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Tuesday, February 07, 2017

On the Market Posted: 2/7/2017 4:15 PM ET Investors Remain Unsure With a host of diverging earnings and economic data, as well as persistent political uncertainty on both sides of the pond in the mix, investors appeared skittish in today's action, with U.S. stocks finishing the day only modestly higher and near the flatline. Meanwhile, Treasuries finished modestly higher, crude oil prices fell, pressuring the energy sector, hawkish commentary from Fed voting member Harker helped the U.S. dollar rebound, and gold was lower. The Dow Jones Industrial Average (DJIA) increased 37 points (0.2%) to 20,090, the S&P 500 Index was a half-point higher at 2,293, and the Nasdaq Composite gained 11 points (0.2%) to 5,674. In moderate volume, 821 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil fell $0.84 to $52.17 per barrel and wholesale gasoline lost $0.02 to $1.49 per gallon. Elsewhere, the Bloomberg gold spot price lost $2.55 to $1,232.98 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% higher at 100.27 General Motors Co. (GM $35) reported 4Q earnings-per-share (EPS) ex-items of $1.28, above the FactSet estimate of $1.17, with automotive revenues rising 9.2% year-over-year (y/y) to $41.2 billion, versus the projected $40.3 billion. GM affirmed its 2017 EPS guidance that was well above expectations. Shares were lower despite the results, which were preliminarily reported in January and included y/y margin deterioration in its key North American segment, along with in China, appearing to cause some concern among analysts. Also, the political uneasiness in the U.S. and Europe may be fostering some uncertainty. Michael Kors Holdings Ltd. (KORS $37) posted fiscal 3Q profits of $1.64 per share, one penny above estimates, with revenues decreasing 3.2% y/y to $1.4 billion, roughly in line with expectations. 3Q same-store sales fell 6.9% y/y, versus the projected 4.1% drop. KORS issued 4Q and full-year guidance that severely missed the Street's forecasts. Shares fell sharply. Gap Inc. (GPS $23) raised its full-year EPS outlook after reporting stronger-than-expected 4Q revenues of $4.4 billion and providing a forecast for 4Q earnings that exceeded estimates. GPS traded to the downside as the report was accompanied by a smaller-than-expected rise in January same-store sales. Trade deficit shrinks more than expected The trade balance (chart) showed that the deficit came in at $44.3 billion in December, compared to the Bloomberg estimate of $45.0 billion. November's deficit was revised to $45.7 billion from the $45.2 billion posted earlier. Exports rose 2.7% month-over-month (m/m) to $190.7 billion, while imports gained 1.5% to $235.0 billion. The Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, dipped to a level of 5.50 million jobs available to be filled in December, from November's downwardly revised 5.51 million level, and below forecasts of 5.58 million. The hiring rate remained at November's 3.6% and the separation rate dipped to 3.4% from 3.5%. Consumer credit, released in the final hour of trading, showed consumer borrowing advanced by $14.2 billion during December, the smallest increase since 2013, compared to the $20.0 billion forecast of economists polled by Bloomberg, while November's figure was adjusted upward to an increase of $25.2 billion from the originally reported $24.5 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, climbed by $11.8 billion, while revolving debt, which includes credit cards, rose by $2.4 billion. Treasuries finished mostly higher, as the yield on the 2-year note was flat at 1.15%, while the yields on the 10-year note and the 30-year bond declined 3 basis points to 2.38% and 3.02%, respectively. For a look at the bond markets, see Schwab's Director of Income Planning, Rob Williams', CFP, and Senior Research Analyst, Cooper Howard's, CFA, latest article, , Short-Term Bonds: Why They Could Outperform As Interest Rates Rise, at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch. Treasury yields have moderated as of late but continue to hold onto their post-election jumps, the U.S. Dollar Index recently pulled back to more than a two-month low, and the stock markets are back near record highs after a recent pullback. U.S. political risk has ramped up with the global markets skittish toward President Donald Trump's global trade and immigration policies and the lack of details on his plans for infrastructure spending and tax cuts, while global economic data has been on the positive side and last week's Fed decision fostered a relatively dovish takeaway from the markets. For a look at these market drivers, see Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, 5 Themes to Watch as the Trump Era Begins, at www.schwab.com/insights. Also, Schwab’s Chief Investment Strategist Liz Ann Sonders offers analysis of the Fed's monetary policy decision in her latest article, Fed Leaves Rates Unchanged, while noting in Rise Up: Dow 20k Fails to Thrill Individual Investors, that individual sentiment has become less bullish, while other measures show highly elevated optimism. She adds that extremely low volatility isn't likely to persist, but the bull market is. Read more at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders. Also, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers his latest article, Simple Indicators In A Complex World, noting that while markets may exhibit increasing volatility, we believe the bull market remains intact supported by tangible and effective indicators of global growth. For more useful indicators see Jeff's article, Five Reasons to Stay Invested Despite Heightened Uncertainty. Read these articles at www.schwab.com/oninternational, and follow Jeff on Twitter: @jeffreykleintop. Europe turns mixed late in the session European equities finished mixed, with solid gains in basic materials, technology and healthcare issues being met with drops in oil & gas and financial stocks following some disappointing earnings reports. The euro came under pressure versus the U.S. dollar, but the British pound reversed sharply to the upside. The pound's wild ride came as Bank of England (BoE) member Kristin Forbes said if the U.K. economy continues on its current trajectory, accelerating inflation may push her to vote for a rate hike, per Bloomberg. The markets showed some resiliency for most of the session in the face of some disappointing economic data, as well as festering political uneasiness on both sides of the pond. For analysis of the U.S. and European political fronts, see Schwab's Jeffrey Kleintop's, CFA, article, President Trump and Global Trade: How Will Campaign Promises Play Out? and Director of International Research, Michelle Gibley's, CFA, article, Europe Votes: Could More Countries Reject the EU? at www.schwab.com/oninternational. German industrial production unexpectedly fell in December and U.K. housing prices surprisingly declined last month. Bond yields in the region finished mostly lower. For global market investing analysis, see Schwab's Jeffrey Kleintop's, CFA, articles, The CURE for a calm Market: Four risks for 2017, and 5 Reasons International Stocks May Underperform In 2017. Read these articles at www.schwab.com/oninternational. Stocks in Asia finished mostly lower following yesterday's declines in the U.S. and Europe as political uneasiness in both regions continued to foster global market uneasiness. Japanese securities declined, with the yen holding onto yesterday's rally amid increased risk aversion. Weakness in energy issues amid crude oil's decline, and lingering liquidity concerns hamstrung stocks in China and Hong Kong, while Australian equities ticked slightly higher, led by strength in industrials and basic materials issues, and as the Reserve Bank of Australia kept its monetary policy unchanged as expected. Stocks in South Korea and India traded to the downside. For our analysis of the global markets, see Schwab's Director of International Research, Michelle Gibley's, CFA, articles, Currency Hedging: 5 Things You Need to Know and Emerging Markets: Why They Deserve a Place in Your Portfolio at www.schwab.com/oninternational, and be sure to check out our release, Why Your Portfolio Needs International Stocks—Despite 2017 Risks at www.schwab.com/insights. Tomorrow's international economic calendar will be light, with reports slated for release to include Japan's trade balance and industrial production from Spain. Also on tap, the Reserve Bank of India will meet, with economists forecasting a 25 bp reduction to its benchmark interest rate.

On the Market
Posted: 2/7/2017 4:15 PM ET

On the Market
Posted: 2/7/2017 4:15 PM ET

Investors Remain Unsure

With a host of diverging earnings and economic data, as well as persistent political uncertainty on both sides of the pond in the mix, investors appeared skittish in today's action, with U.S. stocks finishing the day only modestly higher and near the flatline. Meanwhile, Treasuries finished modestly higher, crude oil prices fell, pressuring the energy sector, hawkish commentary from Fed voting member Harker helped the U.S. dollar rebound, and gold was lower.

The Dow Jones Industrial Average (DJIA) increased 37 points (0.2%) to 20,090, the S&P 500 Index was a half-point higher at 2,293, and the Nasdaq Composite gained 11 points (0.2%) to 5,674. In moderate volume, 821 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil fell $0.84 to $52.17 per barrel and wholesale gasoline lost $0.02 to $1.49 per gallon. Elsewhere, the Bloomberg gold spot price lost $2.55 to $1,232.98 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% higher at 100.27

General Motors Co. (GM $35) reported 4Q earnings-per-share (EPS) ex-items of $1.28, above the FactSet estimate of $1.17, with automotive revenues rising 9.2% year-over-year (y/y) to $41.2 billion, versus the projected $40.3 billion. GM affirmed its 2017 EPS guidance that was well above expectations. Shares were lower despite the results, which were preliminarily reported in January and included y/y margin deterioration in its key North American segment, along with in China, appearing to cause some concern among analysts. Also, the political uneasiness in the U.S. and Europe may be fostering some uncertainty.

Michael Kors Holdings Ltd. (KORS $37) posted fiscal 3Q profits of $1.64 per share, one penny above estimates, with revenues decreasing 3.2% y/y to $1.4 billion, roughly in line with expectations. 3Q same-store sales fell 6.9% y/y, versus the projected 4.1% drop. KORS issued 4Q and full-year guidance that severely missed the Street's forecasts. Shares fell sharply.

Gap Inc. (GPS $23) raised its full-year EPS outlook after reporting stronger-than-expected 4Q revenues of $4.4 billion and providing a forecast for 4Q earnings that exceeded estimates. GPS traded to the downside as the report was accompanied by a smaller-than-expected rise in January same-store sales. 

Trade deficit shrinks more than expected

The trade balance (chart) showed that the deficit came in at $44.3 billion in December, compared to the Bloomberg estimate of $45.0 billion. November's deficit was revised to $45.7 billion from the $45.2 billion posted earlier. Exports rose 2.7% month-over-month (m/m) to $190.7 billion, while imports gained 1.5% to $235.0 billion.

The Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, dipped to a level of 5.50 million jobs available to be filled in December, from November's downwardly revised 5.51 million level, and below forecasts of 5.58 million. The hiring rate remained at November's 3.6% and the separation rate dipped to 3.4% from 3.5%.

Consumer credit, released in the final hour of trading, showed consumer borrowing advanced by $14.2 billion during December, the smallest increase since 2013, compared to the $20.0 billion forecast of economists polled by Bloomberg, while November's figure was adjusted upward to an increase of $25.2 billion from the originally reported $24.5 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, climbed by $11.8 billion, while revolving debt, which includes credit cards, rose by $2.4 billion.

Treasuries finished mostly higher, as the yield on the 2-year note was flat at 1.15%, while the yields on the 10-year note and the 30-year bond declined 3 basis points to 2.38% and 3.02%, respectively. For a look at the bond markets, see Schwab's Director of Income Planning, Rob Williams', CFP, and Senior Research Analyst, Cooper Howard's, CFA, latest article, , Short-Term Bonds: Why They Could Outperform As Interest Rates Rise, at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch.

Treasury yields have moderated as of late but continue to hold onto their post-election jumps, the U.S. Dollar Index recently pulled back to more than a two-month low, and the stock markets are back near record highs after a recent pullback. U.S. political risk has ramped up with the global markets skittish toward President Donald Trump's global trade and immigration policies and the lack of details on his plans for infrastructure spending and tax cuts, while global economic data has been on the positive side and last week's Fed decision fostered a relatively dovish takeaway from the markets.

For a look at these market drivers, see Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, 5 Themes to Watch as the Trump Era Begins, at www.schwab.com/insights. Also, Schwab’s Chief Investment Strategist Liz Ann Sonders offers analysis of the Fed's monetary policy decision in her latest article, Fed Leaves Rates Unchanged, while noting in Rise Up: Dow 20k Fails to Thrill Individual Investors, that individual sentiment has become less bullish, while other measures show highly elevated optimism. She adds that extremely low volatility isn't likely to persist, but the bull market is. Read more at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders.

Also, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers his latest article, Simple Indicators In A Complex World, noting that while markets may exhibit increasing volatility, we believe the bull market remains intact supported by tangible and effective indicators of global growth. For more useful indicators see Jeff's article, Five Reasons to Stay Invested Despite Heightened Uncertainty. Read these articles at www.schwab.com/oninternational, and follow Jeff on Twitter: @jeffreykleintop.

Europe turns mixed late in the session

European equities finished mixed, with solid gains in basic materials, technology and healthcare issues being met with drops in oil & gas and financial stocks following some disappointing earnings reports. The euro came under pressure versus the U.S. dollar, but the British pound reversed sharply to the upside. The pound's wild ride came as Bank of England (BoE) member Kristin Forbes said if the U.K. economy continues on its current trajectory, accelerating inflation may push her to vote for a rate hike, per Bloomberg. The markets showed some resiliency for most of the session in the face of some disappointing economic data, as well as festering political uneasiness on both sides of the pond. For analysis of the U.S. and European political fronts, see Schwab's Jeffrey Kleintop's, CFA, article, President Trump and Global Trade: How Will Campaign Promises Play Out? and Director of International Research, Michelle Gibley's, CFA, article, Europe Votes: Could More Countries Reject the EU? at www.schwab.com/oninternational. German industrial production unexpectedly fell in December and U.K. housing prices surprisingly declined last month. Bond yields in the region finished mostly lower.

For global market investing analysis, see Schwab's Jeffrey Kleintop's, CFA, articles, The CURE for a calm Market: Four risks for 2017, and 5 Reasons International Stocks May Underperform In 2017. Read these articles at www.schwab.com/oninternational.

Stocks in Asia finished mostly lower following yesterday's declines in the U.S. and Europe as political uneasiness in both regions continued to foster global market uneasiness. Japanese securities declined, with the yen holding onto yesterday's rally amid increased risk aversion. Weakness in energy issues amid crude oil's decline, and lingering liquidity concerns hamstrung stocks in China and Hong Kong, while Australian equities ticked slightly higher, led by strength in industrials and basic materials issues, and as the Reserve Bank of Australia kept its monetary policy unchanged as expected. Stocks in South Korea and India traded to the downside. For our analysis of the global markets, see Schwab's Director of International Research, Michelle Gibley's, CFA, articles, Currency Hedging: 5 Things You Need to Know and Emerging Markets: Why They Deserve a Place in Your Portfolio at www.schwab.com/oninternational, and be sure to check out our release, Why Your Portfolio Needs International Stocks—Despite 2017 Risks at www.schwab.com/insights.

Tomorrow's international economic calendar will be light, with reports slated for release to include Japan's trade balance and industrial production from Spain. Also on tap, the Reserve Bank of India will meet, with economists forecasting a 25 bp reduction to its benchmark interest rate.
With a host of diverging earnings and economic data, as well as persistent political uncertainty on both sides of the pond in the mix, investors appeared skittish in today's action, with U.S. stocks finishing the day only modestly higher and near the flatline. Meanwhile, Treasuries finished modestly higher, crude oil prices fell, pressuring the energy sector, hawkish commentary from Fed voting member Harker helped the U.S. dollar rebound, and gold was lower.

The Dow Jones Industrial Average (DJIA) increased 37 points (0.2%) to 20,090, the S&P 500 Index was a half-point higher at 2,293, and the Nasdaq Composite gained 11 points (0.2%) to 5,674. In moderate volume, 821 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil fell $0.84 to $52.17 per barrel and wholesale gasoline lost $0.02 to $1.49 per gallon. Elsewhere, the Bloomberg gold spot price lost $2.55 to $1,232.98 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% higher at 100.27

General Motors Co. (GM $35) reported 4Q earnings-per-share (EPS) ex-items of $1.28, above the FactSet estimate of $1.17, with automotive revenues rising 9.2% year-over-year (y/y) to $41.2 billion, versus the projected $40.3 billion. GM affirmed its 2017 EPS guidance that was well above expectations. Shares were lower despite the results, which were preliminarily reported in January and included y/y margin deterioration in its key North American segment, along with in China, appearing to cause some concern among analysts. Also, the political uneasiness in the U.S. and Europe may be fostering some uncertainty.

Michael Kors Holdings Ltd. (KORS $37) posted fiscal 3Q profits of $1.64 per share, one penny above estimates, with revenues decreasing 3.2% y/y to $1.4 billion, roughly in line with expectations. 3Q same-store sales fell 6.9% y/y, versus the projected 4.1% drop. KORS issued 4Q and full-year guidance that severely missed the Street's forecasts. Shares fell sharply.

Gap Inc. (GPS $23) raised its full-year EPS outlook after reporting stronger-than-expected 4Q revenues of $4.4 billion and providing a forecast for 4Q earnings that exceeded estimates. GPS traded to the downside as the report was accompanied by a smaller-than-expected rise in January same-store sales. 

Trade deficit shrinks more than expected

The trade balance (chart) showed that the deficit came in at $44.3 billion in December, compared to the Bloomberg estimate of $45.0 billion. November's deficit was revised to $45.7 billion from the $45.2 billion posted earlier. Exports rose 2.7% month-over-month (m/m) to $190.7 billion, while imports gained 1.5% to $235.0 billion.

The Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, dipped to a level of 5.50 million jobs available to be filled in December, from November's downwardly revised 5.51 million level, and below forecasts of 5.58 million. The hiring rate remained at November's 3.6% and the separation rate dipped to 3.4% from 3.5%.

Consumer credit, released in the final hour of trading, showed consumer borrowing advanced by $14.2 billion during December, the smallest increase since 2013, compared to the $20.0 billion forecast of economists polled by Bloomberg, while November's figure was adjusted upward to an increase of $25.2 billion from the originally reported $24.5 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, climbed by $11.8 billion, while revolving debt, which includes credit cards, rose by $2.4 billion.

Treasuries finished mostly higher, as the yield on the 2-year note was flat at 1.15%, while the yields on the 10-year note and the 30-year bond declined 3 basis points to 2.38% and 3.02%, respectively. For a look at the bond markets, see Schwab's Director of Income Planning, Rob Williams', CFP, and Senior Research Analyst, Cooper Howard's, CFA, latest article, , Short-Term Bonds: Why They Could Outperform As Interest Rates Rise, at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch.

Treasury yields have moderated as of late but continue to hold onto their post-election jumps, the U.S. Dollar Index recently pulled back to more than a two-month low, and the stock markets are back near record highs after a recent pullback. U.S. political risk has ramped up with the global markets skittish toward President Donald Trump's global trade and immigration policies and the lack of details on his plans for infrastructure spending and tax cuts, while global economic data has been on the positive side and last week's Fed decision fostered a relatively dovish takeaway from the markets.

For a look at these market drivers, see Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, 5 Themes to Watch as the Trump Era Begins, at www.schwab.com/insights. Also, Schwab’s Chief Investment Strategist Liz Ann Sonders offers analysis of the Fed's monetary policy decision in her latest article, Fed Leaves Rates Unchanged, while noting in Rise Up: Dow 20k Fails to Thrill Individual Investors, that individual sentiment has become less bullish, while other measures show highly elevated optimism. She adds that extremely low volatility isn't likely to persist, but the bull market is. Read more at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders.

Also, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers his latest article, Simple Indicators In A Complex World, noting that while markets may exhibit increasing volatility, we believe the bull market remains intact supported by tangible and effective indicators of global growth. For more useful indicators see Jeff's article, Five Reasons to Stay Invested Despite Heightened Uncertainty. Read these articles at www.schwab.com/oninternational, and follow Jeff on Twitter: @jeffreykleintop.

Europe turns mixed late in the session

European equities finished mixed, with solid gains in basic materials, technology and healthcare issues being met with drops in oil & gas and financial stocks following some disappointing earnings reports. The euro came under pressure versus the U.S. dollar, but the British pound reversed sharply to the upside. The pound's wild ride came as Bank of England (BoE) member Kristin Forbes said if the U.K. economy continues on its current trajectory, accelerating inflation may push her to vote for a rate hike, per Bloomberg. The markets showed some resiliency for most of the session in the face of some disappointing economic data, as well as festering political uneasiness on both sides of the pond. For analysis of the U.S. and European political fronts, see Schwab's Jeffrey Kleintop's, CFA, article, President Trump and Global Trade: How Will Campaign Promises Play Out? and Director of International Research, Michelle Gibley's, CFA, article, Europe Votes: Could More Countries Reject the EU? at www.schwab.com/oninternational. German industrial production unexpectedly fell in December and U.K. housing prices surprisingly declined last month. Bond yields in the region finished mostly lower.

For global market investing analysis, see Schwab's Jeffrey Kleintop's, CFA, articles, The CURE for a calm Market: Four risks for 2017, and 5 Reasons International Stocks May Underperform In 2017. Read these articles at www.schwab.com/oninternational.

Stocks in Asia finished mostly lower following yesterday's declines in the U.S. and Europe as political uneasiness in both regions continued to foster global market uneasiness. Japanese securities declined, with the yen holding onto yesterday's rally amid increased risk aversion. Weakness in energy issues amid crude oil's decline, and lingering liquidity concerns hamstrung stocks in China and Hong Kong, while Australian equities ticked slightly higher, led by strength in industrials and basic materials issues, and as the Reserve Bank of Australia kept its monetary policy unchanged as expected. Stocks in South Korea and India traded to the downside. For our analysis of the global markets, see Schwab's Director of International Research, Michelle Gibley's, CFA, articles, Currency Hedging: 5 Things You Need to Know and Emerging Markets: Why They Deserve a Place in Your Portfolio at www.schwab.com/oninternational, and be sure to check out our release, Why Your Portfolio Needs International Stocks—Despite 2017 Risks at www.schwab.com/insights.

Tomorrow's international economic calendar will be light, with reports slated for release to include Japan's trade balance and industrial production from Spain. Also on tap, the Reserve Bank of India will meet, with economists forecasting a 25 bp reduction to its benchmark interest rate.

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