Markets Notch Gains Amid a Flurry of Data and Events

Charles Schwab: On the Market

Posted: 10/13/2017 4:15 PM EDT

Markets Notch Gains Amid a Flurry of Data and Events

 

U.S. equities finished out the week higher, getting a boost from a 13-year high in consumer sentiment and solid retail sales. Technology issues caught a draft from HP's favorable guidance, while healthcare issues came under pressure as the Trump administration cut cost-sharing subsidies. Treasury yields were lower on cooler-than-expected inflation data and the U.S. dollar finished nearly unchanged, while crude oil prices moved higher in the wake of President Trump’s decision not to certify the Iran nuclear deal. 

The Dow Jones Industrial Average (DJIA) increased 32 points (0.1%) to 22,872, the S&P 500 Index added 2 points (0.1%) to 2,553, and the Nasdaq Composite gained 14 points (0.2%) to 6,606. In moderate volume, 769 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil increased $0.85 to $51.45 per barrel and wholesale gasoline was $0.04 higher at $1.62 per gallon. Elsewhere, the Bloomberg gold spot price added $9.74 to $1,303.46 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 93.08. Markets were higher for the week, as the DJIA gained 0.4%, the S&P 500 Index added 0.3% and the Nasdaq Composite increased 0.2%.

Bank of America Corp. (BAC $26) reported Q3 earnings-per-share (EPS) of $0.48, versus the FactSet estimate of $0.46, with revenues rising 1.0% year-over-year (y/y) to $21.8 billion, compared to the expected $22.0 billion. Net interest income topped forecasts and trading revenues were above expectations despite falling, while loans grew and the company cut expenses more than anticipated. BAC was higher.

Wells Fargo & Co. (WFC $54) posted Q3 EPS of $0.84, or $1.04 ex-items, compared to the projected $1.02, as revenues declined 2.0% y/y to $21.9 billion, versus the estimated $22.4 billion. The company's net interest margin came in well below expectations and loans missed estimates. Shares were solidly lower.

HP Inc. (HPQ $22) rallied after the company issued its fiscal 2018 earnings outlook at its analyst day that had a midpoint above expectations. HPQ said it is looking to aggressively focus on pockets of growth in its stabilized core businesses and expand its 3-D printing solutions to include metal for mass-production manufacturing.

The healthcare sector saw some choppiness, led by hospital and managed-care stocks, after President Trump and his administration announced that they will cut off Affordable Care Act cost-sharing subsidies.

With earnings season heating up, Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, offers a look at all the major market sectors in his latest, Schwab Sector Views: Sustainable Energy?, on the Market Commentary page at www.schwab.com. Follow us on Twitter: @schwabresearch.

Retail sales rise, consumer inflation cooler than expected, consumer sentiment jumps

Advance retail sales (chart) for September rose 1.6% month-over-month (m/m), compared to the Bloomberg forecast of a 1.7% gain and compared to August's positively-revised 0.1% decline. Last month's sales ex-autos were up by 1.0% m/m, versus expectations of a 0.9% gain, and following the favorably revised 0.5% increase seen in the previous month. Sales ex-autos and gas rose 0.5% m/m, compared to estimates of a 0.4% rise, and versus August's upwardly revised 0.1% gain. The retail sales control group, a figure used to help calculate GDP, grew 0.4%, matching projections, and the prior month's positively revised flat reading. Auto and gas sales rose solidly, along with building materials, while sales of food and beverages, clothing, at restaurants and online all moved higher. Electronics and appliances, furniture, health and personal care, and sporting goods sales categories were down.

The Consumer Price Index (CPI) (chart) gained 0.5% m/m in September, versus estimates calling for a 0.6% gain, while August's 0.4% rise was unrevised. The core rate, which strips out food and energy, was up 0.1% m/m, versus expectations for it to match August's unrevised 0.2% rise. Y/Y, prices were 2.2% higher for the headline rate, below forecasts of a 2.3% rise, while the core rate was up 1.7%, south of projections of a 1.8% increase. August y/y figures showed unrevised 1.9% and 1.7% rises for the headline and core rates, respectively.

The preliminary University of Michigan Consumer Sentiment Index (chart) surged to a 13-year high of 101.1 in October from the prior month's 95.1 level, and compared to expectations for it to dip to 95.0. The current economic conditions and expectations components of the report both jumped. The 1-year inflation forecast fell to 2.3% from September's 2.7% rate, while the 5-10 year inflation outlook dipped to 2.4% from 2.5%.

