 1.448 million for permits, versus consensus of 1.32 million and 1.41 million, respectively. Another positive item was a 0.9% monthly rise in December durable goods orders, excluding transportation.
Today before the open weekly initial jobless claims are expected to dip to 225,000 from 227,000 the prior week, Briefing.com said. The U.S. December trade balance is out later today and expected to show the U.S. trade deficit slightly falling that month from the previous one.
Treasury yields bounced with equities early Tuesday but the 10-year note yield remains near the low end of its recent range that's seen it generally trade between 4% and 4.2% since last fall. A small bond auction Wednesday drew weak demand, and the Fed minutes likely also played into the rise to 4.08% for the 10-year note yield.
"There’s likely limited downside on longer-term yields in our view," said Cooper Howard, director of fixed income research and strategy at SCFR. "The economy remains resilient, and inflation remains elevated which should keep longer-term yields higher. Additionally, higher debt levels by both governments and corporations are another factor keeping yields elevated."
Looking beyond data, Friday could potentially bring a Supreme Court decision on President Trump's tariffs. Whatever the Court decides, it won't mean the end of trade restrictions. The decision doesn't cover all of Trump's tariffs, and Trump may have other ways of applying trade restrictions in some cases. Companies in their earnings reports early this year continued to cite tariffs as a business headwind.
Technically, the S&P 500 Index seems to have bounced off its 100-day moving average down near 6,815 after some brief intraday drops below couldn't find traction late last week and Tuesday. The index hasn't closed under that line in about three months. However, there still doesn't appear to be much enthusiasm to buy on rallies, with the index unable to push past the 50-day moving average now near 6,900.
A brief rise above 6,900 on Wednesday met selling pressure and the index closed below the 50-day average once again. Things could remain rangebound today with investors unlikely to want to take large new positions on either side ahead of tomorrow's PCE data.
Nvidia's earnings next Wednesday are another factor that might keep the market from making big moves. Though the Dow Jones Industrial Average popped briefly above 50,000 earlier this month and the S&P 500 Index made intraday highs above 7,000, the SPX remains in a tight near-term range between roughly 6,800 and 7,000.
In trading on Wednesday, major indexes all rose as market participants continued nibbling at stocks without taking a huge gulp. Tech led the way, pushing the Nasdaq past its counterparts as Nvidia rose 1.6%, finishing well off its highs. Shares of many software firms performed better following the recent sell-off, while memory chip maker Micron gained more than 5% despite little fresh news.
Volatility gave some ground Wednesday but the Cboe Volatility Index, or VIX, remained just below 20 by the end of the session, evidence of caution and elevated hedging activity.
Eight of 11 S&P 500 sectors ended higher Wednesday, giving the rally a broad-based feel. Energy led thanks to a leap in oil prices as talks between Iran and the U.S. ran into stumbling blocks, according to media reports. Consumer discretionary and info tech jumped from the bottom of the pack last week to near the top yesterday, helped by chip stocks and general strength across the Magnificent Seven. Still, communication services fell sharply amid declines in telecom stocks. T-Mobile fell nearly 3%.
In individual trading Wednesday, the jump for Nvidia came after Meta Platforms announced what it called a "multi-year strategic partnership with Nvidia to advance our long-term AI infrastructure roadmap." The deal could be worth tens of billions of dollars, Barron's reported. The large-scale deployment of Nvidia technology builds on the companies' existing relationship and will support Meta's build-out of data centers optimized for AI training and inference.
Palantir advanced 1.8% after being upgraded by Mizuho to Outperform from Neutral. The firm said the company is delivering total revenue growth, acceleration, and margin expansion "at scale that is unlike anything else in software."
Palo Alto Networks dropped nearly 7%, hurt by weak guidance issued late Tuesday.
Amazon rose 1.8% as regulatory filings showed Bill Ackman's Pershing Square grew its stake in Amazon by 65% in the fourth quarter, CNBC reported. Amazon shares had fallen nine straight sessions before a rise Tuesday, the longest losing streak since 2006.
The Dow Jones Industrial Average® ($DJI) added 129.47 points Wednesday (+0.26%) to 49.662.66; the S&P 500 Index (SPX) gained 38.09 points (+0.56%) to 6,881.31, and the Nasdaq Composite® ($COMP) advanced 175.25 points (+0.78%) to 22,753.63.