Schwab Market Update
Stocks Up as War Fears Ease, Fed Sees Two Cuts
Published as of: June 20, 2025, 9:19 a.m. ET
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| The markets | Last price | Change | % change |
|---|---|---|---|
| S&P 500® index |
5,980.87 |
-1.85 |
-0.03% |
| Dow Jones Industrial Average® |
42,171.66 |
-44.14 |
-0.10% |
| Nasdaq Composite® |
19,546.27 |
+25.18 |
+0.13% |
| 10-year Treasury yield |
4.42% |
+0.03 |
-- |
| U.S. Dollar Index |
98.71 |
-0.20 |
-0.20% |
| Cboe Volatility Index® |
19.38 |
-2.79 |
-12.54% |
| WTI Crude Oil |
$75.11 |
-$0.03 |
-0.04% |
| Bitcoin |
$106,170 |
+$2,205 |
+2.17% |
(Friday market open) In a session suspended between the holiday and the weekend, stocks crept higher early with lots to digest. The Federal Reserve left rates unchanged Wednesday and still expects two rate cuts this year, while President Trump says he'll make a final decision whether to join the Middle East war within two weeks. Meanwhile, Fed Governor Christopher Waller made a splash early today and appeared to lift sentiment by telling CNBC the Fed should think about cutting rates as soon as July.
Though Wednesday's Fed meeting was short on fireworks, policymakers' updated economic projections might keep stagflation as a market buzzword, penciling in higher unemployment and higher inflation this year. The upshot could be a Federal Open Market Committee that's cautious to make policy changes anytime soon. "Seven members of the committee see no change in policy for this year and two expect only one cut," noted Kathy Jones, chief fixed income strategist at Schwab, in her analysis of the meeting. "Consequently, we would not be surprised if the Fed kept policy on hold even longer than the market has been anticipating."
Returning from a rare Thursday off, investors face earnings from Kroger (KR), Accenture (ACN), and Darden Restaurants (DRI), along with so-called "triple witching" when stock index futures, stock index options, and stock options expire. Traditionally, volatility climbs on such days, but it slipped a little this morning as fear of sudden U.S. participation in the war cooled. Looking back at Wednesday, major indexes ran into selling when Fed Chairman Jerome Powell sounded hawkish in his press conference. However, most sectors moved in a narrow range and crude oil (/CL) was subdued despite rising Middle East tensions. The market remains in wait-and-see mode but prepared for downside risk if the geopolitical outlook worsens.
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Three things to watch
- Fed keeps two cuts in dot plot, but risk tilts toward fewer: The Fed still sees the federal funds rate ending the year at 3.9%, unchanged from the March projection. Powell said the economy remains strong but vulnerable to possible tariff-driven inflation, and that current rates are in a good place for any needed adjustments once the central bank has a better understanding of tariffs. "Increases in tariffs this year are likely to push up prices and weigh on economic activity," Powell said. Odds of a rate cut in July were just 10% early Friday, according to the CME FedWatch Tool. Chances of a cut in September were 63%, but the risk appears to be toward fewer, not more, even as the Fed kept two in its dot plot of the likely rate path. "With inflation expected to remain elevated, that projection may be reduced to one or even none over the course of the next few meetings," Schwab's Jones said. Investors hear again from Powell next week when he testifies to Congress Tuesday and Wednesday. But Gov. Waller, appointed by President Trump, had the first word this morning, saying he doesn't think tariff inflation will be a big problem. "I think we're in the position that we could do this, and as early as July," Waller said, according to CNBC, referring to a rate cut.
- Housing data, earnings put focus on rates: As the Fed met this week, investors got new signals from the housing market with more on the way. The deluge began with results from home builder Lennar (LEN) late Monday. Although its revenue exceeded Wall Street's expectations, the company cited "softer market conditions." Its competitor KB Home (KBH) reports this coming Monday. These earnings come amid fresh signs of weakness as U.S. May housing starts fell to a new cycle low of 1.256 million on a seasonally adjusted annual basis and building permits dropped to 1.393 million. "It looks like high mortgage rates continue to weigh on the housing market," said Schwab's Jones. Potential home buyers might not get much help from the Fed, which left rates unchanged for the fourth straight meeting. The 30-year fixed mortgage rate recently was 6.81%, a four-week low but still elevated from late last year, according to Freddie Mac. Existing home sales next week could come under scrutiny for signs of homeowners giving up the keys. They've been reluctant because many have low mortgage rates, but it's a truism in housing that people who need to move eventually pack up.
