Oil Prices, Bitcoin Rise While Rate Hike Odds Slip

Every morning before the opening bell, the Schwab Market Update sets the stage for the day ahead, covering key market movers, economic developments, and emerging themes. Each edition includes "Three things to watch" and every Thursday features a weekly section, "Crypto currents." This recap revisits select items for those who may have missed them, helping traders head into the weekend better informed.

The market showed little sensitivity to spiking crude oil last week, but it's uncertain how long investors can shrug it off. Some analysts note that the U.S. "driving season" traditionally begins after Memorial Day, and with gas going for $4.55 on average, according to AAA, consumers may have to decide whether to travel and pay up or cancel plans, possibly hurting economic growth. A Washington Post survey late last week showed many U.S. consumers already planning to cut back on driving and vacations due to high gas prices, which could hurt all kinds of businesses from gas stations to restaurants to hotels. Airfares have also climbed sharply, which hasn't yet hindered air travel demand but might if it goes on. Norwegian Cruise Line (NCLH) said earlier this week that consumers are recalibrating their travel plans, particularly to Europe, and cited "softer demand" overall, and high fuel prices contributed to the shutdown of Spirit Airlines. Meanwhile, long-term borrowing costs continue to rise, perhaps causing hesitancy on large purchases. "The 30-year U.S. Treasury yield is tip toeing to 5%," said Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research, or SCFR.

Looking beyond headlines, bulls might have a few quibbles about April's jobs data. First, the report was updated to show a combined 16,000 reduction in growth for February and March. Also, average hourly earnings rose just 0.2% monthly, a relatively light gain and the same low growth as seen in March. Labor force participation slipped to 61.8% in April from 61.9% in March and 62.5% a year ago. Lower participation can mean more people giving up looking for jobs, a sign of weakness in the economy. "The total number of individuals in the labor force dipped again in April and has been rolling over since November," noted Gordon. He added that the number of people working part-time for economic reasons has also been rebounding. Light wage growth—combined with the low "quits" rate seen in Tuesday's March job openings report—suggest the "low hire, low fire" climate continued in April. Also, an April decline of 13,000 jobs in the information category could reflect AI competition.

It's looking more and more like crypto spring after bitcoin reclaimed $80,000 for the first time since January. That marks a 26% rise from the January low. But is it the start of a bull run or merely an intermediate top? Among the bullish indicators: Traditional investors appear to be feeling more comfortable. The Fear & Greed Index last week moved past "fear" to "neutral" for the first time since January, and on Tuesday the 30-day moving average of net inflows to spot bitcoin exchange-traded products (ETP) hit the highest level since October, according to Glassnode data. Similarly, last week net inflows to treasury accounts hit the highest level since November, while futures open interest net flows sit just below an eight-month high. But these look more like signs of normalization than a bull market. ETP inflows are at roughly half their 2025 peak, overall spot volumes are barely above two-year lows, and perpetual futures funding rates indicate that short positions continue to dominate. Many investors are still cutting their losses, and others taking quick profits, as price approaches $83,100, the current average cost basis for spot ETPs. In other words, the bulls have some work to do.

The earnings drumbeat has kept high oil prices from being the primary factor the way they were in March. The strength of earnings season, including a strong beat rate, has shifted a little of the direct intraday correlation between oil and stocks. "The focus, maybe rightly so, has been on earnings season, which has been quite strong," said Liz Ann Sonders, chief investment strategist at SCFR, in a CNBC appearance earlier this week. "The only rub with earnings is that three stocks represent about 70% of the dollar-based growth: Alphabet (GOOGL), Amazon (AMZN), and Meta (META). That's something to be mindful of looking ahead." As earnings for the first quarter keep topping expectations, analysts have begun raising their estimates for coming quarters. Earnings growth in the first quarter is near 28% year over year, though the three stocks above contributed hugely to that.

Treasury yields slipped Wednesday as investors began to pull back on ideas of any rate hikes this year. On Friday, the CME FedWatch Tool put odds of a rate cut this year at 11.9%, and chances of a hike fell to 12.5% from nearly 30% earlier in the week as peace hopes grew. Odds remain about three in four that rates will remain right where they are all year between 3.5% and 3.75%. The Federal Reserve last cut in December. Treasury yields may drift modestly higher this year, assuming the economy stays resilient and inflation expectations stay anchored, said Schwab's Cooper Howard, director of fixed income research and strategy for SCFR. "The situation in Iran will continue to drive the outlook for rates," he said. "So far, the situation in Iran hasn't dramatically altered the outlook for the economy but the longer it lingers, the greater the likelihood that it will."