Here is Schwab's early look at the markets for Thursday, July 10:
Earnings season kicks off in earnest next week with big banks, but Delta Air Lines (DAL) beats them to the gate when it reports this morning. Investors are also still digesting minutes from the last Federal Reserve meeting and look ahead to a speech today by Fed Governor Christopher Waller. The Nasdaq Composite closed at a new record high yesterday, lifted by broad demand across the tech sector.
One possible headwind for Delta and all U.S. airlines could be falling demand for international travel to the U.S. amid international anger over U.S. trade policies. However, Delta recently said it expected a solid summer travel season. More airline earnings arrive next week.. Delta pulled its 2025 forecast last time out, citing tariff uncertainty, but recent air passenger traffic industry-wide appears strong judging from government data.
Another touchpoint early Thursday is weekly initial jobless claims and continuing claims. The Briefing.com consensus is 245,000 for initial claims, up from 233,000 the prior week and near recent highs, while continuing claims have trended near three-year highs lately above 1.95 million. A continuing claims number with a "2" as the first digit, if that happens, would likely draw more concern about jobs getting harder to find.
Minutes from the Fed's June meeting, released late Wednesday, showed policy makers sticking with their recent reticence to cut rates but sounding more open to possible cuts before the end of the year.
"Most participants assessed that some reduction in the target range for the federal funds rate this year would likely be appropriate," the Fed minutes release noted.
Chances of a July rate cut are around 7%, and odds of at least one cut by September rose to about 68%, after the Fed minutes, according to the CME FedWatch Tool. Neither number moved all that much, but chances of at least one rate cut before year-end are now 97% while chances for two or more cuts are above 75%.
Fed Governor Waller speaks this afternoon on the balance sheet, remarks worth watching considering he recently expressed dovish views.
Separately, but also Fed-related, The Wall Street Journal reported Wednesday that White House adviser Kevin Hassett is emerging as a "serious contender" to be next Fed chair. Hassett has recently supported cutting rates.
Trade remains in the picture and likely played a role in producer price deflation reported this week by China. The Trump administration continues to send letters to various countries outlining the tariffs on their products effective Aug. 1.
"Markets appear to have become desensitized to tariff news," said Michelle Gibley, director of international research at the Schwab Center for Financial Research. "There may be some thought that the rates announced won’t be the final tariffs – some of the figures seem random and part of a negotiation. Countries where no deal is in place by Aug. 1 could see April 2 tariff levels return on Aug. 1. Even so, these higher tariffs may not stay in place for long – so far this year, tariffs have escalated and de-escalated quickly."
Next week brings June inflation and retail sales data along with the unofficial start of earnings season as big banks begin sharing their results Tuesday.
"The earnings estimate bar may have been set too low again, setting up for higher beat rates," said Liz Ann Sonders, chief investment strategist at Schwab. "But outlooks are more important than reports." Meaning company guidance may be more crucial for investors to watch than the actual second quarter numbers.
S&P 500 earnings growth is seen at 5.8% in the second quarter, down sharply from 13.7% in the first quarter, with communication services and info tech leading the way and energy at the rear.
Overall, Sonders thinks investors should focus on company earnings calls to assess how they're handling tariffs. Companies arguably could pass the cost along to customers by raising prices or take a hit on their margin if they decide to eat the costs.
Major indexes showed some life Wednesday after hibernating the first two days of the week. The tech-heavy Nasdaq 100 posted a new all-time high, surpassing last Thursday's peak. In doing so, it received support from Nvidia driving to a new record high to lift its market capitalization above $4 trillion. Also, Microsoft rose 1% after an upgrade from Oppenheimer, with the analyst pointing to strength in the company's Azure cloud business.
"Buy-the-dip remains in force," Sonders said, noting that retail traders have "their fingerprints" all over the move up from early-April lows. However, she warns that "complacency remains a risk in and of itself."
Home builder stocks also saw buying interest Wednesday as the U.S. 10-year Treasury yield fell about eight basis points to 4.34% on rate-cut optimism and what Briefing.com called "decent dollar demand" for the day's 10-year note auction. Fed minutes also played into support for Treasuries, which move the opposite direction of yields.
Lower interest rates would likely help home builders, and mortgage demand already showed some pep. It rose 9.4% last week, according to the MBA Mortgage Applications Index.
Crude oil stayed near two-week highs above $68 per barrel, lifted in part by concerns about attacks on vessels in the Red Sea, but rising U.S. stockpiles last week came as a bearish surprise. Meanwhile, copper futures gave back about 2% yesterday but remain near all-time highs after President Trump's announcement earlier this week of a 50% tariff on copper imports. That could prove costly to companies that use copper in many of their products. Laptop computer makers, pipeline builders, construction firms, and automobile companies are a few in that category.
Sector-wise, utilities took pole position Wednesday, helped by falling yields that can make dividend-producing stocks more competitive with fixed income assets. Mainly, however, the strength could be credited to one stock. AES Corp. rose nearly 20% Wednesday on news that the renewable power company is considering a potential sale. Several large investment firms are interested, Bloomberg reported.
The S&P 500 remained well above its 20-day moving average yesterday and nine of 11 S&P 500 sectors finished higher, with the exception of staples and energy. Communication services and info tech rounded out the top three behind utilities, with investors plowing into Alphabet, Netflix, and Meta Platforms. However, shares of advertising firm WPP PLC dropped 18% after trimming its profit forecast.
The Dow Jones Industrial Average® ($DJI) climbed 217.54 points Wednesday (+0.49%) to 44,458.30; the S&P 500 index (SPX) added 37.74 points (0.61%) to 6,263.26, and the Nasdaq Composite® ($COMP) rose 192.87 points (+0.94%) to 20,611.34 to set a record high.
