Markets Add to Recent Gains

Charles Schwab: On the Market

Posted: 9/12/2017 4:15 PM ET

Markets Add to Recent Gains

U.S. equities added to their recent run, amid continued eased anxiety toward North Korea and the economic impact of Hurricane Irma. Financials also got a boost as Treasury yields continued to recover from multi-month lows, getting a lift from by an unexpected record high in U.S. job openings. The dollar also continued to rebound from multi-year lows, while crude oil and gold were modestly higher. News on the equity front focused on Dow member Apple, as the tech giant offered its latest products at a gathering at its newest headquarters.

The Dow Jones Industrial Average (DJIA) increased 62 points (0.3%) to 22,119, the S&P 500 Index gained 8 points (0.3%) to 2,497, and the Nasdaq Composite added 22 points (0.3%) to 6,454. In moderate volume, 767 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.16 to $48.23 per barrel and wholesale gasoline moved $0.03 higher to $1.66 per gallon. Elsewhere, the Bloomberg gold spot price rose $4.07 to $1,331.61 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% higher at 91.94.

Shares of DowDuPont Inc. (DWDP $69) were higher as the Street digested the announcement from the company formed by the merger of Dow Chemical and Dow member DuPont of changes to its spin-off plans of materials science and specialty products divisions.

Shares of Sage Therapeutics Inc. (SAGE $76) fell nearly 15% after the company announced disappointing results from a late-stage trial of its treatment of super-refractory status epilepticus.

Intercept Pharmaceuticals Inc. (ICPT $98) was sharply lower after the company sent a letter to doctors saying that injuries, organ failure and death tied to patients taking its treatment for liver disease, its main product, occurred when they took the drug more frequently than recommended. ICPT said this was reported to the Food and Drug Administration and it is working with the agency to reinforce dosing recommendations for patients with liver impairment.

Apple Inc. (AAPL $161) was in focus as the tech giant unveiled its latest line of products at an event at its new headquarters, including a new version of its AppleWatch, as well as the unveiling of the iPhone 8 and its high-end iPhone X. However, shares of AAPL finished lower, as some expressed concerns over the late timing of the iPhone X's pre-order and on-sale dates.

Job openings surprisingly post new record, small business optimism unexpectedly improves

The Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, rose to a level of 6.17 million jobs available to be filled in July—a fresh record high—from June's downwardly revised 6.12 million level. The Bloomberg forecast called for a decrease to 6.00 million. The hiring rate ticked higher to 3.8% from June's 3.7% pace, and the separation rate remained at the prior month's 3.6% rate.

The National Federation of Independent Business (NFIB) Small Business Optimism Index for August rose to 105.3, from July's unrevised 105.2 level, versus the Bloomberg expectation of a decline to 104.8.

Treasuries were lower, as the yield on the 2-year note rose 1 basis point (bp) to 1.33%, while the yields on the 10-year note and the 30-year bond advanced 3 bps to 2.17% and 2.77%, respectively. For analysis of the bond markets, see Schwab's Chief Fixed Income Strategist Kathy Jones' article, What's the Bigger Risk: Bond Market Bubble or Complacency?, on the Fixed Income page at www.schwab.com. Follow Kathy on Twitter: @kathyjones.

Treasury yields continue to rebound from last week's drop that took them to levels not seen since November and the U.S. dollar has slightly extended its recovery from lows not seen since early 2015. Geopolitical and U.S. political concerns continue to fade as North Korea held off on further missile tests and Congress approved three-month extensions of government funding and the debt ceiling. Also, investor sentiment got a boost from early economic cost assessments of Hurricane Irma that appear less than feared.

Amid this backdrop, Schwab's Chief Investment Strategist Liz Ann Sonders notes in her latest article, Trying to Reason with Hurricane Season: The Aftermath of "Harma", Hurricanes Harvey and Irma, or "Harma," will unlikely dent the Fed's plans to continue monetary policy normalization. Read more on the Markets & Economy page at www.schwab.com and follow Liz Ann on Twitter: @lizannsonders.

Also, Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend points out in his article, Debt Ceiling Deal Pushes Showdown in Congress to December, December is now suddenly jam-packed with the complex, time-consuming debate that was expected to happen this month. It is hard to imagine Congress dealing with those issues and a major tax reform bill at the same time. As a result, we continue to believe that tax reform won't get resolved until the first part of 2018. Read more on the Insights & Ideas page at www.schwab.com and follow us on Twitter: @schwabresearch.

Finally, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, adds in his article, Missiles and Markets: An investor guide to geopolitical risks investors should avoid overreacting to geopolitical developments and stick to their long-term financial plans. Read more on the International Investing page at www.schwab.com and follow Jeff on Twitter: @jeffreykleintop.

Tomorrow, investors will get their first look at inflation data for the month of August with the release of the Producer Price Index (PPI), with the measure of prices at the wholesale level expected to have increased 0.3% m/m, while excluding food and energy, the core rate is forecasted to have risen 0.2% m/m. MBA Mortgage Applications will also be released.

Europe mostly higher as concerns recede but U.K. lags after inflation data

Most European equity markets extended a recent run, with bond yields in the region moving higher to bolster the financial sector and tech stocks heading to the upside ahead of today's expected iPhone unveiling later today. Global sentiment was aided by North Korean tensions continuing to fade, and estimates of the economic cost impact on the U.S. of Hurricane Irma being less than feared. The euro ticked higher versus the U.S. dollar, and the British pound rallied versus the greenback. Bank of England rate hike uncertainty flared-up ahead of this week's monetary policy decision as the nation reported hotter-than-expected August inflation figures. Brexit negotiations also remained in focus as U.K. Prime Minister Theresa May's plan passed a parliamentary hurdle. For a look at global investing, see Schwab's Jeffrey Kleintop's, CFA, article, U.S. vs international: what do earnings tell us about what may be ahead?, on the Markets & Economy page at www.schwab.com, and his video with Vice President of Trading and Derivatives, Randy Frederick, Is An Optimistic Outlook for Global Equities Warranted?, on the Insights & Ideas page. Follow Randy on Twitter: @randyafrederick. And for a look at Brexit talks, see our article, Brexit Begins: What's Next for the U.K.? on the Insights & Ideas page.

Asia extends yesterday's gains

Stocks in Asia tacked onto yesterday's gains, with global sentiment continuing to rebound as geopolitical concerns toward North Korea remained tempered despite the UN voting to increase sanctions against the nation. Also, early indications suggesting the U.S. economic impact of Hurricane Irma will likely be less than projected continued to aid the markets. Technology issues were also higher ahead of today's expected new iPhone launch by Apple. Japanese equities gained solid ground, as the yen extended its retreat from a recent rally, and stocks in Australia advanced, despite a decline in the nation's business confidence for August. Securities listed in India also increased ahead of reads on consumer price inflation and industrial production after the closing bell. India's CPI came in a bit hotter than expected for last month and the nation's industrial production rose by a smaller amount than anticipated in August. Meanwhile, markets in mainland China, Hong Kong and South Korea all rose. For analysis of the global markets, see Schwab's Jeffrey Kleintop's, CFA, article, What are fund flows telling us about trends and risks in the global stock market?, as well as his commentary, An important benefit to global investors is back after 20 years on the Markets & Economy page at www.schwab.com.

Tomorrow's international economic calendar will offer South Korea's unemployment rate, consumer prices and retail sales from Japan, India's trade balance, CPI from Germany and Spain, employment figures from the U.K. and industrial production from the Eurozone.