Schwab Market Update

Published as of: May 7, 2025, 9:11 a.m. ET

(Wednesday market open) Today brings a double feature of Walt Disney (DIS) delivering solid results this morning and the Federal Reserve not seen lighting any fireworks later.  Stocks got off to a rocky start this week on tough trade talk from President Trump but rose overnight on Disney and word that a top Chinese trade official will meet with U.S. Treasury Secretary Scott Bessent this weekend.

Investors might want to keep hopes in check for any major progress as trade negotiations begin and China warned the U.S. not to use the talks "as a smokescreen to continue coercion and extortion," according to media reports. Stocks spent the second half of April building in trade optimism. "We could be set-up for a 'sell on the news' once any type of trade development is announced," said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research "Even if we had all the details of the anticipated trade deals, we still don’t know what the economic impact will be, and the S&P is trading as if it's all clear once the deals are inked."

Still, today's sunrise seemed to brighten Wall Street, especially with Disney shares popping more than 6% as results beat analysts' expectations and guidance topped consensus views. The part of Disney's business that includes theme parks performed well, and Disney also reported a surprise jump in streaming subscribers after forecasting a modest decline. It's expecting a small rise in subscribers for the current quarter, too. This positive trend follows a shiny quarter for competitor Netflix (NFLX) and suggests a rising streaming tide lifting all boats.

1. Anchors away as Fed tracks inflation? With benign inflation data for March, markets sighed a little relief. But last week's relatively strong jobs report and Monday's ISM Services PMI^® for April put prices back on the front burner as the Fed meets. The services report featured a surge in the prices paid component, and followed consumer inflation expectations soaring in recent surveys. One interesting aspect of today's press conference by Fed Chairman Powell will be if he still believes inflation expectations are "well anchored," as he likes to say. Any sign of the boat drifting away would likely make him and other policy makers more hawkish, perhaps resulting in bearish remarks. As for the meeting outcome itself: "No policy change is expected as the committee awaits clarity on trade policy," said Kathy Jones, chief fixed income strategist at Schwab. Chances for a June cut fell to around 30% this morning, according to the CME FedWatch Tool.
    
2. Earnings outlook muffled as trade news dominates: With earnings season about 75% finished, results generally have impressed. However, the average analyst estimate for 2025 S&P 500 earnings has fallen 19 consecutive weeks, from around 15% at the end of last year to around 9.5% now, according to FactSet. Falling earnings estimates cast a shadow over stocks, particularly now that the market has rebounded so quickly from its April lows. With trade dominating the news and more companies suspending guidance and canceling investor meetings amid these unusual conditions, earnings concerns have started to nibble at the rally. Container tonnage from China to the United States "is really plunging to a significant degree," said Liz Ann Sonders, chief investment strategist at Schwab. China's April trade data are due tomorrow. Even a quick resolution wouldn't get ships turned around right away, meaning U.S. consumers could soon face challenges getting products they need. If that happens, it could mean further deterioration in consumer sentiment, an important factor in spending decisions that help drive earnings.
    
3. Direction lacking ahead of Fed, guidance may remain on hold: Powell may suggest more of the same waiting game lies ahead after keeping rates on pause so far this year. The market, meanwhile, is at an inflection point. Much of the recent rally reflected short covering and dip buying, not large investors taking massive new positions. With the market now about halfway back from its lows, the S&P 500 index (SPX) forward price-to-earnings (P/E) multiple is again above 20, historically high. Though earnings season has been decent and some recent data suggest the economy is holding up, enthusiasm to jump back in appears limited with earnings expectations trending down and trade policy unclear. Until companies see at least a couple of trade deals and start to understand the parameters, guidance could remain on hold and investors could stay cautious. "Tariff de-escalation would soothe markets, but uncertainty for businesses and consumers may linger," said Michelle Gibley, director of international research at the Schwab Center for Financial Research. "Frameworks or memorandums of understanding may not have details and could result in an extension of the 90-day pause past July 9. The average U.S. trade deal has taken 18 months to sign."

• Advanced Micro Devices (AMD) jumped nearly 2% after beating Wall Street's earnings and revenue consensus, driven by 57% growth in its data center segment. Guidance from the chip firm was in line with analysts' expectations. Gaming revenue fell 30% year over year. The strength in AMD shares didn't translate immediately into gains at Nvidia (NVDA), which was flat ahead of the open.
   
• Marvell Technology (MRVL) plunged 8.7% in pre-market trading. The data storage and network chip company cut the high end of its revenue forecast and decided to postpone its investor day given what it called the "uncertain" macroeconomic environment.
   
• Super Micro Computer (SMCI) dropped 5.7% in pre-market action after the company's earnings and revenue both fell short of Wall Street's consensus. Guidance also missed expectations. The company said some customers delayed making platform decisions in the quarter.
   
• Uber (UBER) put on the brakes, falling 4% despite the ride-hailing firm exceeding analysts' quarterly earnings expectations. Revenue fell short of the average Wall Street guess, however, while trips in the quarter rose 18% from a year ago. Competitor Lyft (LYFT) also saw shares fall ahead of the open.
   
• Wynn Resorts (WYNN) rose 2.8% despite missing analysts' earnings and revenue estimates.
   
• Rivian (RIVN) dropped 0.75% despite the EV maker posting its second straight quarterly profit and exceeding Wall Street's quarterly expectations. However, the company cut its full-year vehicle delivery expectations to between 40,000 and 46,000 vehicles from the prior range of 46,000 to 51,000.
   
• Novo Nordisk (NVO) rose more than 4% in pre-market trading after reporting better than expected earnings and despite a guidance reduction.
   
• Crypto values rebounded after a poor start to the week, with Bitcoin (/BTC) up nearly 2% and testing $97,000. It topped $98,000 earlier this month.
   
• The 10-year Treasury note yield fell slightly after strong demand in a 10-year note auction yesterday.
   
• Chinese stocks rose after China's central bank announced a rate cut and other stimulus measures.
   
• The SPX appeared to find support intraday Tuesday just above its 50-day moving average, now near 5,570. The SPX climbed above the 50-day average last week for the first time since late February but has stayed below the 200-day moving average since early March, the longest stretch below that since late 2022. "Technically, things look significantly better than they were in mid-April, but the rally has brought most of the major indexes within a couple percentage points of their respective 200-day simple moving averages," Schwab's Peterson said. "So, the near-term risk-reward is not great from a trading perspective."

Though major indexes backtracked to start the week, the S&P 500 index (SPX—purple line) is still up 10.76% over the last month, a strong rebound from 13-month lows recorded in early April. But the dollar index ($DXY—candlesticks) hasn't joined stocks in the rally and is down more than 4% from a month ago. This could reflect worries about possible tariff-induced inflation, recession fears, or ideas that overseas investors might shy from U.S. assets. Treasury prices also haven't kept up with Wall Street's rebound, another sign of trouble for U.S. assets.

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

May 8: Q1 productivity—preliminary and expected earnings from ConocoPhillips (COP), Anheuser-Busch (BUD), Shopify (SHOP), Warner Bros. Discovery (WBD), Coinbase Global (COIN), Lyft (LYFT), and McKesson (MCK).
May 9: Expected earnings from Enbridge (ENB).
May 12: Expected earnings from Hertz (HTZ).
May 13: April CPI and core CPI and expected earnings from JD.com (JD) and Under Armour (UAA).
May 14: Expected earnings from Cisco (CSCO).