Schwab Market Update

Published as of: January 24, 2025, 9:23 a.m. ET

(Friday market open) Light pressure emerged on Wall Street early Friday after yesterday's all-time highs, but a sinking dollar in the wake of a Bank of Japan rate hike might lend support. The tech sector weakened after disappointing guidance from Texas Instruments (TXN), but for the most part earnings season continued to impress.

The Bank of Japan raised rates a quarter point earlier today, but it didn't look like a hawkish increase, meaning policy makers didn't indicate steady hikes to come. For now, the move seems unlikely to have the same bearish impact as last July's that upended U.S. stocks. In other overseas-related news, President Trump told Fox News he would "rather not" impose tariffs on imports from China. These remarks could help shares of U.S. multinational firms that would have to wrestle with tariff impacts, but the situation remains fluid and far from resolved.

Back home, earnings from American Express (AXP) and Verizon (VZ) both surpassed Wall Street's expectations and the vast majority of reporting firms late yesterday and early today beat consensus. However, strong corporate results could be weighing on the Treasury market. The benchmark 10-year Treasury note yield is steady today but spent much of this week steadily climbing from recent lows. Data today include December existing home sales, final January University of Michigan Consumer Sentiment, and preliminary January S&P Global U.S. manufacturing and services PMIs.

1. Narrow breadth accompanies record highs: Major U.S. indexes are up sharply from recent lows on earnings and general economic optimism, but it hasn't been a broad rally. "The bounce in participation has been lackluster thus far," said Kevin Gordon, director, senior investment strategist at Schwab. "Just 62% of S&P 500 members are trading above their 200-day moving average. As long as interest rate volatility remains subdued, the bull market can continue to advance, but a lack of participation down the cap spectrum would raise the risk of a much slower advance from here."
2. Info tech earnings approach: Next week opens the tech chapter of earnings with mega cap names like Microsoft (MSFT), Tesla (TSLA), Apple (AAPL), and Meta Platforms (META) expected to report. These companies arguably put the market on their collective (broad) shoulders over the last year as their shares rose nearly 65% combined through earlier this week. The rest of the S&P 500 minus the Magnificent Seven are up "just" 18.5% from a year ago. Any signs of deceleration in mega-cap guidance, however, could threaten the January rally amid ideas that earnings growth could be slowing. Through earlier this month, 25 info tech companies had issued negative fourth quarter guidance, FactSet noted. Also, several major firms received analyst downgrades recently, including Salesforce (CRM), Advanced Micro Devices (AMD), and Apple. The bright side is that fourth quarter profit margin appears on the upswing for info tech companies reporting to date and may exceed the five-year sector average of 24%, FactSet said.
3. Volatility ebbs, but for how long? The Cboe Volatility Index (VIX) briefly fell below 15 on Wednesday for the first time in a month and remains well under recent peaks above 20 as tariff concerns lightened a bit thanks partly to lighter tariff threats from the White House. Where VIX goes next could depend on Treasuries. "If yields on the 10-year move back up towards 4.8% in the coming weeks, or the velocity picks back up, the VIX is likely going higher," said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. When VIX rises, it can indicate toward sharper swings in the stock market. Cboe VIX futures are in contango, meaning higher than spot levels.

• American Express fell 2.2% ahead of the open despite earnings per share (EPS) that beat Wall Street's consensus and revenue that came in as analysts had expected. The company also plans a dividend increase. Shares were up the last few days, perhaps building in earnings expectations. The company said it saw record levels of card member spending during the quarter.
• Verizon shares stayed flat in early action despite the company beating consensus expectations for revenue and EPS. The company's guidance also came in as analysts had expected. Total wireless service climbed 3.1% during the quarter from a year earlier, with total postpaid phone net additions of 568,000 exceeding the year-ago 449,000. "It's only going to get better this year," Verizon said in its press release.
• Texas Instruments slipped 4.2% even though the semiconductor firm beat analysts' earnings and revenue estimates. The culprit appeared to be guidance, as the company's EPS range for the first quarter fell short of Wall Street's average expectation. The auto market continues to be weak, the company said on its earnings call, Barron's reported. TXN's disappointing outlook appeared to spill into the chip sector today, with Nvidia (NVDA) and Broadcom (AVGO) both down ahead of the open and weighing on tech in general.
• Boeing (BA) doesn't report until next week, but shares dropped 1.1% this morning after the jet maker said it expects fourth quarter revenue to come in below Wall Street's consensus at $15.2 billion. FactSet consensus was $16.56 billion. Last year's strike had an impact on the company's commercial airplanes division results, including lower deliveries, Boeing said.
• Novo-Nordisk (NVO) jumped 11% on positive weight-loss drug trial results. Shares of rival Eli Lilly (LLY) also climbed.

Futures insight: Every morning, find out what's happening in important futures markets like crude oil and copper, as well as technical trends, in Schwab's daily Looking to the Futures column. Today's column considers the drop in silver, the dollar index trading off a two-year high, and the potential impact of tariffs.

Bitcoin (white line), or so-called "digital gold," has certainly outpaced its shiny yellow counterpart as the price of Bitcoin in ounces of gold has swelled to near 40 from the mid-20s just a few months ago, as this six-month chart shows.

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

January 27: December new home sales and expected earnings from AT&T (T).
January 28: January Consumer Confidence and expected earnings from Boeing (BA), General Motors (GM), and Lockheed Martin (LMT).
January 29: Expected earnings from Microsoft (MSFT) and Tesla (TSLA).
January 30: Fourth quarter gross domestic product (GDP) first estimate and expected earnings from Intel (INTC), Visa (V), Apple (AAPL), Caterpillar (CAT), and Mastercard (MA).
January 31: December PCE prices, December personal spending, December personal income, and expected earnings from AbbVie (ABBV), Exxon Mobil (XOM), and Chevron (CVX).