Schwab Market Update

(Wednesday market open) After the Nasdaq-100^® (NDX) carved a new all-time high and the S&P 500 index posted its best close since February, markets have large shoes to fill and major indexes were flat early. The Middle East ceasefire, cheaper oil, and rate optimism that supercharged stocks yesterday remain, but it might take additional catalysts to push things much higher with key budget and tariff deadlines straight ahead.

Possible touchpoints today include a 5-year Treasury note auction, new home sales, and Nvidia's (NVDA) shareholder meeting. Treasuries and the dollar were little changed early, with the 10-year note yield near recent lows and the greenback down from highs early this week when investors embraced perceived safety. Demand for the $70 billion auction will be monitored, and yields could rise if buyers don't emerge. Analysts expect May new home sales, due at 10 a.m. ET, to reach a seasonally adjusted annual rate of 700,000, down from 743,000 in April.

Federal Reserve Chairman Jerome Powell heads to the Senate today for more testimony, keeping rates, inflation, and economic trends in focus. Powell stayed cautious on rates yesterday at the House but signaled flexibility if inflation can remain contained despite tariffs. His flexibility was one reason sectors like tech, communication services, and industrials led the way yesterday as risk appetite improved. Financials got a lift on hopes that improving optimism from markets could seep into consumer and business sentiment, driving more demand for banking and payment services. The tech and industrials sectors posted new record highs yesterday.

1. Micron reports as it grew its share of AI, analysts say: Chip giant Micron (MU) reports earnings after the close as the sector continues to flex its muscles following a long swoon. Micron climbed substantially over the last month along with other chip sector stocks, and the PHLX Semiconductor Index (SOX) is up 27% this quarter. For Micron specifically, investors will likely monitor data center revenue growth after that AI-driven segment tripled from a year earlier last time Micron reported. Back then, Micron beat analysts' estimates and offered better-than-expected guidance. Shares are up sharply this quarter and analysts say Micron is gaining share in AI. The SOX rose nearly 4% yesterday, helped in part by a jump in Broadcom (AVGO) following an upgrade from HSBC. The biggest chip stock, Nvidia is at five-month highs and Intel (INTC) and Advanced Micro Devices (AMD) also caught the wave as investors anticipate strong demand growth fueled by AI. In addition, Wall Street firm Wedbush raised its price target on Microsoft (MSFT), saying AI is set to change the company’s cloud growth trajectory. Micron's performance could influence the rest of the chip market.
    
2. "For better or worse" a factor in market rally: The market's had its share of "good news" this week, including an Israel-Iran truce and flexibility on rates from Powell. But investors should keep in mind that how the market perceives news can be more important than the news itself. "One mantra I express quite often is 'better or worse' often matters more than good or bad," said Liz Ann Sonders, chief investment strategist at Schwab, on CNBC yesterday. She noted the "tariff shockers" a week apart in early April that first led to a market implosion and then a rally. Today, the average U.S. tariff is a very high 15%, but it's better than the worst-case people worried about at the time, so the market's up. "The same is true with the conflict in the Middle East," Sonders said. "There was a spike in oil and concerns over the weekend and what futures signaled Sunday night, but things aren't as bad as expected and we're not seeing escalation, so markets rallied." In other words, the Middle East remains unstable, but maybe not as unstable as it looked a few days ago, so the market shook off the fear and rose.
    
3. Budget debate comes down to the wire: Beyond the Fed and Iran, attention shifts to Congress in a pivotal stretch for the budget bill. The Senate is debating its version, which ultimately needs to be reconciled with the House bill. "There are a lot of issues that are dividing Republicans and still need to be resolved, including Medicaid cuts, green-energy tax credits, the State and Local Tax (SALT) deduction and more," said Michael Townsend, managing director, legal and government affairs at Schwab. "But Republicans remain optimistic that they can begin debate on the bill Thursday and finish with a marathon series of votes by the weekend."

• FedEx (FDX) dropped 5% ahead of the open after reporting earnings late Tuesday that met analysts' revenue expectations and surpassed consensus on earnings per share. The rub appeared to be in the company's outlook. It expects fiscal first quarter earnings per share of between $3.40 and $4, versus the $4.05 FactSet consensus. The company cited an uncertain trade environment due to tariffs' impact on international customers, and didn't deliver full-year guidance.
   
• Tesla (TSLA) rose 1% ahead of the open after a 2.3% decline yesterday. Earlier this week, Bloomberg reported that U.S. auto safety regulators are investigating incidents involving Tesla's self-driving robotaxis in which they appeared to violate traffic laws on the first day offering paid rides in Austin. Separately, new data shows slumping May sales in Europe and investors await second quarter production and deliveries numbers expected early next month.
   
• Yum! Brands (YUM) climbed 1.5% today, buoyed by an upgrade to Overweight from Neutral by JPMorgan Chase (JPM).
   
• Uber (UBER) was slightly higher early. This followed yesterday's Bloomberg report that Uber and Alphabet's (GOOGL) Waymo aim to introduce a self-driving ride-hailing service in Atlanta. Shares of Uber rose 7% Tuesday.
   
• QuantumScape (QS) soared 41% in early trading after the solid-state, lithium-metal battery technology company announced what it called a "major milestone" in the scale-up of its production capabilities.
   
• Carnival (CCL) flattened this morning but rose  nearly 7% yesterday as the company beat analysts' earnings expectations and raised its outlook, citing strong customer demand.
   
• General Mills (GIS) dropped nearly 2% in early trading. The company's earnings per share beat analysts' estimates and revenue was in line, but investors appeared to dislike the company's cautious fiscal 2026 outlook and drop in adjusted gross margin.
   
• Nvidia climbed 1% ahead of the open ahead of today's shareholder meeting. Shares hit five-month highs yesterday and are nearing the record close of just above $149.
   
• Stellantis NV (STLA) powered 4% higher ahead of the open, lifted partly by an upgrade from Jefferies to Buy from Hold. Data suggests the company's "earnings slide is about to turn," the analyst told investors in a research note.
   
• Circle Internet Group (CRCL) rose 2.7% in early trading after the stablecoin company plummeted more than 15% Tuesday, possibly a sign of profit taking after the fierce rally since its initial public offering (IPO).
   
• Coinbase (COIN) led the S&P 500 yesterday with a 12% gain and rose another 3% this morning, still getting traction from last week's Senate passage of the Genius Act, a bill to regulate stablecoins.

The Nasdaq-100 (NDX—purple line) posted a new all-time high yesterday for the first time since early this year and is up close to 10% over the last three months. For that, it can likely give a lot of credit to the semiconductor segment of tech. The PHLX Semiconductor Index (SOX—candlesticks) is up nearly 16% in the last three months, putting a charge into the bigger NDX with big gains for chip giants like Broadcom and Nvidia. The chip sector is up far more on a quarterly basis, because the quarter kicked off with chip stocks near long-term lows.

Check out the Investors' Calendar for a summary of the top economic events and earnings reports on tap this week.

June 26: May durable goods orders, Q1 GDP third estimate, and expected earnings from Nike (NKE), Walgreens Boots Alliance (WBA), and McCormick (MKC).
June 27: May PCE prices, May core PCE prices, and final June University of Michigan Consumer Sentiment.
June 30: No major earnings or data expected.
July 1: May construction spending, May ISM Manufacturing PMI®, May Job Openings and Labor Turnover Survey (JOLTS), and expected earnings from Constellation Brands (STZ).
July 2: June Challenger job cuts report and ADP National Employment Report.