Business inventories (chart) rose 0.7% m/m in August, in line with forecasts, and versus July's upwardly revised 0.3% increase.

With inflation garnering more attention, Schwab's Chief Investment Strategist Liz Ann Sonders discusses putting traditional measures of inflation back on the radar screen in her article, The Waiting: Wage Growth and Inflation Finally Getting in Gear?, and Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers analysis of inflation in a global monetary policy perspective in his commentary, Inflation May Be The Biggest Question For Investors In 2018.

Global monetary policy focus remains, with Europe appearing to lean more hawkish and the Fed continuing down the normalization path amid leadership uncertainty, and Jeff discusses, How the Shift by Central Banks May Affect the Stock Market, and talks in the video with Vice President of Trading and Derivatives, Randy Frederick, Should a Change in Fed Leadership Matter to Investors?.

The political front remained in focus, as in midday action President Trump announced that he will not certify the nuclear deal with Iran, while Washington continues to grapple with tax reform, as discussed by Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend, in his article, Tax Reform Framework Released, But The Road Ahead Is Long.

Check out these articles and video on the Market Commentary page at www.schwab.com. Follow our Schwab experts on Twitter: @lizannsonders, @jeffreykleintop, @kathyjones and @randyafrederick.
Treasuries finished higher on the inflation data, as the yield on the 2-year note declined 2 basis points (bps) to 1.50%, the yield on the 10-year note fell 4 bps to 2.28%, and the 30-year bond rate dropped 3 bps to 2.82%.

Europe mixed following U.S. data, Asia mostly higher as Japan extends rally

European equities finished mixed, though a sharp jump in Chinese exports bolstered the basic materials sector. The markets digested today's cooler-than-expected U.S. inflation data and countering retail sales and consumer sentiment reports. As such, the euro and British pound gained modest ground on the greenback to apply some pressure on the markets. A mixed response to key U.S. banking sector earnings reports and declining bond yields weighed on financials. Bond yields saw pressure amid reports suggesting the European Central Bank is considering extending its bond-buying program for at least nine months after it starts tapering stimulus measures, per Bloomberg.

U.K. Brexit uncertainty remained, with a stalemate continuing as a fifth round of negotiations wrap up. Political uncertainty also festered as Spain is pushing Catalonia for clarification on whether or not it declared independence, while recent Italian confidence votes were digested. For analysis, see Schwab's Jeffrey Kleintop's, CFA, and Randy Frederick's video, Political Risk: How Should Investors Respond?, and our article, Brexit Begins: What's Next for the U.K?, on the Market Commentary page at www.schwab.com.

Stocks in Asia finished mostly higher to close out the week, with recent upbeat global economic optimism continuing to buoy sentiment, while Japanese stocks extended a rally to levels not seen in over two decades. Schwab's Jeffrey Kleintop, CFA, and Randy Frederick discuss in the video, Are Investors Underestimating the Stock Market Rally?, on the Market Commentary page at www.schwab.com. Stocks in China and Hong Kong ticked higher on a mixed September trade report, which showed exports rose at a rate that was below forecasts but imports topped expectations. Markets in Australia and India advanced, with the latter gaining on the heels of late-yesterday's upbeat inflation and industrial production reports. After the closing bell, India reported that its exports for September rose solidly. Finally, South Korean equities finished lower.

Stocks tick higher on the week amid mixed data and uncertainties

U.S. stocks posted a fourth-straight weekly gain as Q4 continued to roll on, with data fostering continued global economic optimism to support sentiment and overshadow festering global political and monetary policy uncertainties. Treasury yields and the U.S. dollar slipped after recent rallies on a cooler-than-expected read on consumer price inflation, pared optimism as the markets grapple with the long road to tax reform, and volatility across the pond on a Brexit stalemate and lingering Spanish political uncertainty. As such, real estate and utilities led to the upside, while financials were hampered. Banks also saw pressure as earnings reports from Dow member JPMorgan Chase & Co. (JPM $96) and Citigroup Inc. (C $72) topped expectations but signs of rising credit costs and the continued drop in trading revenues appeared to foster concerns. Telecommunications issues fell solidly amid continued concerns toward the sector, exacerbated by AT&T Inc's (T $36) warning that its Q3 results were negatively-impacted by the hurricanes and heightened competition. Consumer staples were among the best performers, aided by Dow member Wal-Mart Stores Inc's (WMT $87) $20 billion share buyback plan and outlook for sales. The positive global economic mood helped materials issues gain ground. Crude oil prices moved higher to help lift the energy sector.

