Oil, Yields Loom Over Stocks Before Sentiment Data

Colette Auclair (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 Colette Eau Claire, and here is Schwab's Early Look at the Markets for Friday, October 9th. Although the first reports of third quarter peony season are beginning to trickle in, rising oil prices, elevated treasury yields, and ongoing geopolitical tensions will likely remain front and center today. The S&P 500 extended its pullback on Thursday after benchmark Brent crude prices surged to $104 per barrel. The oil price jump came amid increasing attacks on oil tankers in the Strait of Hormuz, and production concerns due to Hurricane Isaias, which shuttered 63% of all Gulf crude production as of Thursday afternoon, according to the Marine Minerals Administration. Despite the surge in oil prices, longer-term treasury yields retreated after above-average demand in yesterday's 30-year treasury auction and Wednesday's 10-year treasury auction. Meanwhile, Fed Governor Christopher Waller said Thursday that further rate hikes would likely be needed to bring inflation back down to 2 percent. The odds of at least one rate hike by year-end rose slightly to around 83 percent after Waller's comments, according to the CME FedWatch tool. While earnings and economic calendar remains relatively light today, investors will be closely watching the University of Michigan's Preliminary Consumer Sentiment Report and earnings from Delta Airlines this morning, while remarks from Kansas City Fed President Jeffrey Schmidt at the 2026 Kansas City Economic Outlook may draw attention later in the day. Consensus expects October's Preliminary Index of Consumer Sentiment to come in at 48, down slightly from September's 48.1. The index dropped 7 percent last month as consumers expressed concerns about business conditions, their personal finances and the threat of persistent inflation. Year ahead and long run inflation expectations will likely be in focus in the University of Michigan's data once again this month as the Fed continues its battle against rising consumer prices. In September, those figures rose to 4.6 percent and 3.4 percent, respectively. With airlines under pressure due to rising jet fuel prices, Delta Airlines is expected to report only a modest year-over-year increase in earnings per share and revenue before the bell today. Investors will be looking for insights into travel demand and the impact of rising fuel costs in the carrier's report. Airlines' fuel expenditures surged 60 percent from a year ago in August, according to a report released Monday by the Bureau of Transportation Statistics.

Turning to Thursday's economic data, weekly jobless claims came in below forecasts at just 197,000, continuing a multi-month trend of low layoffs across the country. While September's Teppit jobs report spooked some investors and renewed anxiety about AI-induced job losses, the labor market remains in a low-hire, low-fire pattern for now. Thus far, at a broad level, payroll growth has been disappointing relative to what is typically seen in an economic expansion. But at the same time, there has not been a major disruption to the labor market. Kevin Gordon, Head of Macro Research and Strategy at the Schwab Center for Financial Research, explained in a Wednesday article, AI has yet to cause broad labor market disruption, but hiring remains choppy and job losses are concentrated in AI-exposed industries. In other AI-related news, Samsung revealed its preliminary earnings guidance for the third quarter yesterday, projecting a 783% year-over-year profit surge driven by the AI memory boom. The company's South Korea-listed shares still dropped nearly 2.5%, however, as its profit projections slightly missed Wall Street's lofty consensus target. Time On Semiconductor Manufacturing Company, or TSMC, also released its monthly revenue report Thursday morning. The AI Bellwether's revenues jumped roughly 55% year-over-year in September, but fell 0.6% from August. Shares of the TSMC fell 3% after the report. Samsung and TSMC's reports failed to lift investor sentiment, as elevated expectations and macro pressure ultimately outweighed impressive headline growth. Investors appear to be increasingly focused on record spending commitments, and whether AI-driven revenue growth will ultimately translate into sustainable profits. Earnings season will now need to validate the market's recent resilience. Wall Street projects year-over-year S&P 500 earnings per share growth of 29.5% this quarter, according to Faxset data. If that forecast proves prescient, it will mark the third straight quarter of earnings growth above 25%.

Looking at Thursday's market movers, Chipotle surged 6.2% after the Financial Times reported Starbucks has explored a takeover of the fast-casual restaurant chain. Starbucks shares dipped on the news. PepsiCo popped 3.7% after topping Wall Street's third-quarter earnings and revenue estimates amid international strength, although the company cut its full-year profit outlook.

AI Link stocks were hit hard after Samsung and Taiwan Semiconductor failed to impress, despite strong pre-earnings results. OpenAI also reportedly told investors that its annualized revenue hit $50 billion at the end of September, lower than the $68 billion figure that was widely reported late last month. NVIDIA fell 2.9%, while Oracle, Intel, Micron Technology, Advanced Micro Devices, and SanDisk all dropped sharply. Although the S&P 500 struggled, 6 out of 11 of the indexes' sectors ended higher Thursday. Energy outperformed as crude prices surged, while InfoTech lagged. Market breadth also improved slightly, suggesting selling was concentrated in heavily-weighted tech stocks. Roughly 47% of S&P 500 stocks traded above their 200-day moving average, while 32% traded below their 50-day moving average.