Schwab Market Update

Here is the morning Schwab Market Update for Monday, June 23. Here is the morning Schwab Market Update for Tuesday, June 24. A shaky truce took shape in the Middle East, giving stocks an early boost after Monday's firm finish. While it's not clear if the war is over and President Trump accused both sides of violating the ceasefire, the impact on crude oil (/CL) was dramatic, easing concerns that inflation could flare. Energy stocks swooned but growth sectors, including tech, enjoyed a Tuesday tailwind in pre-market trading.

Inflation will likely remain in focus at 10 a.m. ET today when Federal Reserve Chairman Jerome Powell delivers his semiannual Monetary Policy Report before the House Financial Services Committee. These occasions often feature Q&A that's more interesting than the testimony itself, given that Powell just last week made his views on the rate path clear. Powell sounded hawkish then and isn't likely to change his tune six days later with little fresh data in hand. The text of his testimony, released before the market opened, showed him still cautious due to tariffs and saying the Fed "is well positioned to wait."

Powell might be probed more intensely about alternate views on rates from other Fed officials who say a rate cut might be appropriate as soon as next month. Chances of a July rate cut rose to almost 23% this morning, according to the CME FedWatch Tool, up from 16% a week ago, and the dollar slipped. Easing Middle East tensions and rate trim hopes lifted major indexes yesterday, with consumer discretionary on top. FedEx (FDX) reports after the close, and last week saw big money flows into U.S. large-cap stocks. Stay tuned for June Consumer Confidence from the Conference Board soon after the open, but analysts don't expect much change.

Three things to watch

Shipping news improves: There are signs that the amount of goods arriving from China to the U.S. may be accelerating, but this comes just as U.S. demand might be about to decline. "Given front-loading of purchases in Q1, and that the goods currently on the way will have higher tariffs associated with them—as well as the potential for stockpiles of inventories—U.S. goods demand could slow from here," said Michelle Gibley, director of international research at the Schwab Center for Financial Research. "As a result, we may see reshuffling of trade like we saw with the increase in China’s shipments to other countries outside of the U.S. in May, which grew 11% year over year, fully offsetting the 34% decline in exports to the U.S." Railroad and trucking firms, which suffered when shipments fell in April, might be able to enlighten investors on shipping demand next month when they report earnings. The Dow Jones Transportation Average ($DJT) has roughly kept pace with the broader market this quarter.

Tech giants eye their next AI move: Perhaps a little late to the AI party, Apple (AAPL) is now hoping to grow by acquisition—a strategy the iPhone manufacturer has traditionally been leery to embrace. According to Bloomberg, Apple is holding internal sessions about potentially making a bid for Perplexity AI to capture talent and technology in the growing AI scene. Apple has only made three acquisitions of $1 billion or more in company history, and a Perplexity bid would be Apple's biggest on record—Perplexity is valued at roughly $14 billion. Meanwhile, Meta (META) is focused on growing its AI offerings, with CEO Mark Zuckerberg reportedly contacting "hundreds" of AI scientists, researchers, and engineers. The Wall Street Journal notes that Zuckerberg is trying to woo these professionals with promises of a "superintelligence lab" and plenty of cold, hard cash—in some cases, reportedly up to $100 million. No stranger to acquisitions, Meta is also considering a bid for Perplexity, putting pressure on the more acquisition-hesitant Apple to act fast.  

Fed officials set to offer further tea leaves: In addition to Chairman Powell's two-day appearance on Capitol Hill, two other Federal Reserve officials will take the mic this week. Fed Governor Michael Barr is scheduled to make opening remarks today at the Federal Reserve Bank of Kansas City. On Friday, Fed Governor Lisa D. Cook will address the Federal Reserve Bank of Cleveland at their 2025 Policy Summit. These remarks come in the wake of Fed Governor Christopher Waller telling CNBC last week that a rate cut could come as soon as next month and President Trump continuing to put pressure on Powell via social media. Adding further complexities to the central bank's position is the conflict with Iran, and how it may or may not impact the stock, oil, and jobs markets. It's notable that seven Fed officials are not projecting any rate cuts at all this year. "With plenty of officials seemingly in no hurry to cut rates," noted Collin Martin, director of fixed income strategy at the Schwab Center for Financial Research, "the bar for two rate cuts by the end of the year may be high."

On the move

Tesla (TSLA) added another 2.3% in early trading after rising 8% yesterday, with the debut of its robotaxi in focus.

Bitcoin (/BTC) jumped 2% early Tuesday as geopolitical concerns eased.

Circle Internet Group (CRCL) slid 3.4% in early trading but is still up more than 200% since its initial public offering amid growing stablecoin enthusiasm.

Amgen (AMGN) stabilized after falling more than 5% yesterday after the company's weight-loss trial showed patients suffering gastrointestinal distress. The number of patients who dropped out of the trial appeared disappointingly high, Barron's reported.

Dow (DOW) rebounded 1% after falling 3% Monday on a BMO Capital downgrade to Underperform from Market Perform for the chemical maker. The analyst said there's heightened concern about a possible dividend cut, Barron's reported.

Fiserv (FI), a financial technology company, rose another 4.4% this morning following a 4% gain yesterday. The firm plans to launch a stablecoin and digital assets platform by the end of the year, Barron's reported. And Mastercard (MA) announced a deeper partnership.

Shares of energy firms including Exxon Mobil (XOM) and Chevron (CVX), Halliburton (HAL), and SLB (SLB) were all 0.5% to 1% lower this morning. Energy remains under pressure and was the worst performing sector yesterday amid a major slide in crude prices.

FedEx rose 1% ahead of its earnings report this afternoon and could provide color on consumer and business sentiment in a quarter characterized by tariff concerns. The company disappointed with its outlook last time, citing "continued weakness and uncertainty in the U.S. industrial economy."

Chewy (CHWY) fell 1.9% following the pet company's announcement of an underwritten public offering of $1 billion shares of its Class A common stock.

Cybersecurity firms CrowdStrike (CRWD) and Palo Alto Networks (PANW) both were up about 1% after rising more than 2% Monday. The Middle East war raised fears of potential cyberattacks by Iran.

KB Home (KBH) dropped 1% in pre-market trading. Earnings surpassed analysts' consensus view but the outlook appeared to disappoint. It lowered its anticipated fiscal 2025 housing revenue, average selling price, and housing gross profit margin guidance. KBH and other home builder stocks had climbed yesterday on falling Treasury yields.

Northern Trust (NTRS) tapped a new one-year high Monday—and Bank of New York (BK) dipped about 2%—on reports that the latter is weighing a bid to acquire its smaller competitor. Northern Trust says it's fully committed to remaining independent, Reuters reported, and shares were flat this morning.

More insights from Schwab

Checking in on inflation: Despite abundant tariff talk and geopolitical unrest, inflationary pressures have been rather tame. But are the latest consumer price index (CPI) readings merely the calm before the storm? Schwab Chief Investment Strategist Liz Ann Sonders and Kevin Gordon, director, senior investment strategist, look at the charts, historical precedent, and something called the Misery Index in their inflation update, noting that "upside inflation risk remains elevated" if the economy continues to expand.

The week ahead

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

June 25: May new home sales and expected earnings from Micron (MU).
June 26: May durable 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®, and expected earnings from Constellation Brands (STZ).