Although ramped up earnings season will likely command a great deal of the market’s attention, next week's economic calendar will bring a flood of reports to be scrutinized, with housing playing a major role. The NAHB Housing Market Index will be followed by housing starts and building permits, and the week will culminate with existing home sales. The docket will be rounded out with the releases of industrial production and capacity utilization, the Fed's Beige Book, the Leading Index and the Import Price Index.

As noted in the latest Schwab Market Perspective: Preparing for the Latter Innings, U.S. stocks continue to grind higher, with little appearing able to knock them off course. The possibility of a pullback always exists but a melt up is also reemerging as a real possibility. Earnings tend to drive equity market direction, and the next few weeks should help set the tone for market action for the rest of the year. Expectations came down a bit as we entered reporting season and recent robust economic data gives support to the potential for companies to meet and/or beat estimates. Global economic growth continues to improve, which should help support both domestic and global stock markets. Read more on the Market Commentary page at www.schwab.com.

International reports due out next week that deserve a mention include: Australia—employment change. China—lending statistics, CPI and PPI, Q3 GDP, retail sales and industrial production. Japan—industrial production and trade balance. Eurozone—trade balance, new car registrations, CPI and construction output, along with German investor confidence. U.K.—inflation statistics, employment change and retail sales.

Financial Review

Bull About Nothing

Sinclair Noe — September 14, 2017

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DOW + 45 = 22,203
SPX – 2 = 2495
NAS – 31 = 6429
RUT – 1 = 1425
10 Y + .01 = 2.20%
OIL + .44 = 49.74
GOLD + 6.50 = 1330.00

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	3,315.2	$54.60B	$2.92B	41.14%	1	+2.38%	-28.28%
	Ethereum	ETH	229.38	$21.46B	$1.30B	18.31%	0.0672749	+2.82%	-30.80%
	Ripple	XRP	0.17636	$6.72B	$179.25M	2.52%	0.00005236	+3.01%	-21.46%
	Bitcoin Cash	BCH	392.11	$6.46B	$291.83M	4.11%	0.115601	+1.06%	-40.60%
	Litecoin	LTC	46.840	$2.35B	$836.80M	11.77%	0.0132326	+3.13%	-43.53%
	Dash	DASH	246.10	$1.88B	$38.24M	0.54%	0.0741691	+2.89%	-27.61%
	NEM	XEM	0.19307	$1.81B	$10.16M	0.14%	0.00005967	+9.91%	-31.50%
	Monero	XMR	88.75	$1.36B	$146.58M	2.06%	0.0268882	+3.64%	-25.26%
	IOTA	MIOTA	0.46000	$1.27B	$26.98M	0.38%	0.0001359	+2.36%	-27.95%
	Ethereum Classic	ETC	10.6945	$944.51M	$245.14M	3.45%	0.00293293	+5.16%	-44.50%

The Dow Industrial average hit another record high close – 3 in a row, and the fifth consecutive session of gains in the Dow. And a tip of the hat to Ed Yardeni, president of Yardeni Research for describing this bull market as “Seinfeld market,” referring to the TV show that was “mostly about nothing.” “During every episode, investors are watching for something to happen. When nothing happens, especially nothing bad, investors are bemused and show their appreciation by throwing more money at the bull.”

This has been a remarkably easy time to be a bull. September is set to be the 11th straight month in which the S&P 500 has either risen, or has fallen by less than 0.1 percent. If stocks continue to act well in the second half of the month, that will make this the longest such streak for stocks in 58 years.

Going back to 1928, the S&P has only seen four prior streaks in which the index avoided posting a monthly drop of more than 0.1 percent in 11 or more straight months. The most recent run was the longest ever, stretching from March 1958 to May 1959. It’s like the market is on auto-pilot.

Treasury Secretary Steven Mnuchin and House Ways and Means Chairman Kevin Brady appeared at a tax event sponsored by Politico Pro and they will have something to say about a proposal to create a new framework for tax reform later in the month – not now.

Meanwhile, Trump traveled to Florida to view hurricane damage and thank first responders. Trump said he was close to a DACA deal with Democratic congressional leaders on protections for illegal immigrants brought to the United States as children. Trump said any final agreement must include border security measures including surveillance systems but would not include funding for his planned wall along the border.

Either that or Trump doesn’t have a deal with Democrats, a path to citizenship is not part of that non-deal, and the wall is definitely happening.

