Schwab Market Update

Published as of: May 28, 2025, 9:07 a.m. ET

(Wednesday market open) Brace for a late night. Nvidia (NVDA) and Salesforce (CRM) report after the close, making tonight's futures trading must-watch TV for market reaction even though things are quiet this morning. Options trading projects volatile action, with an approximately 7% post-earnings move priced in for Nvidia. However, overall volatility eased Tuesday as stocks surged on hopes for trade progress. "Buy-the-dip mentality is alive and well," said Liz Ann Sonders, chief investment strategist at Schwab, observing yesterday's rally.

When Nvidia reports, focus often turns to guidance and gross margin. Last time out, a slight dip in margin hurt shares, and analysts remain concerned about Nvidia's ability to maintain its long string of higher guidance, especially considering recent struggles in China.

"Investors have come to expect a beat-and-raise quarter from Nvidia, while maintaining low-to-mid 70% gross margins, so forward revenue and gross margin guidance will be important metrics to gauge both demand and pricing," said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. Analysts expect quarterly earnings per share of $0.93 and revenue of $43.25 billion for the AI giant.

1. GDP, jobs data could provide early hints of trade impact: Investors are on their toes for a second government estimate of first quarter gross domestic product (GDP) Thursday before the open. The first estimate surprised with a negative reading of –0.3%, a number that was discounted slightly because it reflected a surge in imports as companies scurried to ship products in before tariffs took effect. This is backward-looking data but still could have an impact on stocks, especially if it gets worse, but analysts expect no change. Another metric to follow tomorrow is weekly initial jobless claims, which analysts peg at 230,000, according to Briefing.com. This has long been an early indicator of any wobbles in the labor market but has been steady so far this year despite trade concerns. This could reflect companies' hesitation to lay off employees after struggling to rehire after the pandemic. Job openings data next Tuesday could be more interesting, indicating if April's pace slowed as tariffs rose.
    
2. Clouds surround Nvidia's guidance after China struggles: One question heading into Nvidia's report is how guidance might be affected by U.S. export restrictions on shipments to China that hurt the company over the last few months. Nvidia said the licensing requirement on its H20 chip that caused the firm to take a $5.5 billion charge in April could ultimately cost it $15 billion, but it's unclear how those costs will be spread across coming quarters or if those projected sales were part of previous guidance. The average analyst projection is for revenue growth of 52% in the current quarter to around $45.7 billion, according to Yahoo Finance. But Nvidia has a long history of outpacing estimates by $1 billion or more. Failure to do so might disappoint the market, but with shares now trading at levels last seen in February, investors have built a lot of positive momentum into the earnings report. Nvidia has beaten analysts' revenue estimates 10 quarters in a row and has beaten on earnings nine straight quarters.
    
3. Fed minutes eyed for policy path: May Federal Open Market Committee (FOMC) minutes at 2 p.m. ET will be mulled for signs of anyone at the Federal Reserve departing from the current playbook on rates. Nearly every Fed speaker over the last week has stood by hawkish comments made by Fed Chairman Jerome Powell earlier this month when he warned that tariff-generated inflation could keep the Fed from making any near-term cuts. Next month's Fed meeting will bring new projections for the future rate path, but minutes today "likely won't shed additional light on the path for Fed policy," said Cooper Howard, director, fixed income strategy at the Schwab Center for Financial Research, adding that "we expect the Fed to lower rates later this year but it will be largely dependent on how the labor market evolves."

• Macy's (M) jumped 2.6% after beating analysts' earnings and revenue estimates in its latest quarter. However, the retailer cut its full-year earnings per share outlook, citing tariffs and "some moderation in consumer discretionary spending."
   
• Dick's Sporting Goods (DKS) rose 1.3% as the retailer beat analysts' quarterly revenue estimates and confirmed its previous 2025 outlook, saying the company had a "strong start to the year."
   
• Nvidia climbed 0.55% in pre-market trading after a 3.2% rise yesterday as investors awaited today's earnings. Nvidia also got some traction from a Reuters report that Nvidia would launch a cheaper version of its advanced Blackwell AI chip in China. China accounted for nearly 13% of Nvidia's sales last year, but U.S. export restrictions have curbed Nvidia's ability to export chips to the country.
   
• Abercrombie & Fitch (ANF) shares soared 26% ahead of the open as the retailer easily beat Wall Street's earnings per share and revenue estimates. Sales in the first quarter rose 8% from a year ago to a record of $1.1 billion, the company said, led by Hollister brands. The company slightly raised its full-year sales outlook.
   
• Salesforce shares flattened in pre-market trading after a 1.5% climb yesterday ahead of earnings later today. The cloud-based software firm Tuesday acquired Informatica (INFA) for $8 billion, a move designed to help Salesforce advance its AI offerings. Last time it reported, Salesforce missed analysts' revenue estimates and disappointed with its forecast. Subscription and support revenue rose 8% that quarter and will be a closely watched category.
   
• Tesla (TSLA) rose 0.9% as recent positive momentum continued for the stock.
   
• Okta (OKTA) fell nearly 12% ahead of the open after the identity and access-management company reported a first-quarter profit but gave guidance that underwhelmed investors.
   
• Bitcoin (/BTC) and other cryptocurrencies fell for the second straight day as the market appeared to take a breather after last week's highs. The slip came as the 2025 Bitcoin Conference began in Las Vegas, which could mean headlines as different crypto-related firms make announcements.
   
• Bond yields rose in Japan Wednesday after lackluster investor demand at a 40-year Japanese bond auction. Rising yields around the world could mean more competition for U.S. Treasuries, where yields have long held a premium to foreign bonds. A U.S. 20-year auction had weak demand last week but a 2-year auction did better yesterday. A 5-year auction is today. U.S. Treasury yields climbed this morning after a drop yesterday that helped stocks.
   
• As of early Wednesday, futures trading indicated just a 2% chance of a Fed rate cut in June, and 24% in July, according to the CME FedWatch Tool.

"Hard" and "soft" data divergence persists: A recovery in soft data like sentiment surveys likely will be sluggish unless policy uncertainty diminishes, said Schwab's Sonders and Kevin Gordon, director, senior investment strategist at Schwab. "The mercurial nature of the Trump administration's trade policy is likely to keep expectations a bit shaky," they wrote in their most recent analysis. Businesses have proven time and again they can be nimble and make adjustments to policy changes. "The rub in this era is that there is little sense of the playing field—or even the rules of the game—on which companies are operating."

If you've been to a gas station lately, you may have noticed a discrepancy. Crude oil futures (/CL—blue line) are down a massive 17% so far this year on recession fears and expected higher production from OPEC and its allies. But gasoline prices, reflected here by CME futures (/RB—candlesticks) have stayed stubbornly near their year-end 2024 level, giving customers no relief at the pump. This could reflect near-term issues including a seasonal shift to more expensive and less pollutive summer fuels that raise refinery costs, as well as regional supply variations and solid consumer demand as summer driving season peaks between now and July 4. The discrepancy in these two markets means the average U.S. gas price remained at $3.17 as of Tuesday, according to AAA, and hasn't necessarily allowed consumers to feel confident about spending on other things. It's still the lowest gas price for this time of year since 2021.

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

May 29: Q1 GDP second estimate and expected earnings from Best Buy (BBY), Foot Locker (FL), Kohl's (KSS), Costco (COST), Dell (DELL), Gap (GAP), Marvell Technology (MRVL), and Ulta Beauty (ULTA).
May 30: April Personal Consumption Expenditures (PCE) price index and final May University of Michigan Consumer Sentiment.
June 2: May ISM Manufacturing PMI^®, April construction spending, and expected earnings from Campbell Soup (CPB).
June 3: April factory orders, April Job Openings and Labor Turnover Survey (JOLTS), and expected earnings from Dollar General (DG), CrowdStrike (CRWD), and Hewlett Packard Enterprise (HPE).
June 4: May ISM Services PMI^® and expected earnings from Dollar Tree (DLTR).