Oil in Focus as Iran Addresses UN, Following Trump

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 Wednesday, September 23 While the tech-heavy NASDAQ Composite scored another record close Tuesday, the rest of the markets stalled as investors approached today's session still monitoring high-level geopolitical developments that might move oil prices. One highlight is tomorrow when President Trump is scheduled to meet China's President Xi Jinping at a bilateral summit in Washington, DC. The Trump-Xi meeting will focus on trade, AI safety, and Iranian crude, said Michelle Ghibli, Director of International Equity Research and Strategy at the Schwab Center for Financial Research. One positive outcome could be reciprocal tariff relief for US agricultural products and Chinese low-tech consumer goods. China has resumed oil imports after cutting back earlier in the Iran War, Ghibli added. In the longer run, this could mean tighter supplies if Chinese buying coincides with continued Middle East supply tangles. Oil prices declined Tuesday after Reuters reported that Iran said it might be willing to reopen the Strait of Hormuz if the US lifted its blockade of Iran. US representatives discussed matters with Iran at the UN Tuesday, even as Trump leveled new threats towards Iran in his UN speech Tuesday. Iran's president speaks at the UN today, another geopolitical event investors will likely concentrate on.

Geopolitics might take a backseat next week as jobs data arrive starting Tuesday with the August job openings and labor turnover survey or JOLTS. Next Friday features the September nonfarm payrolls report. Labor data looms amid signs of tightening in the jobs market, meaning fewer workers available to fill positions. If this persists, it could lead to faster wage growth, kindling inflation concerns. Those concerns didn't vanish despite the drop in crude oil and treasure yields. Earlier this week, Chicago Federal Reserve President Austin Goolsbee said that current elevated inflation reflects factors beyond energy prices, meaning the Fed may have to hike rates if it persists. Today features Fed Governor Michael Barr speaking on the economic outlook and housing at 10:05 a.m. Eastern Time.

Yesterday's $69 billion two-year Treasury note auction drew the highest yield in more than two years at 4.787 percent but also saw solid demand. Treasury yields inched up afterward. The action continues with five- and seven-year auctions today and tomorrow, respectively. Strong demand could potentially ease some of the pressure on yields, while weak demand could have the opposite effect. Treasuries were choppy yesterday amid Trump's messaging on Iran. While auctions are separate from the Treasury futures market, it appears the recent jump to 5 percent for the ten-year yield had a positive impact on buying interest. Buyers appear to be stepping in around 5 percent, which coincides with the prior high in 2023, said Nathan Peterson, director of derivative research and strategy at the Schwab Center for Financial Research. By late Tuesday, odds of another rate hike at the Fed's October meeting reached 55 percent, according to the CME FedWatch tool. Odds of a hike before year end were close to 90 percent. Earnings remain thin, but AutoZone drew attention early Tuesday when its quarterly revenue missed expectations. The company cited a difficult selling environment early in the quarter, but sounded optimistic about its growth strategies. KB Home reported late Tuesday, and earnings per share beat consensus. Revenue was in line, and shares were flat in initial post-market trading. Shares of homebuilders struggled recently amid housing market weakness, though they ticked up this week as yields fell. Earnings today include Sintas, General Mills and Cracker Barrel. Costco rolls out results late Thursday. Next week features some more prominent firms, including Micron and Nike. There's a smattering of data today, mainly the September S&P Global US. Manufacturing PMI soon after the open. Any headline above 50 marks expansion, and 53.9 was last month's figure. Consensus for today is 53.6.

Separately, the Fed's Richmond Fed Manufacturing Index dropped unexpectedly in September into negative territory for the first time in six months. Tomorrow's main numbers are initial jobless claims before the open and new home sales soon after. On Tuesday, major indexes finished mixed with the NASDAQ jumping again, but the S&P 500 index flat. Action remained somewhat narrow as more stocks made new lows than highs by midday. Advancers outpaced decliners, but just five of 11 S&P 500 sectors finished higher. Materials led the way, with mining shares lifted by rising copper prices. Copper hit a new record high above $6.92 a pound Tuesday on tight supplies. Weaker crude also helped copper amid hopes that falling oil prices might prevent an economic slowdown. InfoTech remained solid Tuesday, but so did staples and health care, often seen as defensive areas. Technically, the S&P 500 index bounced off several recent tests of support near the 50-day moving average of just above 7,600. However, none of these bounces have been particularly robust, and caution might accumulate if the index falls below support again. Volatility eased amid hopes for diplomatic progress. At 14.2 as of late Tuesday, the SIBO Volatility Index or VIX is tracking just above this month's long-term lows. A weak VIX suggests investor uncertainty is less prevalent. Checking today's individual market movers, Shopify jumped 7% after announcing the company will partner with Meta to use Meta's Muse AI agent for checkout with ShopPay at all Shopify stores. Memory chip stocks led the tech sector after President Trump reiterated support for AI in his UN speech. Software went the opposite way for the most part. Some energy refiner stocks fell after President Trump said he's considering a temporary ban on diesel exports. This comes as Republicans in close election fights called for the administration to ease energy prices.