Schwab Market Update

Published as of: May 1, 2025, 9:16 a.m. ET

(Thursday market open) It's the first day of May but the vibe feels more like a time machine back to 2024 as big tech drives early gains. Solid results from Microsoft (MSFT) and Meta Platforms (META) sent their respective shares up nearly 9% and 6%, overnight, putting major indexes on pace to open much higher and to extend a seven-day win streak for the S&P 500 index (SPX). That said, there's a long list of developments that could change the tone, including Apple (AAPL) and Amazon (AMZN) results tonight and tomorrow morning's April nonfarm payrolls report.

There's also news on the trade front this morning, with a social media account associated with China Central Television (CCTV) reporting that the U.S. has reached out to China for talks on tariffs. The Trump administration said yesterday no official talks with China are underway, Reuters reported, but touted progress on talks with India. Separately, CNBC reported today that Treasury Secretary Scott Bessent has been asked by President Trump to take the lead on the China trade situation. Also overseas, the Bank of Japan (BoJ) kept rates unchanged as analysts had expected.

Back home, an April once on pace to be the worst since 1932 ended with relatively benign results following yesterday's late turnaround rally. For the month, the Dow Jones Industrial Average ($DJI) fell 3.17%, the SPX fell 0.76%, and the Nasdaq Composite ($COMP) managed to inch up 0.85%. Decent earnings, falling Treasury yields, signs of inflation progress, and growing hopes for rate cuts in the second half of 2025 helped counter tariff concerns that at one point sent the SPX to 13-month lows. Still, things aren't necessarily smooth as May begins, because there's so much uncertainty around trade policy. And major indexes remain well under their February peaks.

1. Busy end to week for data: The ISM Manufacturing PMI^® for April is due just after the open. Analysts expect it to come in at 47.9, down from 49 in March and below the 50 level that is the line between contraction and expansion. Initial weekly jobless claims jumped to 241,000, the highest in many weeks, compared with the Briefing.com consensus of 225,000 and 223,000 last week. However, it's a snapshot and no single week is a trend. The longer-term continuing jobless claims number posted a new three-year high of 1.916 million, suggesting it's harder for those laid off to find new work. Treasury yields fell on the data. Tomorrow's payrolls report is expected to show a pullback in job growth to around 130,000, from 228,000 in March, with unemployment staying at 4.2%. Yesterday's first quarter gross domestic product (GDP) report's annualized slide unnerved investors, and any sign of weakness in the jobs report could highlight concerns that the trade war is starting to bite the real economy. Some analysts expect a major drop in jobs growth due partly to cuts in government positions. April layoffs fell to 105,441 from 275,240 in March, according to this morning's Challenger Job Cuts report, but were the highest for April since 2020 and up 63% from last April.

2.  Heavy afternoon for earnings: Apple and Amazon report after the close today, and Amazon Web Services, the company's market-leading cloud business, will be a focus for any signs of growth stalling as tariff worries mount. On the consumer side of Amazon's business, it's possible that pull-ahead buying ahead of tariffs contributed some zip. That, unfortunately, could mean weaker demand in coming quarters, especially with Chinese goods apparently seeing weak demand if recent shipping data is accurate. Investors might want to monitor what Amazon says about the supply chain amid reports that stores are worried about empty shelves this coming holiday season. Amazon's shelves are virtual, but its results could have ramifications for big-box retailers reporting later this month like Walmart (WMT) and Target (TGT). Apple also may have seen pull-ahead iPhone buying, which means some investors might discount its results as they fear rising costs and supply chain difficulties caused by tariffs. Also, there could be more insight into AI spending, with ramifications for companies like Advanced Micro Devices (AMD) and Nvidia (NVDA).

3. Trade "deals" may not be enough: The administration promises trade deals soon with many countries, not including the elephant in the room, China. However, these deals aren't likely to be too detailed and may be more along the lines of "memorandums of understanding," CNBC reported. While such announcements could lift stocks, it may not be enough to convince major U.S. companies the uncertainty is over and they can resume normal spending and hiring. That's because such memorandums can be unclear and hard to enforce, with much less clarity than typical trade deals that take years to negotiate. General Motors (GM) holds its earnings call today, a chance for investors to hear how a major company might react to incremental tariff easing or deals with specific countries. Recent consumer and business data should be looked at with skepticism because it's influenced by trade. "Distortions from tariff front running could cloud the picture for investors," said Michelle Gibley, director of international research at the Schwab Center for Financial Research. "Front-loading purchases in anticipation of higher prices could result in inventories building, which would need to be worked down. However, consumers may be pulling forward purchases as well, which could dampen inventory building. This could result in a vacuum in economic data and add to uncertainty about the trend in activity."