- Confidence measures ahead remain key: Recent consumer sentiment measures improved but no upward trend is established yet. The coming week will provide more insight as investors await Tuesday's June consumer confidence report from the Conference Board and Friday's final June consumer sentiment data from the University of Michigan. "With two-thirds of U.S. GDP tied to consumer spending, consumer confidence remains key to the outlook—and the strength of the labor market is one of the most important supports for consumer confidence and consumption," said Liz Ann Sonders, chief investment strategist at Schwab, and Kevin Gordon, director, senior investment strategist at Schwab, in their mid-year outlook analysis. "Tariffs may raise prices of certain goods or cut into profits for businesses that don't pass on the tariff cost to customers via price increases. Higher prices may lower consumer demand, which could slow economic growth."
On the move
- Darden Restaurants (DRI) rose 2.7% in pre-market trading after narrowly beating Wall Street's consensus earnings and revenue estimates and hiking its dividend.
- Accenture (ACN) fell 5% ahead of the open even though the info tech services company surpassed Wall Street's earnings and revenue consensus. It also raised guidance, but investors appeared disappointed by underlying business trends.
- CarMax (KMX) soared 9.6% before the open as earnings per share and revenue topped analysts' consensus views amid strong used car demand.
- Tesla (TSLA) rose nearly 2% in pre-market trading ahead of its tentative plan to launch robotaxis in Austin this Sunday.
- Bitcoin (/BTC) climbed 2.1% in early trading as geopolitical risk eased slightly thanks to Trump giving negotiations with Iran more time. Cryptocurrencies had dropped earlier this week amid war worries.
- Coinbase (COIN) jumped 3% and Circle Internet Group (CRCL) climbed 14% in early trading after rising 16% and 33%, respectively, Wednesday after the Senate passed legislation that paves the way for stablecoin regulation. A House vote is still necessary and there are some differences between the two bills that need to be ironed out. A House passage is possible by end of summer, Reuters reported.
- IBM (IBM) eased almost 1% after closing at record highs for three straight sessions. Wednesday's gains came as Bank of America (BAC) raised its price target for IBM, citing the potential for additional AI-driven growth as well as growth in quantum computing.
More insights from Schwab
Washington ahead of weekend: In his latest Washington Wise podcast, Schwab's Michael Townsend, managing director of legislative and regulatory affairs, looks at the "One Big Beautiful Bill" and its implications and provides perspective on the latest news from D.C., including crypto legislation and who the next Fed chair might be.
" id="body_disclosure--media_disclosure--356571" >Washington ahead of weekend: In his latest Washington Wise podcast, Schwab's Michael Townsend, managing director of legislative and regulatory affairs, looks at the "One Big Beautiful Bill" and its implications and provides perspective on the latest news from D.C., including crypto legislation and who the next Fed chair might be.
Chart of the day
Data source: S&P Dow Jones Indices, Nasdaq, FTSE Russell. Chart source: thinkorswim® platform.
Past performance is no guarantee of future results.
For illustrative purposes only.
On Wednesday's Fed decision day, the S&P 500 index (SPX—candlesticks) and Nasdaq-100® (NDX—purple line) both rallied shortly after the Fed's announcement but quickly lost their gains and fell into the close. But the small-cap Russell 2000® index (RUT—blue line) managed to forge a moderate gain even though it, too, came down during Fed Chairman Jerome Powell's press conference as he sounded a cautious note about future rate cuts. Small cap stocks likely would benefit from a stronger U.S. dollar that sometimes accompanies elevated rates, though higher rates also mean higher borrowing costs that tend to hurt small businesses the most. Over time, small caps have often performed better when the dollar is firmer, though past isn't precedent.
The week ahead
Check out the Investors' Calendar for a summary of the top economic events and earnings reports on tap this week.
June 23: May existing home sales and expected earnings from KB Home (KBH).
June 24: June Consumer Confidence and expected earnings from FedEx (FDX).
June 25: May new home sales and expected earnings from Micron (MU).
June 26: May durable orders, Q1 GDP third estimate, and expected earnings from Nike (NKE), Walgreens Boots Alliance (WBA), and McCormick (MKC).
June 27: May PCE prices, May core PCE prices, and final June University of Michigan Consumer Sentiment.