AMD, Caterpillar, SpaceX and Job Openings Loom

**Keith Lansford** (0:05)
Welcome to the Schwab Market Update Podcast, where we prepare you for each trading day with a recap of recent news and a look at what's ahead.
I'm Keith Lansford, and here is Schwab's early look at the markets for Tuesday, August 4th. It's tempting to think earnings season has crested with 60% of S&P 500 companies reporting. That would be mistaken, though, as more than 140 firms line up this week to share results, including many in the closely followed chip industry. Software firm Palantir led things off late Monday with a solid base hit, rising 7% in post-market action after reporting results that beat consensus and guiding for better-than-expected third quarter revenues. It also raised its fiscal 2026 revenue estimate above the average Wall Street estimate and adjusted free cash-flow guidance upward. It cited growing AI demand. Palantir's results came after a banner day on Wall Street that saw all major indexes rise and volatility ease. The impetus was falling oil prices triggered by hopes for negotiations with Iran. However, Reuters reported that Iran denied any talks taking place. Earnings calendar widens this morning with giants like Caterpillar, McDonald's and Merck before transitioning this afternoon to advanced microdevices and SpaceX. Earnings from SpaceX come with shares down sharply since the June initial public offering or IPO, in part on worries about more shares soon hitting the market. An insider lockup expiration this Thursday puts more pressure on the company to soothe worries with earnings and guidance. Caterpillar and McDonald's have traveled different directions this year, with the fast-food giant mainly slumping and Caterpillar rallying at least until the last week or two. Obesity drugs and high gas prices hurt the fast-food industry, while industrial firms like Caterpillar benefited from the AI build-out. Caterpillar, however, suffered recently amid pushback from communities on data center construction and President Trump's announcement of new tariffs.
US comparable sales growth is key for McDonald's, briefing.com said. Investors appear hopeful that value items helped improve market share. US comparable sales growth was 3.9 percent in the first quarter year-over-year. Earnings later today from advanced micro-devices turn focus back to tech, as the giant chip firm looks to show investors that the heavy infrastructure spending keeps translating into strong profits. Any setback for AMD could affect the entire chip market, particularly its main competitor, NVIDIA. The concerns behind July's volatility in stocks related to the AI capex boom may not be resolved, said Michelle Gibley, Director of International Equity Research and Strategy at the Schwab Center for Financial Research. De-leveraging of speculative trades last week may have eased some of the momentum pressure, but it's important to remember that stocks went parabolic heading into July and reacted negatively to earnings beats in the tech sector, suggesting elevated expectations. One thing to listen for in earnings calls is how executives view possible cheaper competition from China. The potential for more competition from Chinese models and hardware makers at potentially much lower costs could reduce the return on investment and or the size of the addressable markets, Gibley said.
With 60% of S&P 500 companies reporting, blended earnings growth for the second quarter is expected to be around 47%, according to Faxset. That would be the highest in five years. Strong earnings support ideas that current valuations may be justified. In fact, earnings are growing so quickly, the valuations have fallen. The S&P 500's forward price to earnings or PE ratio is below 20, as Faxset said, down from 22 at times over the last year.
Economic data this week is all about jobs, starting today with the 10 a.m. Eastern time June job openings and labor turnover survey or JOLTS. Analysts expect around 7.45 million, down slightly from 7.59 million in May, but still relatively healthy. Friday's July Non-Farm Payrolls Report provides this week's crescendo. Analysts expect it to show 86,000 jobs created, up from 57,000 in June. In data yesterday, the July ISM Manufacturing PMI climbed to 55.6% from 53.3% in June. A reading above 50 depicts expansion and analysts had expected 53%.
The AI infrastructure buildout appears to be paying dividends for this report. In overseas news, the US and Japan announced a joint intervention to lift the Yen, their first since 1998, that appeared to ease some of the pressure on Treasuries, which move opposite of yields. The 10-year note yield fell 6 basis points but remained near recent highs at 4.69%. The dollar also fell. Before the intervention, there was concern Japan might unload some of its heavy US. Treasury holdings to finance Yen purchases, but the US stepped in to help. Crude oil remains in view following a post by President Trump that he postponed a planned attack in Iran to let negotiations proceed. Iran denied that the negotiations are happening, however, and the Strait of Hormuz remains virtually closed. On Monday, advanceors outpaced decliners by about a 3 to 1 ratio by midday. A 1.5% gain for the S&P 500 index took it to 7,600 for the first time since June. The index spent some time above that level and came within shouting distance of the all-time intraday high of 7,620 set on June 2nd. Interestingly, this came with only a 1% climb for chip stocks, a sign that the rally has broadened. More than 68% of S&P 500 stocks trade above their 200-day moving averages near the 2026 high of close to 72% reached last week. Overall, 8 of 11 S&P 500 sectors ended higher Monday, led by consumer discretionary, industrials and InfoTech. The only red sectors were defensive ones like utilities and health care. Energy got knocked around by lower oil prices. Looking at individual market movers on Monday, CoreWeave catapulted 19% lifted by optimism around AI data-centered demand and by new partnerships that extend its services. CoreWeave reports earnings next week. Hyperscalar stocks, Alphabet, Microsoft, Meta and Amazon advanced 4% to 6%, still receiving tailwinds from recent earnings that showed some evidence of AI return on investment. Lumentum surged 9% amid signs of strong AI spending and after a positive write-up last week from Barron's. Boeing soared 8% after receiving Federal Aviation Administration approval for its 737 MAX 7, a smaller jet with better fuel efficiency. Shares of Southwest, an airline expected to fly passengers in the plane soon, rose 4% on hopes the jet's efficiency can help margins. Shares of consumer firms including airlines, grocery stores, home builders, car makers, restaurants and delivery firms generally performed well Monday as yields and oil fell. Alibaba rose 4% after the firm unveiled its latest AI model as Chinese companies try to close the AI gap with the US. AstraZeneca fell nearly 7% after the Financial Times reported that it held early-stage discussions about a potential combination with Bristol-Myers Squibb. A deal would create a firm with a combined value of nearly $400 billion.