Micron Earnings, Guidance Top Estimates, PCE Ahead

**Keith Landsford** (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 Landsford, and here is Schwab's early look at the markets for Thursday, June 25th. Memory chip giant Micron's solid results late yesterday and May personal consumption expenditures or PCE price data at 8:30 a.m. Eastern time today likely set the tone for Wall Street. Micron got things started on a positive note. Its earnings strength could translate into positive performance for other chip stocks after two sessions of struggles, though there's no guarantee. Micron shares initially jumped more than 9% in post-market trading late Wednesday as earnings per share of $25.11 easily beat consensus of $20.83, while revenue of $41.46 billion topped consensus of $35.85 billion. Gross margin of 84.9% was up sequentially, and the company cited rapidly growing demand. For the current fiscal fourth quarter, Micron projects earnings per share between $30 and $32, well above consensus of $25.72 and revenue of $49 billion to $51 billion. That topped consensus of $43.58 billion per factsat. In another positive corporate news development after Wednesday's close, the Federal Reserve's annual bank stress tests confirm banks are well positioned to weather a severe recession and continue lending to households and businesses. Banks often announce dividend increases after passing this test. Looking ahead to PCE due at 8:30 a.m. Eastern time, analysts expect headline monthly growth of 0.5% and annual growth of 4%. Monthly core PCE, which excludes volatile food and energy, was expected to rise 0.3% with annual core PCE up 3.4%. Today also brings weekly initial jobs claims, expected to be 225,000 in line with recent readings, at still near three-month highs. The final government estimate of first-quarter gross domestic product, or GDP growth, also comes at 8:30 a.m. Eastern time and is seen remaining at 1.6% on an annualized basis, the same as the second estimate.
In data Wednesday, May, new home sales missed consensus by quite a bit at a seasonally adjusted annual rate of 580,000. They've been expected to total 627,000, up slightly from 626,000 in April, according to briefing.com. They fell 6.8% year over year with median sales prices flat.
Treasury yields could be influenced by inflation and GDP data. As of late Wednesday, the benchmark 10-year Treasury Note yield was down sharply at just above 4.40%, the lowest since May 11th, despite Wednesday's 5-year Treasury Note auction seeing soft demand. Weak housing data and lower oil prices might have pushed yields down. Shorter-term yields fell less, flattening the yield curve. A 7-year Treasury Note auction looms later today. The US dollar index continues hitting new 2026 highs, supported by ideas the Fed could hike rates at least once this year, though that's far from assured. A Fed rate hike is fully priced in by October, and there's a rising implied probability that a hike comes a month earlier at the September meeting, said Colin Martin, head of fixed-income research and strategy at the Schwab Center for Financial Research. We are not there yet. We need to see how the inflation outlook evolves over the next few months before we become more certain a hike is likely. Last week's Fed statement made it clear the committee favors its inflation mandate over its labor market mandate right now, given the recent strength in the labor market, and Fed Chairman Kevin Warsh repeatedly stated that the committee was unambiguous and unanimous in its commitment to bringing inflation down. The updated dot-plot of Fed rate expectations also showed that nine participants now project a hike this year. From a broader perspective, a bull market remains in place, supported by strong earnings and a resilient economy, though there are still underlying vulnerabilities beneath the surface, said Lizanne Saunders, Chief Investment Strategist at the Schwab Center for Financial Research. Major indexes finished flat to lower Wednesday after a flurry of buy-the-dip interests to start the session. Chip stocks mostly reversed their early gains to finish lower ahead of Micron's results, and a generally cautious risk-off attitude seemed to prevail ahead of PCE. The risk-off sentiment showed up in cryptocurrencies, where Bitcoin fell back below $60,000 in a 4% skid Wednesday that sent Bitcoin to 21-month lows intraday. That plunge hurt crypto-related stocks. Tuesday's meltdown in technology shares, particularly chips, looks less like a broad deterioration in fundamentals, and more like froth coming out of crowded AI and semiconductor positioning. The S&P 500 tech sector was up 27% over the last three months, making it the only sector to surpass S&P 500 index growth of 9.8% over that stretch. Seen in that light, recent pullbacks in tech seem unsurprising, as it's hard for any one sector to maintain that kind of premium to the broader market over a long period.