Schwab Market Update

Yields, Stocks Slip After Weak Retail Sales Data

February 14, 2025 • Joe Mazzola
Weaker-than-expected January retail sales sent yields and the dollar lower, but wildfires and storms may have caused the data dip. Tariff concerns also have stocks on defense.

Published as of: February 14, 2025, 9:25 a.m. ET

Listen to this article

Listen here or subscribe for free to the Schwab Market Update in your favorite podcast app.

00:000
The marketsLast priceChange% change
S&P 500® index

6,115.07

+63.10

+1.04%

Dow Jones Industrial Average®

44,711.43

+342.87

+0.77%

Nasdaq Composite®

19,945.64

+295.69

+1.50%

10-year Treasury yield

4.48%

-0.05

--
U.S. Dollar Index

106.80

-0.51

-0.48%

Cboe Volatility Index®15.15
-0.05

-0.10%

WTI Crude Oil

$71.82

+0.53

+0.74%

Bitcoin

$96,859.92

+701.96

+0.73%

Major index values are as of Thursday's close; others are as of 8:55 a.m. ET.

(Note to readers: U.S. markets are closed Monday, February 17, in observance of Presidents' Day. The Schwab Market Update will return on Tuesday, February 18.)

(Friday market open) U.S. January retail sales fell 0.9% from a month earlier, well below the expected 0.2% decline, initially pushing the 10-year Treasury note yield below 4.5%. "Retail sales disappointed this morning, but it might not be as bad as the headline numbers suggest as winter weather and the California wildfires likely played a role," said Collin Martin, director, fixed income strategy at the Schwab Center for Financial Research. "The next month's reading will be key to see if there's an offsetting rebound, or if January was the start of a trend."

Before the report, stocks retreated from near-record highs amid lingering tariff concerns, though President Trump cooled fears yesterday by saying that "reciprocal tariffs" wouldn't start until April. Next week—a holiday-shortened one with trading closed Monday for Presidents' Day—features minutes from the Federal Reserve's last meeting and a host of housing data. Home builder stocks felt pressure this week from receding odds of Fed rate cuts as inflation stayed hot. Rising shelter costs played into January's bearish Consumer Price Index (CPI), and looming data could hint if stubborn rates kept home buying muted. Walmart (WMT) is the largest company reporting next week.

"Price action is very resilient and perhaps that just reflects that investors are more focused on healthy economic data and double-digit earnings growth, rather than the potential for higher yields and inflation," said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. Still, he warns investors to monitor the trajectory of earnings revisions due to uncertainty about how government policy changes might affect corporate growth. Around 77% of S&P 500 companies have surpassed Wall Street's earnings consensus, with fourth quarter earnings per share growth at 11%.

To get the Schwab Market Update in your inbox every morning, subscribe on Schwab.com.

Three things to watch

  1. Retail sales deeper dive: The Retail Sales Control Group—which excludes auto dealers, gas stations and several other categories and is closely followed by investors because it feeds into gross domestic product (GDP)—fell 0.8%, a big miss versus Wall Street's expectations. Analysts had expected flat to lower retail sales in January, in part due to weather and wildfires, but these numbers were below estimates. However, the government upwardly adjusted December's reading to 0.7% from 0.4%. Retail sales followed hotter-than-expected inflation data earlier this week, but investors saw yesterday's Producer Price Index (PPI) as constructive because elements feeding into the Fed's favored inflation meter, the Personal Consumption Expenditures (PCE) price index, rose less sharply. Bloomberg Economics now sees January core PCE, due February 28, up 0.3% from December, a faster pace than the prior month but one that would lead to a decline in the year-over-year rate. Separately, January import prices rose 0.1% excluding oil, as expected.
     
  2. Musical chairs: If investors had heard on December 31 that by mid-February one major U.S. chip firm's stock would be flat and another's would be up more than 20%, they might have guessed Intel (INTC) and Nvidia (NVDA). They would have been right about the companies, but likely wrong about which one rallied. Intel hit two-month highs yesterday and Nvidia is flat year to date, one reason why the market capitalization-weighted S&P 500 index (SPX) hasn't had much traction this year (other Magnificent Seven stocks have also struggled). To be fair, Intel is down more than 50% from 14 months ago, but investors seem to be giving it a chance on hopes that new leadership can manage Intel's effort to build chips domestically, an effort that the Trump administration indirectly supported this week by saying it wants to shift AI manufacturing back home. Nvidia rebounded from the DeepSeek dive but remains well below all-time highs as investors await earnings, expected later this month. One key metric to watch is any update on Blackwell and Rubin, the newest Nvidia AI chips. Blackwell’s performance in its first quarter on the market, along with Nvidia’s revenue guidance for coming quarters, could move shares of the AI chip giant.
     
  3. The Buffett effect: Berkshire Hathaway (BRK.B) hasn't announced its quarterly earnings date, though analysts expect it later this month. But today after the close, the company will share its equity holdings for U.S.-listed companies in a 13-F filing with the Securities and Exchange Commission (SEC), which could provide investors an early look at which investments the conglomerate is entering and exiting. Two major trends to watch are BRK.B's positions in Apple (AAPL) and Bank of America (BAC). Berkshire cut its Apple holdings by two-thirds to 300 million shares last year, a 2% stake, Barron's noted, and reduced its Bank of America position by 25%. Shares of Apple are down 9% from their late December peak of $260 and Bank of America shares saw selling earlier this week, leading some to wonder if that reflected moves by Warren Buffett's firm. The filing could also be interesting if it shows Buffett dipping his toes into any major new investments, and its overall strategy after the company sold far more stocks than it bought through three quarters of 2024.

On the move

  • Palo Alto Networks (PANW) dropped 4.6% after the cybersecurity firm surpassed analysts' earnings and revenue estimates, but its full-year outlook appeared to disappoint investors hoping for an uptick in bookings demand, MarketWatch reported.
     
  • Coinbase (COIN) fell 2.2% following what looked like strong earnings that included an 88% sequential rise in revenue, something the company credited to "higher crypto asset prices" and continued subscriber growth. Overall, earnings and revenue both beat Wall Street's estimates. A recent drop in Bitcoin from all-time highs might explain recent pressure on shares, though they jumped Thursday ahead of earnings.
     
  • Airbnb (ABNB) jumped 14% in pre-market trading despite a disappointing first quarter revenue outlook after the firm beat Wall Street's fourth quarter earnings and revenue estimates. The first quarter this year is a tough comparison to a year ago, when the quarter included Easter and an extra day in February due to the leap year. Nights and experiences booked rose 12% in the fourth quarter from a year ago.
     
  • Applied Materials (AMAT) gave back 5% ahead of the open despite earnings that topped Wall Street's expectations. Export rules recently added by the departing Biden administration targeted on China could pose "headwinds," the company warned. About one-third of the chip manufacturing equipment firm's sales are to China, and the rules will likely hurt fiscal 2025 revenue.

More insights from Schwab

Tariff update: The latest Schwab WashingtonWise podcast discusses implications of tariffs on the markets and economy. "On tariffs, bark has been worse than the bite so far," said Michael Townsend, managing director, legislative and regulatory affairs at Schwab. "Tariffs so far are being used more as a negotiating tool than as a real policy tool."

Analyzing the year's market dynamics: In the latest OnInvesting Podcast, Schwab Chief Investment Strategist Liz Ann Sonders and Chief Fixed Income Strategist Kathy Jones discuss the market dynamics of the past year with Louis-Vincent Gave, CEO of Gavekal Research. That includes the concentration of U.S. equities, the divergence between growth and value stocks, and the implications of China's trade surplus. Sonders and Jones also analyzed how the January CPI data may have affected the Fed's thinking on rate cuts, as well as the potential implications of tariffs on prices, the labor market, and the overall economy.

Chart of the day

Chart of gold versus the Bloomberg Magnificent Seven index. Gold rose from about $2,650 to $2,957 this year while the index remained between 26,500 and 28,000. In late 2024 the index rose from about 23,000 to above 28,000 while gold was below $2,800.

Data sources: Bloomberg and CME group. Chart source: thinkorswim® platform.

For illustrative purposes only. Past performance does not guarantee future results.

The Bloomberg Magnificent 7 ($BM7N—canedlesticks) have marched in place much of early 2025, but gold (/GC—purple line) has accelerated its rally since the start of the year. The Magnificent Seven got a boost after the election amid hopes of favorable U.S. domestic policies, but tariff fears and DeepSeek have hurt them since. Gold has gained due to some of the same uncertainty related to those policies that weighed on shares of companies like Nvidia and Tesla.

The week ahead

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

February 17: U.S. markets closed for Presidents' Day holiday.
February 18: Expected earnings from Medtronic (MDT), Toll Brothers (TOL), and Baidu (BIDU).
February 19: January housing starts and building permits, expected earnings from Carvana (CVNA).
February 20: January leading indicators and expected earnings from Walmart (WMT), Alibaba (BABA), and Newmont (NEWM).
February 21: January existing home sales and University of Michigan Consumer Sentiment—final.

DIY investing? Trading? Professional advice?