Here is Schwab's early look at the markets for Thursday, January 29.
The new day starts with investors mulling the Federal Reserve's rate decision and yesterday's late results from Tesla, Meta Platforms, and Microsoft. There's little time for rest, however, with Apple due later today and wholesale inflation data early Friday. Amid all the news yesterday, the S&P 500 Index touched 7,000 for the first time but couldn't maintain those early gains.
As expected, the Fed left rates unchanged following three consecutive cuts.
"Markets are priced for steady policy the next few months as inflation remains above target and unemployment is low despite the slowdown in hiring," said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research, or SCFR. "Moreover, financial conditions are loose and there are few signs of stress in the financial system."
The Fed meeting didn't include any economic or rate projections. Market participants still expect two rate cuts this year, but chances don't rise above 50% for a cut until mid-year, according to the CME FedWatch Tool.
"The decision to hold steady reflects a lack of reason to cut," Jones added. "The Fed likely reasons that economic growth is strong at around 3.5% to 4%, there's fiscal stimulus ahead, inflation is closer to 3% than the 2% target, the dollar is softening, financial conditions are very loose, and unemployment is low."
The Fed's statement was more upbeat than December's, describing economic growth expanding at a "solid pace," compared to a "moderate pace" in the prior statement. The new statement also said the unemployment rate has "shown some signs of stabilization."
In his press conference, Fed Chairman Jerome Powell said he expects to make decisions meeting by meeting and cited broad support among policymakers for a pause. That said, two Fed governors voted for a quarter-point cut. Upside risks to inflation and downside risks to employment have both "diminished a bit," Powell added, noting he doesn't believe the Fed's current policy is significantly restrictive with a fed funds target range of 3.5% to 3.75%.
The 10-year Treasury yield inched up after the meeting--possibly reflecting the Fed's more upbeat description of the economy--but hasn't returned to last week's four-month highs.
"Thirty-year yields have been creeping higher," said Nathan Peterson, director of derivatives research and strategy at SCFR. "It could be just due to stronger longer-term economic growth expectations, but also global higher yields are playing a role and the AI infrastructure play is sending input costs--like industrial metals--higher, which could impact inflation later this year."
Checking mega-cap earnings late Wednesday—Meta announced earnings per share of $8.88, handily topping Street estimates. Revenue for the Facebook parent's fourth quarter exceeded expectations as well, and the firm's first-quarter revenue outlook was also an upside surprise. Meta said an average of 3.58 billion people were active on its platform daily. After hours, the stock rallied more than 3.5% in the minutes after reporting but year-over-year, META shares have been virtually unchanged.
Tesla stock, meanwhile, rose more than 3% in early after-hours trading after the EV giant reported earnings per share of $0.50, compared to the $0.45 expected, and revenue of $24.9 billion, versus the estimated $24.7 billion. This comes despite Tesla revealing its fourth-quarter vehicle deliveries fell 16% year-over-year earlier this month. The company also said it entered an agreement to invest $2 billion in Elon Musk's xAI startup. Growing competition in the EV market, particularly from BYD in China, has hampered Tesla's core EV business of late, shifting investor focus to its budding robotaxi and humanoid robotics businesses. Including Wednesday's rebound, Tesla shares were still down roughly 10% from their mid-December all-time highs.
Microsoft shares pulled back more than 4% in post-market trading despite results topping analysts' average revenue and earnings expectations. Earnings per share of $4.14 outpaced the $3.91 FactSet consensus, while $81.27 billion in revenue was almost $1 billion above the average estimate. Microsoft Azure and other cloud services revenue grew 39%, surpassing the company's previous 37% guidance but falling short of 40% the prior quarter. Overall revenue rose 17%, down from expansion of 18% in the previous quarter.
Before the mega-caps reported, tech enjoyed a robust run the last few sessions, lifting the S&P 500 Index to new record highs. Yesterday featured solid earnings and guidance from ASML, a chip equipment maker also known as a "barometer" of industry health, and Seagate, a data storage firm.
