Stocks Finish with Slight Gains in Muted Session

Charles Schwab: On the Market

Posted: 8/7/2017 4:15 PM ET

Stocks Finish with Slight Gains in Muted Session

U.S. equities were marginally higher to start the week, as data was on the lighter side, as continued upward momentum in tech stocks was tempered by energy issues amid a decline in crude oil prices ahead of OPEC's looming production cut compliance meeting. Treasury yields were nearly unchanged, showing little reaction to an afternoon release of consumer credit, while gold and the U.S. dollar were lower.

The Dow Jones Industrial Average (DJIA) gained 26 points (0.1%) to 22,118, the S&P 500 Index added 4 points (0.2%) to 2,481, and the Nasdaq Composite rose 32 points (0.5%) to 6,384. In moderate volume, 743 million were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil lost $0.19 to $49.39 per barrel and wholesale gasoline was $0.02 lower at $1.63 per gallon. Elsewhere, the Bloomberg gold spot price was $1.19 lower at $1,257.69 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—traded 0.1% lower at 93.43.

Tyson Foods Inc. (TSN $67) reported fiscal Q3 earnings-per-share (EPS) of $1.21, or $1.28 ex-items, versus the $1.19 FactSet estimate, as revenues grew 4.8% year-over-year (y/y) to $9.9 billion, north of the forecasted $9.5 billion. TSN raised the low end of its full-year EPS outlook. Shares were solidly higher.

NxStage Medical Inc. (NXTM $30) jumped after the U.S.-based medical technology and services company announced an agreement to be acquired by German dialysis products and services provider, Fresenius Medical Care AG (FMS $46), for $30.00 per share in cash in a transaction valued at about $2.0 billion.

Consumer credit kicks off economic week that will have an inflation focus

Consumer credit, released in the final hour of trading, showed consumer borrowing expanded by $12.4 billion during June, below the $15.8 billion forecast of economists polled by Bloomberg, while May's figure was adjusted slightly downward to an increase of $18.3 billion from the originally reported $18.4 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, rose $8.3 billion, its slowest pace in a year (y/y), while revolving debt, which includes credit cards, increased by $4.1 billion.

Treasuries were slightly higher, with the yield on the 2-year note little changed at 1.35%, while the yields on the 10-year note and the 30-year bond dipped 1 basis point to 2.26% and 2.84%, respectively. Schwab's Chief Fixed Income Strategist Kathy Jones offers a look at the bond markets in her article, Bond Market Mid-Year Outlook: Redefining the Borders of 'Lower for Longer' on the Fixed Income page at www.schwab.com.

Treasury yields showed some signs of life and the U.S. Dollar Index bounced off of lows not seen since 2016 on Friday in the wake of the July nonfarm payroll report. The employment data, which showed job growth topped forecasts, the unemployment rate matched a 16-year low, and wage growth, appeared to preserve expectations for one more Fed rate hike and the beginning of the reduction of its bloated balance sheet this year.

This week, the economic docket likely begin to regain some of the markets’ attention as earnings season winds down, headlined by the releases of the Producer Price Index (PPI) and Consumer Price Index (CPI). Inflation is the other side of the Fed's dual mandate and has remained subdued to foster some uncertainty regarding if the Central Bank has one more rate hike in it this year. The PPI and CPI will follow tomorrow's releases of the NFIB Small Business Optimism Index, with economists expecting a slight downtick to a level of 103.5 for July from the 103.6 posted in June, as well as the JOLTS Job Openings report, with forecasts calling for the measure of unmet demand for labor to show 5.70 million jobs were available to be filled in June, up marginally from the 5.67 million registered in May. Later in the week, the economic calendar will offer the preliminary Q2 nonfarm productivity and unit labor costs.

As noted in the latest Schwab Market Perspective: Things are Looking Good … But are They Too Good?, earnings season has been solid and equity indexes continue to set record highs. The bull market should continue but the risk of a "melt-up" appears to be rising. The U.S. economy is growing modestly and the Federal Reserve is maintaining its slow pace of policy normalization—both supports for further equity market gains, but geopolitical risk remains elevated. While the weaker U.S. dollar is a benefit for U.S. companies, there is a downside internationally … but it may not be where you think. Read more on the Markets & Economy page at www.schwab.com.

The political front remains in focus and a source of uncertainty with dysfunction in the White House and another failed attempt at health care reform dampening optimism of other policy implementation. For analysis, see Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend's articles, Health Care Reform: What Investors Should Know, and Washington Midyear Update: 4 Key Issues for Investors to Watch, on the Insights & Ideas page at www.schwab.com.

Europe mixed on data and geopolitics, Asia higher following U.S. employment report

European equities finished mixed, as optimism following Friday's upbeat U.S. employment report gave some way to an unexpected drop in German industrial production and lingering geopolitical concerns as the U.N. imposed new sanctions on North Korea. The euro ticked higher, though the British pound dipped versus the U.S. dollar, while bond yields in the region were mostly lower. Energy issues showed some resiliency in the face of softness in crude oil prices as the markets await this week's OPEC gathering on production cut compliance. For a look at global investing, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, and Vice President of Trading and Derivatives, Randy Frederick's video, Why Add Foreign Stocks to Your Portfolio?, on the Insights & Ideas page at www.schwab.com. Follow Jeff and Randy on Twitter: @jeffreykleintop and @randyafrederick.

Stocks in Asia finished mostly higher amid optimism on the heels of Friday's stronger-than-expected U.S. employment report, which helped overshadow exacerbated geopolitical concerns as the United Nations Security Council imposed new sanctions on North Korea and China/U.S. trade uncertainty lingered. Japanese equities advanced, with the yen holding onto losses that stemmed from the U.S. jobs report, while stocks in mainland China and Hong Kong rose on the U.S. data and as steel companies rallied. Markets in Australia increased 0.9% and shares traded in South Korea ticked slightly higher, but stocks in India declined amid some weakness in the technology sector. South Korean and Indian markets remain near all-time highs. Amid this global backdrop, Schwab's Jeffrey Kleintop CFA, offers his articles, The Long Period of Underperformance for Emerging Market Stocks May Finally Be Over on the International Investing page at www.schwab.com, and Missiles and Markets: An investor guide to geopolitical risks on the Markets & Economy page.

Tomorrow's international economic calendar will host trade data from Japan and China, retail sales from the U.K., as well as the trade balances from Germany and France.