Schwab Market Update

New U.S. chip export restrictions and fresh highs in the dollar and yields hit stocks, especially tech, continuing last week's chill ahead of earnings and inflation data.

Published as of: April 24, 2025, 9:05 a.m. ET

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The markets Last price Change % change
S&P 500® index

5,375.86

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Dow Jones Industrial Average®

39,606.57

+419.59

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Nasdaq Composite®

16,708.05

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+2.50%

10-year Treasury yield

4.33%

-0.06

--
U.S. Dollar Index

99.41

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Cboe Volatility Index® 27.82
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-2.21%

WTI Crude Oil

$63.00

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+1.17%

Bitcoin

$92,737.96

-$678.05

-0.73%

(Thursday market open) Two days of optimism turned into "show me the money" as investors grew impatient awaiting trade progress and China denied it's in talks with the U.S. Major indexes fell despite President Trump's recent softer rhetoric over trade and the Federal Reserve and as Wall Street digested a mixed batch of earnings. So far this quarter, 90% of reporting companies mentioned tariffs, Reuters said, and several this morning cited slowing consumer and government demand.

Alphabet (GOOGL) reports this afternoon at a critical juncture for the company. Federal courts have ruled that Alphabet violated antitrust laws, putting legal troubles at the forefront. From an earnings perspective, Alphabet's cloud business growth and outlook is in focus, along with trends in digital ad spending. "Digital ad spend is one of the first places to get cut if there are concerns about economic growth," said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. "Maybe that will show up in revenue guidance."

Before the open, initial weekly jobless claims came in at 222,000, compared with the 220,000 Briefing.com consensus. These reports are snapshots, and no single data point is a trend, but next week's April nonfarm payrolls report is approaching and could offer a deeper look at labor trends. "The next unemployment report is likely to reflect some impact of the recent job cuts at the federal government level and limited hiring by companies uncertain about the outlook," said Kathy Jones, chief fixed income strategist at Schwab.

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Three things to watch

1. Tech AI spending eyed: As major AI spenders like Alphabet, Microsoft (MSFT), Amazon (AMZN), and Meta Platforms (META) report in coming days, attention will turn to any possible changes in this current tough environment. All these firms put pedals to the metal over the last few quarters ramping up their AI spending, but current conditions loom over their plans, including the U.S.-China trade war, emerging AI competition from Chinese firms, and signs of weakness in the global economy that could hurt cloud and digital ad demand. If there's any sign of a slowdown in spending, the market might welcome it from the so-called hyperscalers, as rising costs hurt margins. However, it would get a different review from semiconductor investors, especially for the biggest beneficiaries of AI spending like Nvidia (NVDA), Advanced Micro Devices (AMD), and Broadcom (AVGO). Those firms are all slumping, partly on worries that demand could hit a speed bump. Overall, earnings growth estimates remain in the double digits for info tech, according to FactSet. But many analysts have dialed back their earnings growth outlook for Magnificent Seven names. Intel (INTC) isn't in that club but reports later today after fellow chip stock Texas Instruments' (TXN) earnings impressed late yesterday.

2. Volatility still elevated: Through Monday, the S&P 500 index (SPX) has had 19 trading days this year with moves of –1% or more, the same number as in all of 2024, according to Bloomberg. Volatility for stocks, measured by the Cboe Volatility Index (VIX), remains near 28, well above its traditional average of around 20. For investors stuck in this turbulence, possible ideas include assets with high credit quality, whether that's Treasuries or the corporate bond market. "You can always own Treasuries," said Schwab's Jones. "The yields aren't that bad. They're north of 4% for most of the yield curve. You could stay shorter term. We've been advocating being lower in duration." Jones added that municipal bonds also enjoy high credit quality and may be interesting for investors in higher tax brackets. So-called "value" stocks are also sometimes less vulnerable to major ups and downs. Volatility is likely to stay elevated as long as there's trade uncertainty, but VIX futures are in backwardation, meaning future contracts are much lower than the spot price, painting a picture of VIX falling toward 25 by summer. However, keep an eye on 30. If VIX climbs back above 30, it could indicate lack of faith in stock market rallies and keep a speed brake on any major initial public offering or mergers and acquisition activity, much to the chagrin of investors in banking stocks.

3. Next Treasury auction looms: Bonds initially rallied yesterday along with stocks, but as the day wore on yields turned higher, suggesting Treasury market volatility remains elevated. "The 5-year note auction didn't see as much demand as anticipated, dampening the rally" in Treasuries, Schwab's Jones said. That was the second auction in a row to disappoint this week, suggesting investors want higher yields if they're buying U.S. debt. The hammer pounds again today as the Treasury auctions a batch of 7-year notes. Though Treasury auctions might seem like an esoteric subject, weak demand for Treasuries and associated higher yields can be a drag on stocks, forcing consumer and business borrowing costs higher. Softness in Treasuries could reflect worries about tariff-driven inflation as well as concerns about heavy U.S. debt supplies hitting the market as the government funds growing budget deficits. Also, the trade war might curb overseas enthusiasm for U.S. assets.

On the move

- Super Micro Computer (SMCI) added another 1.3% after climbing 7.6% yesterday. Other tech names also got elevated in Wednesday's rally including Palantir (PLTR), Marvell Technology (MRVL), and AppLovin (APP) amid hopes for trade progress. Semiconductors were also strong yesterday but lost ground in pre-market trading.

- Texas Instruments climbed 8% ahead of the open after the chip firm beat analysts' earnings and revenue estimates and gave in-line second quarter guidance for EPS. It expects revenue to top consensus. "Revenue increased 11% from the same quarter a year ago and increased 2% sequentially," Texas Instruments said in its press release. "All of our markets grew sequentially with the exception of a seasonal decline in personal electronics."

