CPI Ahead, Oracle Tops Estimates, But Eyes on Oil

0:00Welcome to the Schwab Market Update Podcast, where we prepare you for each trading day with a recap of recent news and look at what's ahead. I'm Keith Lansford, and here is Schwab's early look at the markets for Wednesday, March 11. And Flasian Data competes today with warn news for investor attention following better than expected quarterly earnings from Oracle late Tuesday. Oracle's results might be another boost for the chip sector, which has remained surprisingly resilient. The February Consumer Price Index, or CPI, do at 8.30 a.m. eastern time is seen up 0.3% monthly for the headline reading, and 0.2% for Core, which excludes food and energy. Local Core and headline inflation are seen at 2.5% and 2.4% respectively unchanged from January. However, all these numbers could be discounted to some extent because the data was compiled

1:05before the war. That said, the Federal Reserve, which meets next week and is widely expected to keep rates on pause, tends to look more closely at Core CPI, uninfluenced by gas prices. That might change if the work continues for an extended time, as the price of crude begins seeping into costs across the economy. Though the US is less dependent on oil than in the past, judging by lower per capita usage, the commodity is still widely used across industries, along with natural gas. Looking at likely scenarios for the course of the conflict, Schwab experts note that uncertainty remains very high. We see the most likely outcomes, as either a relatively quick transition from major military operations to negotiations, or a gradual de-escalation, wrote Michelle Ghibli, director of International Equity Research and Strategy at the Schwab Center for Financial Research, or Skiffer, and Chris Farerrone, head of equity research and strategy at Skiffer.

2:06However, downside risks rise meaningfully in scenarios where global energy supplies face a prolonged disruption with potential spillovers to global growth, inflation, tightening financial conditions with international markets, especially Europe and Asia, most exposed. In the moderate case, military operations continue for several weeks, set reduced intensity before winding down. Oil prices may remain elevated, but there is no major disruption to global supplies. In that environment, risk aversion can stay higher for longer, and market leadership could remain with relative, safe haven assets and sectors with less exposure to energy costs, Ghibli and Farerrone wrote. US equities may outperform Europe and Asia-Pacific on a relative basis, while energy and defense-related areas tend to hold up better than energy-sensitive industries, such as airlines and transportation. Crude paired early losses Tuesday and briefly clawed back to $90 per barrel after President

3:09Trump threatened to hit Iran 20 times harder if oil stops flowing through the strait of poor moves. Bloomberg reported that Iran denied it once a truce. The group of seven countries, including the US, met late Tuesday to consider releasing crude supplies from strategic reserves with a decision expected possibly by today. Such a move would help tide things over from a supply standpoint, and could be a bridge to a time of possible improved flows out of the Gulf should that happen. Rising oil lifted US gas prices to $3.53 a gallon on average Tuesday, the highest since last April according to AAA. The 10-year Treasury note yield finished unchanged yesterday at 4.14% near the middle of its long-term trading range. Shorter 10-year yields fell slightly, despite relatively weak demand for a US 3-year Treasury note auction Tuesday according to briefing.com.

4:10Treasury trading continues to reflect up and downs in oil, with yields climbing late yesterday on concerns that Iran might be laying mines in the strait of poor moves. Fed policymakers entered their quiet period, the head of next week's meeting, with chances of a rate cut near zero, according to the CME Fed watch tool. Chances for at least one cut rise to around 40% by June and 70% by September, with the market still pricing in high odds of one to two cuts before year-end. Key data ahead after CPI include tomorrow's weekly initial jobless claims data, and Friday's job openings and labor turnover survey, or jolts. Also Friday, investors get January personal consumption expenditures, or PCE price index data, and report the Fed eyes closely for inflation. Federalists expect monthly 0.3% growth for the headline reading and 0.4% for core, compared with 0.4% for both in December.

