Here is Schwab's early look at the markets for Thursday, August 13.
The next leg of this week's two-step inflation dance is the Producer Price Index (PPI), due at 8:30 a.m. ET. Results could have implications for next month's Federal Reserve meeting as the market still works in chances of a rate hike and Treasury yields remain elevated.
PPI plays a key role in determining results of the Personal Consumption Expenditures (PCE) price index, the Fed's favored inflation meter due later this month. PPI measures wholesale prices, and it rose steeply earlier this year.
Consensus is for a 0.1% monthly rise in headline PPI and a 0.3% increase in core, excluding food and energy, according to Briefing.com. The June numbers were -0.3% and 0.2%, respectively, with total PPI up 5.5% year-over-year.
Wednesday's headline July Consumer Price Index rose 0.1% monthly and core CPI climbed 0.2%, in line with consensus.
"The report likely doesn't change the narrative for the Fed," said Cooper Howard, director of fixed income research and strategy at the Schwab Center for Financial Research (SCFR). "We expect the Fed to remain on hold for the time being. They are closely focused on their inflation mandate and given this was as expected, it gives them time before making the next move."
Treasury yields and odds of a Fed rate hike in September both fell after CPI, but today's PPI represents another possible concern that might affect both. As of late Wednesday, chances of a September hike were 40%, down from 54% a week ago, according to the CME FedWatch Tool.
A 10-year Treasury note auction brought solid results Wednesday, with a 30-year auction on tap today. Strong auction demand can moderate yields.
"Are higher yields a risk? Yes, bond yields are very important to stocks, risk premium and borrowing costs of course, but it's not just about the trajectory of oil prices, it's also the influence from rising global bond yields, rising fiscal deficits and higher supply from hyperscalers and the like," said Nathan Peterson, director of derivatives research and strategy at SCFR.
PCE later this month and the August jobs report also loom before the next rate decision, along with August CPI and PPI. In sum, the Fed has plenty of numbers ahead before a decision. CPI is a snapshot.
"It's one report, and although it doesn't ring the alarm bells for inflation, it also doesn't suggest inflation moving lower toward the Fed's 2% target," Howard said.
Annual CPI rose 3.4% in July, in line with expectations and down from 3.5% in June and 4.2% in May. Core rose 2.5% year over year, matching consensus and down from 2.6% in June.
Along with PPI, the government will release weekly initial jobless claims data today and University of Michigan Consumer Sentiment early tomorrow. Also, at 8:30 a.m. ET Friday, comes July retail sales. Consensus is for a 0.2% monthly rise.
On the earnings front, Cisco reported late Wednesday and slightly surpassed analysts' revenue and earnings per share growth estimates. Guidance for the current quarter topped expectations, too, and shares rose 2% in initial post-market action.
Cisco's results followed solid outings from AI-related firms Super Micro Computer and CoreWeave that helped push the Nasdaq higher Wednesday. These fed into strength at Nvidia, the largest AI company and a major factor on Wall Street due to its huge market capitalization.
The next earnings report to watch is Applied Materials after today's close. Last time out, the company shared guidance that topped analysts' estimates, powered by the AI boom that's helping equipment suppliers, Reuters reported at the time.
On Wednesday, stocks started higher and maintained their gains throughout the session but traded in a narrow range just below all-time highs posted last week. The S&P 500 Index experienced an "inside" day on the charts, not breaking above Tuesday's high or below its low in light-volume trading. Info tech led gains, though defensive sectors were close behind.
Crude prices were flat Wednesday, trading in a narrow range and not having much impact on stocks after pressuring them Tuesday. Strait of Hormuz shipping traffic this week is 10% of normal, the Wall Street Journal reported.
Eight of 11 S&P 500 sectors rose Wednesday, led by nearly 1% gains for info tech on earnings momentum. Consumer discretionary stocks had the worst day, falling more than 1.3%. Earnings from many large retailers start next week.
Stocks moving Wednesday included CoreWeave surging 19% after the cloud infrastructure firm reported strong quarterly revenue growth that topped Wall Street's forecasts and a narrower-than-expected loss. Guidance also topped expectations.
Super Micro Computer climbed 19% as earnings per share for the server maker topped estimates and the company gave guidance that topped the range seen by analysts, spurred by rising AI demand and a long list of new customers. Dell, another server maker, rose 8%.
Lumentum added 13% after beating analysts' estimates for quarterly results and offering fiscal first quarter guidance, buttressed by solid AI-related demand.
Nebius rose 34% after the AI cloud infrastructure firm reported a narrower-than-expected quarterly loss. Revenue was $582.3 million, up from $105.1 million a year earlier.
Nvidia, which owns about a 9% stake in Nebius, rose 2%, lifted partly by Nebius results and by strong AI demand evident in earnings from CoreWeave.
Memory chip stocks including Sandisk, Western Digital, Micron, and SK Hynix all rose in conjunction with impressive demand shown by AI infrastructure firms. The PHLX Semiconductor Index climbed more than 2.5%.
SpaceX climbed almost 10% after launching 24 Starlink satellites to low-Earth orbit overnight, Barron's reported. This came after the stock fell sharply yesterday on profit taking and finished below its initial public offering price.
Cava Group rose 15%, driven by better-than-expected quarterly revenue and traffic into its restaurants.
Wendy's soared 14% after the Financial Times reported investor Nelson Peltz is preparing to bid for the company.
With the notable exceptions of Cava and Wendy's, consumer stocks including homebuilders, apparel and shoemakers, and ride hailing companies fell Wednesday. Uber lost 4% a day after announcing it's divested from long-time partner Serve Robotics, which Bloomberg called a setback to Uber's push to provide autonomous services. Lyft also fell.
Weakness in Nike, Travelers, Microsoft, and Home Depot weighed on the Dow Jones Industrial Average. Struggles for Nike and Gap might still reflect Tuesday's weak results from the Swiss running shoe maker On Holding.
Gold added 0.63% to post its highest close since June 4, helped by flagging expectations for a U.S. rate hike.
The Dow Jones Industrial Average® ($DJI) dropped 21.58 points (-0.04%) Wednesday to 53,770.27; the S&P 500 Index ($SPX) gained 20.30 points (+0.26%) to 7,748.50, and the Nasdaq Composite® ($COMP) climbed 143.04 points (+0.54%) to 26,588.49.