Additionally, Nvidia got a boost yesterday from news that China's government has given companies there permission to buy Nvidia's H200 AI chips, sales of which the Trump administration banned last year before relenting.
Apple reports after the close today, rounding out mega-cap earnings for this week before Alphabet and Amazon share results next Wednesday and Thursday, respectively. Apple has rallied into its report, buffered by hopes of strong holiday sales after the successful roll-out of its iPhone 17. Investors will look for updates on the next iPhone, pricing changes, and any word on Apple's delayed AI initiatives. Apple is under pressure to impress with its Siri AI launch, which it promised sometime this year.
Before yesterday's mega-cap reports, about 20% of S&P 500 companies had reported so far this quarter, with 77% beating analysts' estimates on the bottom line, according to Bloomberg, but only 57% beating top-line estimates, a relatively light amount.
The dollar continued struggling near four-year lows Wednesday as investors digested the Trump administration's recent tariff threats against South Korea and Canada. On Tuesday, Trump said the dollar is doing "great," implying that a weak dollar could make U.S. products more affordable for foreign buyers, helping exports. The flip side of that is a weak dollar can cause inflation at home, and rising crude oil prices related to the dollar might be an early sign.
In a CNBC interview Wednesday, Treasury Secretary Scott Bessent denied media reports that the U.S. and Japan are working together to support the slumping yen.
In a light data week, tomorrow's 8:30 a.m. ET PPI report is expected to show wholesale prices stubborn last month at 0.2% for headline and 0.3% for core, which excludes food and energy. The core number would be up from a flat reading in November, though readings that month were possibly affected by data collection issues during the shutdown. A stubborn year-over-year PPI that stays at the November level of 3% might be seen as another barrier for rate cuts. The Fed's goal is 2%.
Data next week is in jeopardy as another government shutdown might loom. The House passed the last six of 12 appropriations bulls last week, and the Senate had been prepared to do the same by Friday's deadline, but the shooting in Minneapolis changed the dynamics. Even if the Senate can resolve its issues over the Department of Homeland Security funding bill, the House is in recess until Monday and would have to approve any changes.
"A partial government shutdown this weekend is a very real possibility," said Michael Townsend, managing director of legislative and regulatory affairs, Schwab
Markets vacillated Wednesday and ended up finishing relatively flat. There were no wild swings following the Fed meeting, as is sometimes seen. Powell's press conference didn't appear to have much effect on Wall Street. The takeaway is that investors might have been holding their powder until seeing the mega-cap results.
"The rotation/broadening trade seemed to unwind a bit starting late last week, likely due to some mean reversion and investors wanting to get back into tech before mega-cap tech reports," Peterson said, referring to a recent trend that saw sectors outside of tech and communication services outperform Magnificent Seven stocks.
Just four of 11 S&P sectors climbed Wednesday, led by energy and info tech. No sector rose or fell as much as 1%, a rare occurrence.
In individual trading Wednesday, GE Vernova climbed 2.7% after solid earnings and guidance, along with what looked like strong new orders.
ASML ended up falling 2% after the semiconductor equipment maker reported better-than-expected quarterly sales and impressed with its guidance. The company had a record quarter for orders, a possible sign of solid demand from the AI buildout. But shares enjoyed a meteoric rise heading into earnings, which appeared to trigger profit taking.
Seagate Technology rose nearly 20% on solid earnings as the data storage firm cited strong AI demand. Other AI and chip-related stocks also exhibited strength Wednesday, with gains for Nvidia, Western Digital, Intel, and Micron. Much of it was based on the robust results from ASML, along with hopes for more signs of data center spending growth from mega-caps.
The Dow Jones Industrial Average® ($DJI) climbed 12.19 points Wednesday (+0.02%) to 49,015.60; the S&P 500 Index (SPX) fell 0.57 points (-0.01%) to 6,978.03, and the Nasdaq Composite® ($COMP) added 40.35 points (+0.17%) to 23,857.45.