Nancy Pelosi and Chuck Schumer left a dinner with President Trump on Wednesday night insinuating they had struck a deal on the future of DACA. Then shortly after, the White House disputed the story — at least in part. Press secretary Sarah Huckabee Sanders tweeted that “excluding the wall was certainly not agreed to.”

Trump managed to sow more confusion, tweeting that “no deal” had been made. Earlier today, Trump tweeted: “Does anybody really want to throw out good, educated and accomplished young people who have jobs, some serving in the military?” (Wait. Remind me again who decided to end DACA…)

Oil prices are once again pushing at resistance at the $50 a barrel level. Part of the recent increase in prices is fallout from the hurricanes, but part of the reason is just a story of supply and demand. Global economies are humming and today the International Energy Agency and OPEC nudged their demand forecasts higher. IEA says oil demand for 2017 will expand by the most in two years, the Paris-based IEA. OPEC increased its estimate for how much crude buyers will seek from the cartel next year, driven by rising consumption in Europe and China.

Economists have long debated whether higher energy prices are inflationary or a drag on the economy. The answer seems to lie in what’s happening at the time. If rising prices come during a healthy economy, then it’s inflationary. If not, then it tends to curb growth. Right now, bond traders are betting on the inflationary impact.

The Consumer Price Index, or CPI, which measures inflation at the retail level – jumped 0.4% month over month and 1.9% year over year. Excluding food and energy, the core CPI rose 0.2% in August; up 1.7% year over year. The 0.2 percent rise in the core gauge ends a five-month streak of weaker-than-expected readings.

Energy prices rose 2.8%, the most since January; food costs advanced 0.1 percent. Lodging away from home rose by a record 4.4 percent; hotel costs jumped 5.1%, the most since 1991. Broader shelter costs rose 0.5 percent.

The CPI for new vehicles was unchanged, the first month without a decline since January, while prices of used cars and trucks fell 0.2 percent; air fares dropped 1 percent. Wireless-phone services fell 0.1 percent. Expenses for medical care rose 0.1 percent from the previous month.

Hourly earnings adjusted for inflation rose 0.6 percent from August 2016, after a 0.7 percent gain. This is just one month’s data. If it holds, it would make it easier for the Fed to raise interest rates.

Arizona’s seasonally adjusted unemployment rate decreased from 5.1% in July to 5.0% in August. The national unemployment rate increased from 4.3% in July to 4.4% in August. A year ago, the Arizona unemployment rate was 5.1% and the U.S. rate was 4.9%. Arizona gained 41,900 Nonfarm jobs in August. The Private Sector gained 9,700 and government added 32,200 jobs. That is a big turnaround in government jobs and a disappointment in private sector jobs.

Motel 6 – they’ll leave the light on for you, and then they’ll turn over personal information to ICE – immigration and Customs Enforcement.  According to the New Times, clerks at “multiple” Motel 6 properties around Phoenix said they regularly share customer information with federal immigration authorities.

A front-desk clerk told the newspaper that they send a report every morning to ICE with all “the names of everybody that comes in.” At least 20 undocumented people were arrested at two Motel 6 locations between February and August. Innkeepers routinely comply with search warrants and other court orders when law enforcement agents seek customer data and may reveal customer information when police are summoned to a property for an emergency or other public-safety situation.

But most lodging companies prohibit the voluntary offer of such data. Legally, there could be constitutional violations if ICE agents enlisted the help of Motel 6 operators, effectively making them agents of the government. Additionally, state privacy laws could mean civil or criminal penalties for motels who disclose customer information.

Three female former employees of Alphabet/Google filed a lawsuit accusing the tech company of discriminating against women in pay and promotions. The proposed class action lawsuit comes as Google faces an investigation by the Department of Labor into sex bias in pay practices. The lawsuit appears to be the first to make class action sex bias claims against Google, but is only the latest instance of a major tech company being accused of discriminating against women.

Nestle has acquired a majority stake in premium coffee company Blue Bottle Coffee. Nestle already owns brands such as Nespresso, Nescafe and creamer brand Coffee-Mate. Blue Bottle opened its first coffee shop in Oakland, California, 15 years ago. Many of its shops are in the Bay Area, but it has expanded to cities such as New York and Tokyo.

The Federal Trade Commission says it is investigating the Equifax data breach. Equifax last week reported a massive data breach, saying hackers may have accessed the personal details, including names and Social Security numbers, of more than 143 million consumers from mid-May to July. Equifax, which said it learned of the breach in late July, said credit card numbers for about 209,000 people and certain documents for another 182,000 were also accessed.