- Procter & Gamble (PG) slipped 1.5% in pre-market trading after beating analysts' earnings per share consensus but falling short on revenue and guiding fiscal year 2025 earnings per share below Wall Street's view. The company expects organic sales growth of 2% year over year.

- IBM (IBM) dropped nearly 7% ahead of the open despite stronger-than-expected earnings and guidance. CEO Arvind Krishna expressed caution about the economic environment, Bloomberg reported, saying U.S. government cost cuts might have affected the business. He added, "In the near term, uncertainty may cause clients to pause."

- ServiceNow (NOW) added 8% after the software and cloud computing company beat earnings expectations and shared guidance that topped Wall Street's consensus.

- Chipotle (CMG) fell 3.6% as quarterly sales fell year over year at stores open a year or more and the company reported a "slowdown" in consumer spending. First quarter revenue missed analysts' average estimate.

- Southwest (LUV) fell 4% after announcing it's cutting flights this year and withdrawing previous guidance. The company beat analysts' EPS estimates and revenue met consensus. "Amid the current macroeconomic uncertainty, it is difficult to forecast given recent and short-lived booking trends," Southwest said in a release. But the company expects to reduce capacity to adjust for lower demand.

- American Airlines (AAL) slipped 0.6% despite reporting a narrower-than-expected quarterly loss. Revenue missed analysts' estimates and the company withdrew guidance based on the uncertain outlook. "Domestic leisure travel fell off considerably as we went into the February time frame," CEO Robert Isom said, according to CNBC.

- Merck (MRK) rose 1.2% ahead of the open despite lowering its full-year profit outlook as quarterly earnings and revenue beat expectations. Cancer drug Keytruda sales rose 4%, but total worldwide sales fell 2% including foreign exchange. "Merck's outlook includes the impact of tariffs," the company said, which it expects to lead to incremental costs of approximately $200 million.

- March U.S. durable goods orders soared 9.2% month over month compared with consensus for 1.5%. However, with transportation excluded, growth was flat and lower than the 0.3% Briefing.com consensus. Some of the buying may have reflected pull-forward demand as businesses tried to get ahead of tariffs. Following a recent spike, the number of container ships departing China for the U.S. has declined sharply, according to Bloomberg data.

- Chances of a May Fed rate cut were 5% early today, according to the CME FedWatch Tool. June rate cut odds are 60%. In the wake of recent cautious comments from Fed officials, it increasingly appears that a May rate cut is off the table and now June is coming into question as well.

More insights from Schwab

Munis and volatility: Recent volatility in yields might have created an opportunity in municipal bonds, especially for high-net-worth investors, wrote Cooper Howard, director, fixed income strategy at the Schwab Center for Financial Research. "We've long believed that higher-net-worth investors should consider munis for their credit stability, diversification, and potential tax benefits—and that's even more the case now," he wrote.

Munis and volatility: Recent volatility in yields might have created an opportunity in municipal bonds, especially for high-net-worth investors, wrote Cooper Howard, director, fixed income strategy at the Schwab Center for Financial Research. "We've long believed that higher-net-worth investors should consider munis for their credit stability, diversification, and potential tax benefits—and that's even more the case now," he wrote.

opportunity in municipal bonds, especially for high-net-worth investors, wrote Cooper Howard, director, fixed income strategy at the Schwab Center for Financial Research. "We've long believed that higher-net-worth investors should consider munis for their credit stability, diversification, and potential tax benefits—and that's even more the case now," he wrote.

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Munis and volatility: Recent volatility in yields might have created an opportunity in municipal bonds, especially for high-net-worth investors, wrote Cooper Howard, director, fixed income strategy at the Schwab Center for Financial Research. "We've long believed that higher-net-worth investors should consider munis for their credit stability, diversification, and potential tax benefits—and that's even more the case now," he wrote.

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Munis and volatility: Recent volatility in yields might have created an opportunity in municipal bonds, especially for high-net-worth investors, wrote Cooper Howard, director, fixed income strategy at the Schwab Center for Financial Research. "We've long believed that higher-net-worth investors should consider munis for their credit stability, diversification, and potential tax benefits—and that's even more the case now," he wrote.

Breadth check: Market breadth improved last week, according to Schwab's Weekly Trader's Outlook. For that positive trend to continue, it might help to see non-mega cap companies surpass Wall Street's earnings estimates. This might lift hopes that the hundreds of S&P 500 stocks without $1 trillion market capitalizations can contribute more to overall index growth.

Chart of the day

A six-month chart of the Russell 2000 shows it unable to move above resistance at the 50-day moving average now just above 2,300, but it remains well above it 200-day moving average near 2,190.

Data sources: FTSE Russell. Chart source: thinkorswim® platform.

Bitcoin futures (/BTC) topped out around the first of the year and fell more than 26% by March 10. Recently, BTC has moved upward creating what many technical analysts would call a rising wedge. The rising wedge price pattern is usually considered to be bearish. If the pattern plays out, the downtrend in bitcoin could continue. Support around $74,160 could put the brakes on the bears. Otherwise, the next support level is near $50,000. 

The week ahead

Mon leading indicators; Tue Verizon, LMT, NOC, 3M, KMB, Halliburton, Tesla; Weds PM, AT&T, Boeing, IBM, TI, March new home sales; Thu P&G, Merck, PepsiCo, American Air, Alphabet, Intel, March durable goods, home sales; Fri Consumer sentiment final