- Microsoft jumped nearly 9% after easily beating analysts' earnings and revenue expectations late yesterday. The closely watched Microsoft Azure cloud platform rebounded to 33% growth in its latest quarter from 31% the previous period, and its More Personal Computing and Intelligent Cloud segments also outpaced revenue growth expectations.

- Meta bounced 6% after surpassing Wall Street's quarterly consensus and delivering solid guidance for second quarter revenue of between $42.5 billion and $45.5 billion, near the FactSet consensus of $43.84 billion. It also slightly lowered its fiscal 2025 expense guidance. Revenues last quarter rose 16.1% from a year earlier. Meta bumped up its guidance for capital spending, an encouraging sign for the chip industry.

- Software, cloud and AI infrastructure firms saw shares climb in pre-market trading following positive results and guidance from Microsoft and Meta. Shares of Oracle (ORCL) rose 4.2%, ServiceNow (NOW) added 2.8%, Arista Networks (ANET) rose 8.6%, AppLovin (APP ) jumped 4.8%, Nvidia (NVDA) added 4.7%, and Broadcom (AVGO) climbed 2.6%.

- Super Micro Computer (SMCI) rebounded 2.5% after falling more than 13% yesterday as the server maker's preliminary quarterly results missed analysts' expectations and it delivered disappointing guidance below its previous projections.

- Qualcomm (QCOM) tumbled 5.8% after issuing earnings late yesterday that exceeded expectations. However, its revenue forecast appeared to disappoint investors as tariff concerns led to cautious guidance. Chinese phone makers are one of the company's top customers, Bloomberg noted.

- McDonald's (MCD) fell 1.4% after reporting its worst U.S. same-store sales drop since 2020, highlighting challenges for the fast-food industry. First quarter revenue fell 3% year over year and missed analysts' expectations. U.S. stores open a year or more saw sales fall 3.6%. In the company's press release, it said consumers are "grappling with uncertainty."

- CVS Health (CVS) soared 9.2% ahead of the open after the company's results beat analysts' estimates and it raised its full-year earnings per share guidance. It didn't forecast annual revenue, however, citing "the potential for macro headwinds." The company appeared to enjoy improved profitability in its insurance business last quarter, helping drive the earnings beat.

- Eli Lilly (LLY) fell nearly 5% in pre-market trading despite a 45% quarterly sales gain on strong sales of weight-loss drugs. However, the company lowered its 2025 EPS guidance for several reasons unrelated to performance of its pharmaceutical products. It stuck by previous revenue guidance.

- Roku (ROKU) and MicroStrategy (MSTR) both climbed ahead of the open. They report after today's close. MSTR may also be getting a lift from this morning's 2.6% rise in bitcoin (/BTC) as cryptocurrencies surge amid today's cheerier market sentiment.

Washington diary: Congress is busy trying to pass a massive budget of tax and spending cuts while also dealing with the debt ceiling. "Republican leaders are pushing to pass the final package through the House by Memorial Day—an ambitious timeline given the complexity of the bill," said Michael Townsend, managing director, legislative and regulatory affairs at Schwab, in his latest analysis.

The small-cap Russell 2000^® Index (RUT—candlesticks) has foundered this year, down nearly 12%, though up appreciably from its early-April low. Lower Treasury yields can help small caps, which are often more dependent on borrowing, and the 10-year yield (TNX:CGI—blue line) has fallen sharply from recent highs. Its descent may be one factor helping lift small caps from their lows. Traditionally, a small cap rally has sometimes signaled broader market strength ahead, and that appeared to be the case when the Russell 2000 exhibited strength about two weeks ago. The rest of the market followed suit, but the RUT hasn't kept up.

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

May 2: April nonfarm payrolls and expected earnings from ExxonMobil (XOM) and Chevron (CVX).
May 3: Expected earnings from Berkshire Hathaway (BRK.B).
May 5: April ISM Services PMI^® and expected earnings from Palantir (PLTR).
May 6: Start of FOMC meeting and expected earnings from Archer-Daniels-Midland (ADM), Duke Energy (DUK), Marriott International (MAR), Advanced Micro Devices (AMD), Wynn Resorts (WYNN), and Rivian Automotive (RIVN).
May 7: FOMC rate decision and expected earnings from Johnson Controls (JCI), Uber (UBER), Walt Disney (DIS), AppLovin (APP), Arm Holdings (ARM), DoorDash (DASH), and Occidental Petroleum (OXY).