The disclosure was swiftly met with criticism because of the delay in alerting the public to the hack, as well as problems with the website Equifax set up for people to check whether their details were at risk. You should probably check your credit report and maybe even freeze your credit but you can’t because the website keeps freezing.

Three senior executives dumped almost $2 million worth of stock days after the company learned of the breach. An emailed statement from the credit-monitoring agency said the executives “had no knowledge” of the breach beforehand. Sure, it wasn’t even a topic of conversation in the C Suite.

So, lots of outrage. And we can bet dimes to donuts nothing more severe than a slap on the wrist.

Stocks Dipping After Data and BoE

Charles Schwab: On the Market

Posted: 9/14/2017 9:00 AM ET

Stocks Dipping After Data and BoE

U.S. stocks are lower in early action, coming off another record high run, following a hotter-than-expected read on consumer price inflation that may be bringing the Fed back in focus, while the Bank of England's expected unchanged monetary policy decision hinted at a potential rate hike in the coming months. Treasury yields are mixed and the U.S. dollar is paring losses. Crude oil prices and gold are higher. Asia finished mixed and Europe is mostly lower on the BoE's decision and following some disappointing Chinese economic data.

As of 8:55 a.m. ET, the December S&P 500 Index future is 8 points below fair value, the DJIA future is 32 points below fair value, and Nasdaq 100 Index future is 29 points south of fair value. WTI crude oil is increasing $0.53 to $49.83 per barrel and Brent crude oil is gaining $0.42 to $55.58 per barrel. The Bloomberg gold spot price is trading $2.84 higher at $1,326.05 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is dipping 0.1% to 92.45.

Tenet Healthcare Corp. (THC $16) is getting a boost from a report by the Wall Street Journal suggesting the hospital operator was exploring strategic options, including the possible sale of the company, citing sources familiar with the matter. THC has not commented on the report.

Lattice Semiconductor Corp. (LSCC $6) is in focus after President Donald Trump blocked Chinese-backed investor, Canyon Bridge Capital Partners LLC's $1.3 billion bid to acquire the company. The White House and Treasury Department said President Trump acted on the recommendation of a multi-agency panel, per Bloomberg.

Consumer price inflation tops forecasts, jobless claims decline

The Consumer Price Index (CPI) (chart) rose 0.4% month-over-month (m/m) in August, versus the Bloomberg estimate calling for a 0.3% gain, while July's 0.1% rise was unrevised. The core rate, which strips out food and energy, was up 0.2% m/m, matching expectations and compared to July's unrevised 0.1% rise. Y/Y, prices were 1.9% higher for the headline rate, above forecasts of a 1.8% rise, while the core rate was up 1.7%, topping projections of a 1.6% increase. July y/y figures showed an unrevised 1.7% rises for both the headline and core rates.

Treasuries are mixed, with the yield on the 2-year note ticking 1 basis point (bp) higher to 1.36%, while the yields on the 10-year note and the 30-year bond are dipping 1 bp to 2.18% and 2.77%, respectively.

Bond yields are modestly extending this week's sharp rebound from a recent drop back to November lows that came despite upbeat economic data and record highs for the stock markets. Schwab's Chief Fixed Income Strategist, Kathy Jones, and Vice President of Trading and Derivatives, Randy Frederick, provide analysis of the conundrum in the video, The Economy is Picking Up, But Bond Yields Are Falling—What's That About?, with Kathy noting that the disconnect between the fixed income markets and the economy is about inflation. Read more on the Insights & Ideas page and follow Kathy and Randy on Twitter: @kathyjones and @randyafrederick.

Weekly initial jobless claims (chart) declined by 14,000 to 284,000 last week, below forecasts of 300,000, with the prior week’s figure being unrevised at 298,000. The four-week moving average rose by 13,000 to 263,250, while continuing claims decreased 7,000 to 1,944,000, south of estimates of 1,965,000.

The jobless claims figures likely continued to be distorted by the impacts of Hurricanes Harvey and Irma, discussed by Schwab's Chief Investment Strategist Liz Ann Sonders in her latest article, Trying to Reason with Hurricane Season: The Aftermath of "Harma", on the Markets & Economy page at www.schwab.com. Follow Liz Ann on Twitter: @lizannsonders.

The U.S. dollar is giving back some of its solid recovery seen this week in the wake of the Bank of England's (BoE) expected unchanged monetary policy stance, where it suggested that it may tighten policy in coming months. The greenback's rally this week has come amid relatively eased geopolitical and U.S. political concerns, as well as reduced economic cost estimates of Hurricane Irma. However, the greenback is paring losses in the wake of the inflation data.

