Charles Schwab: On the MarketPosted: 11/7/2016 1:15 PM ET
Equities Jump on Election Eve
U.S. stocks are rallying, and Europe jumped, with the global markets reacting positively to the FBI's conclusion that no charges will be brought against presidential candidate Clinton regarding her email usage ahead of tomorrow's election. Treasuries are lower and the U.S. dollar is rallying, amid elevated Fed rate hike expectations and a quiet economic front. MGM and Sysco are jumping on their earnings reports, while Biogen and Ionis Pharmaceuticals reported upbeat trial results. Gold is falling and crude oil prices are little changed after a recent tumble.
At 12:51 p.m. ET, the Dow Jones Industrial Average is rising 1.9%, the S&P 500 Index is gaining 2.0%, and the Nasdaq Composite is advancing 2.3%. WTI crude oil is increasing $0.26 to $44.33 per barrel and Brent crude oil is ticking $0.07 higher to $45.65 per barrel, while wholesale gasoline is off $0.02 at $1.36 per gallon. Elsewhere, gold is falling $23.65 to $1,281.42 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is up 0.8% at 97.86.
MGM Resorts International (MGM $27) announced 3Q earnings-per-share (EPS) of $0.93, including some large one-time items related to its Borgata acquisition and its NV Energy exit that may be impacting comparability to the $0.29 FactSet estimate. Revenues rose 10.3% year-over-year (y/y) to $2.5 billion, north of the projected $2.4 billion. MGM is trading nicely higher.
Sysco Corp. (SYY $53) posted adjusted 1Q profits of $0.67 per share, exceeding the expected $0.58, with revenues gaining 11.2% y/y to $14.0 billion, versus the projected $13.9 billion. Shares are rallying.
First Data Corp. (FDC $15) reported 3Q EPS ex-items of $0.34, in line with estimates, as revenues rose 1.0% y/y to $2.9 billion, below the projected $3.0 billion. Shares are rallying as unexpected growth in the company's North American global business solutions segment is fostering positive reactions from analysts.
Biogen Inc. (BIIB $295) is solidly higher and Ionis Pharmaceuticals Inc. (IONS $32) is surging after the companies announced favorable trial results for their treatment of spinal muscular atrophy. The companies said it is preparing for the potential launch of the treatment in the U.S. possibly as early as the end of 2016 or the first quarter of 2017.
Domestic economic calendar light as election takes center stage
Treasuries are lower in afternoon action, with the economic calendar void of any major reports before the final hour of the trading session, when we will get the release of consumer credit, expected to show consumer borrowing was $17.5 billion during September, down from the $25.9 billion posted the month prior. The yield on the 2-year note is rising 3 basis points (bps) to 0.82%, the yield on the 10-year note is gaining 5 bps to 1.82%, and the 30-year bond rate is advancing 4 bps to 2.60%. Bond yields are gaining ground after giving back some of a recent rally last week. Interest rates have been buoyed by elevated December Fed rate hike expectations, which were bolstered by last week's monetary policy decision from the Federal Open Market Committee (FOMC) as discussed in the video by Schwab's Fixed Income Director Collin Martin, CFA, and Senior Derivatives Analyst Nathan Peterson titled, Fed Holds Steady on Rates: Can We Expect a Rate Hike by Year-End?, at www.schwab.com/insights. Also, Schwab's Chief Fixed Income Strategist, Kathy Jones offers analysis of the interest rate environment in her article, Are Bond Yields About to Rise?, at www.schwab.com/onbonds. Follow Kathy on Twitter: @kathyjones.
This week, the NFIB Small Business Optimism Index, JOLTS Job Openings and the preliminary University of Michigan's Consumer Sentiment Index will headline a light U.S. economic docket, while earnings season downshifts. However, the political front will likely garner the most attention and volatility is set to remain as the results from Tuesday's election, including how the House and Senate races play out, are digested and scrutinized by the markets.
As noted in the Schwab Market Perspective: Looking Past the Election, given the polling numbers and betting markets, the stock market appears to be expecting a Clinton win and continued gridlock, with at least the House remaining in Republican hands. If the results are quite different than expectations, market volatility could surge, but we suggest investors hold tight. Much as we saw following the Brexit vote, reacting in a kneejerk fashion can be detrimental to longer term performance. Read more at www.schwab.com/marketinsight and be sure to follow Schwab on Twitter: @schwabresearch. For more analysis on the election, Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, Election Night: How to Watch the Returns, as part of our election 2016 commentary at www.schwab.com/insights/category/election-2016, where you can also find timely analysis of The Stock Market and Election Cycles.
Europe gains ground
European equities finished broadly-higher, with traders reacting to the FBI's conclusion that no charges will be brought against U.S. presidential candidate Hillary Clinton as it recently reopened its probe into her private email usage while serving as Secretary of State. Financials rallied to lead the way, bolstered by a jump in shares of HSBC Holdings PLC. (HSBC $38) after Europe's largest bank, per Bloomberg, posted adjusted earnings that topped expectations. Ryanair Holdings PLC. (RYAAY $79) gained solid ground after the airline bested profit projections and announced a share repurchase program. In economic news, German factory orders unexpectedly dropped, while eurozone retail sales declined by a smaller amount than anticipated in September. The euro and British pound lost ground versus the U.S. dollar, while bond yields in the region traded mixed. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers analysis of the global economic landscape in his article, Recession Odds Pass Key Threshold, at www.schwab.com/oninternational, and follow Jeff on Twitter: @jeffreykleintop.
The U.K. FTSE 100 Index was up 1.7%, France's CAC-40 Index, Germany's DAX Index, and Switzerland's Swiss Market Index rose 1.9%, Spain's IBEX 35 Index gained 1.5%, and Italy's FTSE MIB Index rallied 2.6%.