Schwab Market Update

Published as of: May 13, 2025, 9:11 a.m. ET

(Tuesday market open) April U.S. consumer prices showed little impact from trade policy as the Consumer Price Index (CPI) rose 0.2% for both headline and core inflation. That was better than analysts' average expectations of 0.3% for each, and annual inflation dropped to 2.3%, below the 2.4% Wall Street forecast. Core excludes volatile energy and food prices. "Good news on inflation," said Cooper Howard, director, fixed income strategy at the Schwab Center for Financial Research.

Though the tariff easing that sparked Monday's impressive rally doesn't end all uncertainty and major indexes were mixed early today despite CPI, it hints there's light at the end of the tunnel. This could mean the groundwork being laid for companies to consider resuming some of the spending that stalled but doesn't necessarily turn the spigot on all the way. Some things to monitor are whether companies announce any new capital spending and if there's any reacceleration in earnings revisions after recent guidance cuts. Either or both could potentially mean more upside for the market. Meanwhile, Goldman Sachs (GS) has cut its U.S. recession odds to 35% from 45%, media reports said.

U.S. Treasury Secretary Scott Bessent expects to meet again with Chinese officials in coming weeks, and those talks could help set market direction—perhaps more than reports like CPI and Thursday's April retail sales, which now reflect activity when tariffs on Chinese goods were far higher. "Both sides recognized that the sky-high tariffs were not a realistic long-term position," said Michael Townsend, managing director, legal and government affairs at Schwab. "Bessent was a key negotiator and seems to have settled into a role as the president's top economic advisor—something that the markets are welcoming."

1. CPI deeper look: Annual CPI in April of 2.3% was the lowest since February 2021 and down from 2.4% in March. Analysts had expected 2.4%. Interestingly, the headline CPI, which includes energy prices, eased from March despite higher costs for natural gas and electricity, Bloomberg pointed out. Core annual inflation rose 2.8%, also the slowest pace in four years but in line with analysts' thinking and unchanged from March. Shelter prices remain elevated but food prices came down month over month. The services part of the economy made the largest contribution to April's CPI growth, Schwab's Howard noted, while goods flipped from disinflation to inflation. The 10-year Treasury note yield, which climbed sharply yesterday as recession worries retreated on the trade news, gave back some of those gains after the CPI data. But futures trading still shows less than a 10% chance of the Federal Reserve cutting rates next month, according to the CME FedWatch Tool. Odds of a July cut also keep falling, now below 40%.
    
2. AI on Trump trip agenda: When a U.S. president jets to the Middle East to talk business, the commodity in mind is usually black and liquid. This week, as President Trump flies to Qatar, Saudia Arabia, and the United Arab Emirates, a different industrial material, silicon, is key, with possible implications for Nvidia (NVDA) and Advanced Micro Devices (AMD). Their AI chips are "highly coveted" by governments across that region constructing data centers, The New York Times reported, but the Biden administration was wary of such purchases. The new administration may be less so. Several tech executives, including leaders of Nvidia and AMD, will attend a Middle East forum with Saudi and White House officials on partnership in data centers and AI. This trip contrasts with the administration's tough policy on chips to China, though that might come up when China and the U.S. resume trade negotiations. On another track, China appears fully committed to developing its own AI chips as President Xi calls for "overcoming challenges" in that field, worrying U.S. tech executives that China's home-grown industry might hinder opportunities there. Nvidia publicly opposed a Biden administration chip trade barrier affecting China and other countries, and the White House last week hinted it could roll that back.
    
3. Next steps for sustained rally: With the trade war now on hold, the question is whether companies with the most exposure to tariff-related softness can find renewed interest from investors. Up until yesterday's tariff relief surge, sectors that were farthest away from trade had led the one-month rebound from the early April lows. And during the April sell-off, U.S. companies with the most exposure to the domestic economy and less exposure to trade initially surged, though that trend eased a bit over the last month. "Parts of the market that are oriented toward the consumer, freight, and energy have seen the weakest rebound, which fits with the current economic backdrop," said Kevin Gordon, director, senior investment strategist at Schwab, in a recent interview with Bloomberg. "I think the next phase of this rebound will need to include those parts of the market in order for us to transition from the recovery phase to a sustainable rally phase."

