Morning in Arizona

Morning in Arizona
Rainbows over Canyonlands - Dave Stoker

The Headline Animator

Monday, December 21, 2015

Schwab Market Update

Posted: 12/21/2015 4:15 PM ET
Stocks Hold Gains to Start Holiday Week

In some relatively choppy action, U.S. equities managed to close higher on the first session of a Christmas-holiday shortened week in which the U.S. and many international markets will be closed on Friday and the US stock market will close early on Thursday. Treasuries were mostly higher amid an empty economic calendar, while gold advanced, the U.S. dollar was lower and Brent crude oil prices touched an 11-year low. In equity news, Dow member Walt Disney weighed on the blue chip index despite a record breaking debut of its latest Star Wars movie.

The Dow Jones Industrial Average (DJIA) increased 123 points (0.7%) to 17,252, the S&P 500 Index gained 16 points (0.8%) to 2,021, and the Nasdaq Composite advanced 46 points (0.9%) to 4,969. In moderate volume, 922 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil lost $0.25 to $35.81 per barrel and wholesale gasoline decreased $0.06 to $1.21 per gallon, while the Bloomberg gold spot price added $14.08 to $1,080.25 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% lower at 98.36.

Apple Inc. (AAPL $107) and Ericsson AB (ERIC $10) have reached a licensing agreement, settling a long-standing legal dispute surrounding mobile-device patents. Ericsson said the accord will focus on multiple areas of technology, including 5G development, wireless networking and video traffic management. As part of the 7-year agreement, Apple will make an initial payment to Ericsson and provide future royalties. Shares of both companies finished higher.

Walt Disney Co.'s (DIS $107) Star Wars: The Force Awakens saw a box office tally of $517 million globally. The debut shattered records, making the latest episode of the popular franchise top dog for any movie debut ever. Despite the news, shares of DIS were lower.

Economic calendar dormant, crude oil in focus

Treasuries were mostly higher, while the U.S. economic calendar was void of any major economic reports today. The yield on the 2-year note was nearly unchanged at 0.95%, while the yields on the 10-year note and the 30-year bond declined 1 basis point to 2.19% and 2.91%, respectively.

Crude oil prices continued to slide, with Brent touching intraday on an 11-year low at $36.05/barrel and WTI crude closing down at $35.81/barrel, as oversupply worries for the commodity were hit with a double-whammy after President Obama signed a bill to end the U.S. export ban on crude oil that was put in place during the 1970 shortages. The news comes on the heels of the Organization of Petroleum Exporting Countries' (OPEC) decision earlier this month not to cut production in an attempt to ensure its market share.

Amid the backdrop of the Christmas holiday shortened week in which the U.S. and many international markets will be closed on Friday and the US stock market will close early on Thursday, the economic calendar will shed some light on the housing and manufacturing scenes with the release of existing and new home sales reports coupled with a preliminary read on November durable goods orders, while the third and final look at 3Q GDP is slated for release tomorrow. As noted in the recent Schwab Market Perspective: What Was, What Is, and What May Be, some headwinds are keeping the U.S. economy from firing on all cylinders. Manufacturing weakened in the second half of the year according to the Institute for Supply Management (ISM) and while manufacturing is important and shouldn’t be ignored, it represents only 12% of US economic activity; while the export market is a relatively small part of overall gross domestic product (GDP). Read more at, and follow us on Twitter: @SchwabResearch.

Additionally, the consumer will be represented with the releases of the final University of Michigan Consumer Sentiment Index for December and personal income and spending figures for November.

Gains in Europe fade, Asia mostly higher

Europe's bid to bounce back following Friday's solid declines were dashed, as early gains in stocks quickly turned lower as the political uncertainty surrounding Span was too much for the bulls to handle, and as the pressure on energy stocks persisted in the midst of an 11-year low in crude oil prices. Meanwhile, technology stocks got a boost from the news of Ericsson's patent agreement with Apple. General elections over the weekend in Spain came to a confusing conclusion, as the ruling Partido Popular party failed to retain a majority in parliament, with strong showings from two new political movements, and as the vote fractured between four parties. As no particular party gained control of the majority of seats, a coalition will likely need to be formed between the groups, adding to the ambiguity surrounding the future in the nation's direction of government. The euro was slightly lower versus the U.S. dollar, while bond yields in the region were higher.

Stocks in Asia finished mostly higher, bouncing off early losses following the solid declines in the U.S. last week. Chinese equities advanced after one of the nation's top think tanks recommended monetary policy easing from the People's Bank of China (PBoC) next year, upping hopes of addition stimulus from the central bank, and as optimism of accelerated reforms by the government for state-owned enterprises (SOEs) within the energy space ran high. As well, the PBoC guided the reference rate for the yuan higher for the first time in nearly two weeks. However, Japanese stocks fell amid some strength in the yen, and continued overhang from last week's Bank of Japan monetary policy meeting that appeared to disappoint investors. Elsewhere, securities trading in Australia, South Korea and India were higher.

The international economic docket for tomorrow will be relatively light, offering the Leading Index from China, small business confidence from Japan and GfK Consumer Confidence from the U.K. and Germany.

Schwab Center for Financial Research - Market Analysis Group

©2015 Charles Schwab & Co., Inc., Member SIPC. All rights reserved.

Schwab Center for Financial Research ("SCFR") is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.

No comments: