Morning in Arizona

Morning in Arizona

The Headline Animator

Monday, February 13, 2017

Record Run Continues

Charles Schwab: On the Market
Posted: 2/13/2017 4:15 PM ET

Record Run Continues

U.S. equities added to a recent rally, with optimism regarding President Trump's reflationary policies overshadowing exacerbated global trade and immigration concerns. Treasury yields and the U.S. dollar were higher ahead of a week of key economic reports, including Fed Chair Yellen's Congressional testimony later in the week. Crude oil pulled back from a recent jump and gold lost ground.

The Dow Jones Industrial Average (DJIA) advanced 143 points (0.7%) to 20,412, the S&P 500 Index gained 12 points (0.5%) to 2,328, and the Nasdaq Composite added 30 points (0.5%) to 5,764. In moderate volume, 798 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil decreased $0.93 to $52.93 per barrel and wholesale gasoline lost $0.04 to $1.54 per gallon. Elsewhere, the Bloomberg gold spot price fell $7.15 to $1,226.47 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% higher at 100.99.

Restaurant Brands International Inc. (QSR $54) reported 4Q earnings-per-share (EPS) ex-items of $0.44, above the FactSet estimate of $0.42, with revenues rising 5.1% year-over-over (y/y) to $1.1 billion, roughly in line with expectations. The parent of Burger King and Tim Hortons increased its dividend to $0.18 per share, from $0.17 per share. Shares were solidly higher.

Teva Pharmaceutical Industries Ltd. (TEVA $34) posted 4Q EPS ex-items of $1.38, north of the projected $1.36, as revenues rose 33.0% y/y to $6.5 billion, including results from the recent acquisition of Actavis Generics, topping the expected $6.3 billion. TEVA reaffirmed its 2017 guidance and shares were noticeably higher.

Hain Celestial Group Inc. (HAIN $35) fell after the U.S. Securities and Exchange Commission (SEC) has issued a formal order of investigation of the company's previously disclosed internal probe of its accounting practices pertaining to concessions that were granted to certain U.S. distributors. HAIN said it is in the process of responding to the SEC's requests for information and intends to cooperate fully.

Treasury yields gaining ground as economic calendar set to heat up this week

Treasuries were lower amid a dormant economic calendar, as the yield on the 2-year note was flat at 1.19%, the yield on the 10-year note ticked 2 basis points (bps) higher to 2.43%, and the 30-year bond rate gained 3 bps to 3.03%. 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.

The week's economic calendar will begin tomorrow with the NFIB Small Business Optimism Index, with economists expecting a reading of 105.0 for January, a slight decline from the prior month's 105.8, as well as the Producer Price Index (PPI), forecasted to have increased 0.3% during January, matching that seen in December, as well as a 0.2% rise in the core rate, which excludes food and energy, also mirroring that in the previous month. Other key reports slated for the week that will provide a good read on many key contributors to economic output include the Consumer Price Index (CPI), retail sales, industrial production, the Leading Indexhousing starts and building permits, and regional manufacturing reports out of New York and Philadelphia. Finally, Federal Reserve Chairwoman Janet Yellen will deliver her semi-annual monetary policy testimony before Congress.

As noted in the latest Schwab Market Perspective: Not So Fast!, investor caution is rising, which contrarily should help the bull market continue. Economic data has continued to beat expectations, but the number of upside surprises may start to level off, and investor enthusiasm toward potential new policies from Washington could wane as political realities set in. International growth appears stable, but acceleration doesn't seem to be on the horizon, while trade tensions pose a risk to global economies and markets. Read more at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch.

The stock markets are at record highs, while the U.S. dollar and Treasury yields have regained some upward momentum, with President Donald Trump pledging a "phenomenal" tax plan in the coming weeks, the Fed holding off on further rate hikes, and economic data remaining solid. For further analysis, see Schwab’s Chief Investment Strategist Liz Ann Sonders' and Schwab's Vice President of Trading and Derivatives, Randy Frederick's latest video, What Can Investors Make of Latest Fed Meeting and January Labor Report?, at www.schwab.com/insights.

Finally, 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 is being 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 and Asia higher as global markets advance

European equities moved higher, joining a global market advance despite festering political concerns in the region and in the U.S., while also showing some resiliency in the face of a flare-up in geopolitical focus as North Korea conducted ballistic missile tests. For analysis of these issues, 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, release, Europe Votes: Could More Countries Reject the EU? at www.schwab.com/oninternational. Basic materials led a broad-based advance, with the Stoxx Europe 600 Index posting a fifth-straight winning session and hitting the highest level since December 2015. The markets digested a mixed eurozone economic forecast from the European Commission and awaited economic data in the U.S. later this week, including Congressional monetary policy testimony from Fed Chairwoman Janet Yellen. The euro was lower and the British pound ticked higher versus the U.S. dollar, while bond yields in the region finished mixed.

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 higher, with the markets showing some resiliency in the face of continued political uncertainty in the U.S. and Europe, as well as flared-up geopolitical concerns as North Korea conducted ballistic missile tests. The markets gained ground following the late-week rally in the U.S. with stocks at record highs. Japanese equities advanced, as the yen continued to give back a recent rally. Also, stocks gained ground as the meeting between Prime Minister Abe and U.S. President Donald Trump over the weekend did not fan any trade concerns, while the nation reported 4Q GDP growth of 1.0% on a quarter-over-quarter annualized basis, after the upwardly revised 1.4% increase in 3Q and compared to expectations of a 1.1% expansion.

Stocks in China and Hong Kong both gained ground, and those traded in Australia rose, amid a broad-based advance led by basic materials and oil & gas issues. As well, markets in South Korean and India were higher. 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 Portfolioat 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 hold CPI and PPI from China, industrial production from Japan, and confidence figures from Australia, while from across the pond will come CPI, the Zew Economic Sentiment Survey and GDP from Germany, CPI, PPI, and the Retail Price Index from the U.K., and GDP and industrial production from the Eurozone.

No comments: