Schwab Market Update

Published as of: June 17, 2025, 9:09 a.m. ET

(Tuesday market open) Nerves rattled by President Trump's early departure from an economic meeting to deal with the Middle East conflict, investors sent major indexes lower early Tuesday on concerns this could mean escalating tension. Adding to market fears, Trump called for the evacuation of Tehran. The reversal from Monday's rebound came as the Federal Reserve prepared to meet and May U.S. retail sales plunged a worse-than-expected 0.9%, reviving worries about consumer demand in a report that was mixed under the hood.

Analysts had expected a 0.6% drop, and retail sales excluding autos fell 0.3%. The government also lowered April retail sales figures. However, the so-called "control group" that's included in the government's gross domestic product (GDP) calculation rose 0.4% in May compared with a 0.3% expectation. "It was a mixed report," said Cooper Howard, director, fixed income strategy at the Schwab Center for Financial Research. "The control group was up more than expected but the advanced figure fell. Motor vehicles and parts were a big contributor to the decline." It's possible the weakness in automobiles could reflect demand getting pulled forward to earlier this year ahead of expected tariffs.

Typically, markets move little ahead of a Fed decision, but global events could mean volatile trading today as crude oil (/CL) bounced back nearly 2%. A primary fear is that the U.S. could get involved in the conflict. "Markets are on defense," said Kathy Jones, chief fixed income strategist at Schwab. Treasury yields fell as investors sought perceived safety, but so far, shipping traffic continues to flow through the Strait of Hormuz.

1. No rate move seen but projections loom large: Today's retail sales report gives the Fed fresh data to mull before it announces its rate decision and new economic and rate projections tomorrow. The market builds in virtually no chance of a rate move, but participants eagerly await updated projections from policy makers. The key question is whether the Fed, which built in two rate cuts this year when it last issued projections in March, sticks with that or dials back. There's a 14.5% chance of a July rate cut, and a 66% chance of one in September, according to the CME FedWatch Tool, but those could change depending on tomorrow's outcome. The Fed may be more likely to watch the control group figure from the retail sales report, not the headline, due to the control group's impact on GDP. The control group excludes sales from auto dealers, building materials stores, and gas stations. Interestingly, restaurant and bar sales fell 0.9%, the worst for that category since February 2023 and another sign of possible slowing services industry demand.
    
2. Inflation fixation as Fed meets: The focus of the Fed tomorrow will likely be on the updated inflation projection in the central bank's Summary of Economic Projections. This zeroing in on prices is despite signs of recent disinflation in the data. Goods inflation, for instance, is up modestly even with the impact of tariffs. "In March the median projection for core PCE was revised up from December’s projection, but we might see that reverse this week as disinflation in services might offset any potential goods inflation," said Collin Martin, director, fixed income strategy at the Schwab Center for Financial Research. Rate projections will also get a close look. "The median projection in March suggested two rate cuts by the end of this year; if two officials who projected two cuts revise their outlook to just one cut, the median projection would move down to just one cut by year end."
    
3. Data watch on jobless claims, foreign capital flows: This week is shortened for U.S. markets by Thursday's Juneteenth holiday. This affects the calendar, with weekly initial jobless claims due out tomorrow instead of Thursday. Claims have been on the rise the last three weeks to around 250,000 from their previous range of 220,000 to 230,000. This jobs slowdown is likely being watched by the Fed, though it's still a relatively new trend. Even so, it may be picking up on a longer-term trend in layoffs. "Year-to-date, we have seen nearly 700,000 job cut announcements, which compared to nearly 390,000 in the same period in 2024," noted Liz Ann Sonders, chief investment strategist at Schwab, citing data from Challenger, Gray, & Christmas. Another data point is tomorrow's April Treasury International Capital (TIC), sometimes overlooked by investors but more important in the current trade environment. It will provide some of the first solid data about foreign capital flows since tariff "liberation day" after recent concerns that the trade war might have weakened international demand for U.S. assets.

• Verve Therapeutics (VERV), a gene-editing startup, climbed 75% in pre-market trading when Eli Lilly (LLY) said it would buy the company for up to $1.3 billion. Lilly's shares fell 0.8% in the early going.
   
• First Solar (FSLR), Enphase Energy (ENPH), Sunrun (RUN), and SolarEdge Technologies (SEDG) plummeted 15% to 30% early Tuesday after the U.S. Senate's version of the budget bill maintained provisions to cut renewable energy incentives, CNBC reported.  
   
• T-Mobile (TMUS) fell 4.5% ahead of the open on reports that SoftBank had sold shares of the wireless network provider.
   
• The CBOE Volatility Index (VIX) jumped 5% to back above 20 amid rising Middle East tensions. It had fallen below 19 at times yesterday. This could signal choppier trading ahead.
   
• Bitcoin (/BTC) sank 2.8% and continues its recent roller coaster ride amid rising geopolitical worries. Shares of crypto-related names like Coinbase Global (COIN) and Strategy (MSTR) each fell around 2%.
   
• Lennar (LEN) rose 1.8% ahead of the open despite a mixed earnings outing late yesterday in which the home builder missed Wall Street's average earnings per share estimate while exceeding revenue consensus. In its release, Lennar cited "softer market conditions" that drove down its average sales price. Mortgage rates remained high and weakening consumer confidence also was a factor.
   
• Advanced Micro Devices (AMD) climbed another 1% in pre-market trading after a nearly 9% jump yesterday following the company's introduction of a new series of chips designed to compete in AI with products from rival Nvidia (NVDA).
   
• Microsoft (MSFT) fell nearly 1% ahead of the open after The Wall Street Journal reported that tensions between OpenAI and Microsoft are reaching "a boiling point."
   
• The Bank of Japan (BoJ) kept rates unchanged at its meeting and announced it would slow the tempo at which it will decrease its monthly bond purchases, Bloomberg reported. The benchmark rate remained 0.5%. The change in pace of bond purchases was designed to address rising bond market volatility.
   
• Today also brings an updated Atlanta Fed GDPNow estimate for second quarter gross domestic product (GDP) growth. The last estimate was 3.8%.
   
• Technically, the S&P 500's uptrend persists but momentum appears slower, judging from a modest negative divergence in the Relative Strength Index (RSI). "The technicals are still bullish from an intermediate-term perspective, but on a near-term basis … perhaps some caution is warranted, especially in light of the 20% rally off the April 7 lows," said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research.
   
• The 10-year Treasury note yield (TNX:CGI) yield hasn't felt much pressure from the Middle East conflict, rising yesterday despite decent demand for a 20-year auction. Historically, investors often gravitate toward Treasuries—which trade inversely to yields—amid geopolitical strife. But they may be looking past Middle East tensions to President Trump's self-imposed budget and trade deadlines next month.

The small-cap Russell 2000^® (RUT—candlesticks) bumped its head against technical resistance near the 200-day moving average of 2,175 (blue line) last week and remains below it. Momentum remains moderate, with the RSI (lower chart) just under 58. "While the intermediate-term technicals have seen incremental bullish improvement, but on a near-term basis, the index needs to clear resistance at the 200-day for bullish confirmation," Schwab's Peterson said. The index appears to be breaking out from a bullish inverse head and shoulders pattern on the chart, he added.

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

June 18: Fed rate decision, May housing starts, and May building permits.
June 19: U.S. markets closed for Juneteenth holiday observance.
June 20: May leading indicators and expected earnings from Accenture (ACN), CarMax (KMX), Darden Restaurants (DRI), and Kroger (KR).
June 23: May existing home sales and expected earnings from KB Home (KBH).
June 24: June Consumer Confidence and expected earnings from FedEx (FDX).