5:12Today features a 10-year Treasury auction that could help set direction for yields, though crude is arguably a more power influencer for now. This week's earnings calendar is relatively quiet, but Oracle shared results late yesterday and shares initially popped 6% in post-market action. Quarterly earnings and revenue topped consensus, and fiscal fourth quarter earnings guidance also exceeded Wall Street's thinking. In data Tuesday, February existing home sales offered a positive surprise following an 8% decline in January. A headline for February, a 4.09 million outpace the briefing.com consensus of 3.88 million units on a seasonally adjusted annual basis. However sales still fell more than 1% from a year earlier, and median prices instubed 0.3% annually. The median single-family home now sells for $401,800, and mortgage rates remain slightly

6:13above 6%. Outside geopolitics, economic data has been leaning weaker recently, whether it's jobs or GDP, but there have been some positive signs in the PMI data, said Nathan Peterson, director of derivatives research and strategy at Skipper. Then there's still a question mark around private credit, which took a back burner recently, but still has them in solved, so to speak. Credit concerns in the private credit market surfaced earlier this year, especially around the highly leveraged software industry under pressure for months on AI competition and substitution concerns. Adobe reports late tomorrow, offering a chance for investors to hear how it's adapting to the new climate. Technically, charts suffered damage as all major US indexes hit multi-month lows Monday. The SMP 500 index, NASDAQ composite, and Dow Jones industrial average are all struggling to regain their 100-day moving averages a key level to watch for all three.

7:16Major indexes had a relatively quiet Tuesday after their roller coaster ride the day before. Stocks spent most of the morning in positive territory on spill over buying amid hopes that conflict might be fading. A drop in crude below $80 per barrel at midday provided additional support, but that came after an erroneous report by the Trump administration that the US Navy had escorted tankers through the strait. The White House quickly corrected that assertion and oil-paired losses, hurting stocks. Major indexes mostly lost ground, but the NASDAQ finished higher by a nose, lifted partly by continued resiliency in the chip sector, especially memory chip names like Micron and Western Digital. And video also plowed to 1% gains after the company announced its launching an open-source AI agent platform. Over the near future, until conflict eases, crude oil prices will likely continue calling the shots on Wall Street.

8:18History suggests equity markets would rapidly rebound when a ceasefire occurs, Schwab's Ghibli and Farahrone wrote that said this conflict presents meaningful downside risks, and we don't believe now is the time to aggressively add risk. U.S. S&P 500 sectors ended lower yesterday with energy falling to the very bottom of the pack as U.S. crude fell more than 8% to finish the day near $87 per barrel. Brent crude, which is more indicative of global prices, fell 8% as well. U.S. natural gas prices fell nearly 3% too, remaining at what historically are relatively cheap levels. Other week's sectors Tuesday included financials, utilities, and health care. Communication services rose for the second day in a room, and discretionary stocks held onto light games despite expected pressure on consumer sentiment from higher gas prices. In individual trading Tuesday, Hula Packard Enterprise dropped 3.3%, though quarterly

9:22earnings exceeded Wall Street's expectations and the company raised its earnings outlook, guidance also was in line with estimates. The company sees memory chip prices remaining high, one headwind faced by the entire industry. Qualcomm fell 2.3% after B of A securities assumed coverage with an underperform rating. Software names including Apploven and ServiceNow came back under pressure with both seeing heavy selling Tuesday, Palantir, and Salesforce also fell sharply, and Rivian added 4% following an upgrade to buy from TD Cohen, which previously rated the stock a hold. The firm sees full-scale R2 demand at 212,000 to 335,000 units, suggesting upside to consensus forecasts for 2027. The Dow Jones industrial average slipped 34.28 points Tuesday or 0.07% to 47,706.51.

10:26The S&P 500 index gave back 14.51 points or 0.21% to 6781.48, and the NASDAQ composite ticked up 1.16 points or 0.01% to 22,697.10. This has been the Schwab Market Update Podcast. To stay informed, visit www.swab.com slash Market Update or follow us for free in your favorite podcasting app. And if you like what you've heard, please consider leaving us a rating or a review. It really helps new listeners find the show. Join us for another update tomorrow. From Portland Dislosures, see the show notes and Schwab.com slash Market Update Podcast.