• UnitedHealth Group (UNH) plunged 10% in pre-market trading after suspending its 2025 outlook amid growing care demand and higher costs. The company also announced the appointment of Stephen Hemsley as CEO after CEO Andrew Witty decided to step down as CEO for "personal reasons," the company said in a press release. Other big health care peers moved lower in the wake of the UNH struggles.
   
• Travel names like Carnival (CCL), Wynn Resorts (WYNN), and Norwegian Cruise Line (NCLH) were among the biggest winners in yesterday's rally, all climbing 8% or more on relief over lower tariffs. Travel and leisure stocks were among the hardest hit by recent U.S. trade policy and accompanying worries about a recession. They remain down sharply from their February peaks.
   
• Retail stocks highly reliant on China for manufacturing and sales including Amazon (AMZN), Foot Locker (FL), Lululemon (LULU), and Nike (NKE) were mostly up in pre-market trading after their relief rally yesterday.
   
• Hertz Global (HTZ) dropped 8.3% ahead of the open after earnings showed a wider-than-expected quarterly loss and revenue missed expectations.
   
• Bitcoin (/BTC) rose another 2% this morning and has been on a parabolic rally along with some other cryptocurrencies as risk sentiment improves.
   
• The Nasdaq Composite ($COMP) climbed back into a bull market yesterday up more than 20% from recent lows, and took out its 200-day moving average.
   
• Chip stocks, including Nvidia (NVDA), generally built on Monday's gains this morning after the PHLX Semiconductor Index (SOX) rose 7% yesterday. Even with that rebound, the SOX remains down nearly 20% from last summer's all-time highs as competition from China and diminished demand for certain non-AI chips continue to dog the industry.
   
• Boeing (BA) climbed 1.9% after China removed the ban on airlines taking delivery of Boeing's planes, Bloomberg reported.
   
• Coinbase (COIN) climbed more than 9% on news that the crypto-related stock would be added to the S&P 500 index. Coinbase will replace online bank operator Discover Financial Services (DFS), according to a press release from S&P Dow Jones Indices. Discover is being acquired by Capital One (COF).
   
• Under Armour (UA/UAA) jumped 2.25% after reporting results today that surpassed analysts' expectations for revenue and providing slightly higher-than-expected guidance for this quarter's earnings per share. Still, year-over-year revenue fell globally and the company didn't guide beyond its fiscal first quarter, citing trade uncertainty.
   
• FedEx (FDX) rose 0.5% after Amazon said FedEx will join other third-party providers on its "last mile delivery network."
   
• JD.com (JD) climbed 2.8% after earnings this morning. Quarterly revenue grew more than expected at 16%, with Chinese stimulus measures sparking spending on electronics and other high-cost products, Bloomberg reported.
   
• In terms of market breadth, there's been improvement—typically a bullish sign. As of last Friday, 44.4% of S&P 500 stocks traded above their 200-day moving averages, a one-month high, while for the Nasdaq Composite, only 29.8% exceeded their respective 200-day moving averages.

Sentimental journey: After last month's Wall Street plunge and reversal, investors may be wondering if this will be more of a COVID-19 sort of dip and recovery or a longer, more protracted affair. "Investor sentiment might hold some important keys to help in answering that," said Liz Ann Sonders, chief investment strategist at Schwab, and Schwab's Gordon, in their latest analysis.

The S&P 500 index (SPX—candlesticks) clawed back above its 200-day moving average (blue line) yesterday for the first time since late March and posted its highest close since March 3. It just had the longest stretch below its 200-day since late 2022 and early 2023, and at one point in early April was more than 700 points below the 200-day. The quick comeback could suggest there's plenty of buying interest on retreats, but also raises concerns of overbought conditions in this big of a swing. The Relative Strength Index (below main chart) climbed to 65 yesterday from below 30 in early April, close to the 70 level that's considered overbought.

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

May 14: Expected earnings from Cisco (CSCO).
May 15: April PPI and core PPI, April industrial production, April retail sales, and expected earnings from Alibaba (BABA), Walmart (WMT), Deere (DE), Applied Materials (AMAT), and Cava Group (CAVA).
May 16: April housing starts, April building permits, and May preliminary University of Michigan consumer sentiment.
May 19: April leading indicators from the Conference Board
May 20: Expected earnings from Home Depot (HD), Palo Alto Networks (PANW), and Toll Brothers (TOL).