For commentary on the geopolitical and domestic political fronts, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, article, Missiles and Markets: An investor guide to geopolitical risks, on the International Investing page at www.schwab.com as well as Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend's article, Debt Ceiling Deal Pushes Showdown in Congress to December, on the Insights & Ideas page. Follow Jeff and Schwab on Twitter: @jeffreykleintop and @schwabresearch.

Europe mostly lower on mixed BoE decision

Most European equity markets are trading lower in afternoon action, with the British pound rallying versus the U.S. dollar after the Bank of England (BoE) held its monetary policy stance steady as expected, but noted that it may need to raise rates in the coming months. The markets are also eyeing more threatening rhetoric from North Korea, while digesting some disappointing Chinese economic data. However, Next Plc. (NXGPY $29) is a bright spot, rallying after the British retailer lifted its full-year profit outlook. In other central bank news, the Swiss National Bank kept its monetary policy unchanged, in line with forecasts. Growth in EU new car registrations for August accelerated in August. The euro is higher versus the U.S. dollar and bond yields in the region are mixed.

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 Randy Frederick, Is An Optimistic Outlook for Global Equities Warranted?, on the Insights & Ideas page.

The U.K. FTSE 100 Index is down 0.9%, France's CAC-40 Index is ticking 0.1% higher, Germany's DAX Index is declining 0.3%, Italy's FTSE MIB Index is rising 0.2%, Spain's IBEX 35 Index is declining 0.4%, and Switzerland's Swiss Market Index is dipping 0.1%.

Asia mixed following data and ahead of monetary policy decisions

Stocks in Asia finished mixed on the heels of the continued gains in the U.S. to record highs, while the markets digested some disappointing Chinese economic data and awaited monetary policy decisions out of the U.K. and Switzerland. China's Shanghai Composite Index and the Hong Kong Hang Seng Index declined 0.4% after August reports on retail sales, industrial production and fixed asset investment all rose at smaller-than-expected amounts. Japan's Nikkei 225 Index decreased 0.3%, despite the yen weakening. South Korea's Kospi Index overcame early losses and finished 0.7% higher and India's S&P BSE Sensex 30 Index nudged 0.2% higher. Australia's S&P/ASX 200 Index dipped 0.1%, even as the nation reported upbeat August employment figures. For more on the global markets, see Schwab's Jeffrey Kleintop's, CFA, articles, What are fund flows telling us about trends and risks in the global stock market?, and An important benefit to global investors is back after 20 years, on the International Investing page at www.schwab.com.

Stocks Take a Mid-Week Breather

Charles Schwab: On the Market

Posted: 9/13/2017 4:15 PM ET

Stocks Take a Mid-Week Breather

U.S. stocks paused a bit from the recent two-day run, but still registered mild gains as another subdued inflation report hit the Street and participants await tomorrow's Bank of England monetary policy decision. Treasury yields continued to rise from multi-month lows and the U.S. dollar furthered its fresh advance. Geopolitical concerns seemingly continued to ease and cost assessments related to the aftermath of Hurricane Irma have been relatively favorable. Crude oil prices were higher and gold experienced a minor decline.

The Dow Jones Industrial Average (DJIA) increased 39 points (0.2%) to 22,158, the S&P 500 Index added 2 points (0.1%) to 2,498, and the Nasdaq Composite ticked 6 points (0.1%) higher to 6,460. In moderate volume, 820 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil rose $1.07 to $49.30 per barrel and wholesale gasoline moved $0.01 lower to $1.65 per gallon. Elsewhere, the Bloomberg gold spot price lost $9.90 to $1,321.92 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.6% higher at 92.45.

American Airlines Group Inc. (AAL $47) lowered its Q3 guidance for the key industry metric of total revenue per available seat mile (TRASM) and pre-tax profit margin. The airline cited the impact of Hurricane Irma, which caused more than 5,000 flight cancelations amid closures at 40 airports in Florida and the Caribbean, including its hub at Miami International Airport. Shares traded higher after airline stocks took a hit leading up to Hurricane Irma's landfall and as early estimates of the economic cost impact have been less than projected.

Schwab's Chief Investment Strategist Liz Ann Sonders notes in her latest article, Trying to Reason with Hurricane Season: The Aftermath of "Harma", we expect to see a dip in economic activity in the short-term, followed by a boost associated with the recovery/rebuilding efforts, and the impact 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.

CNBC reported that Nordstrom Inc. (JWN $48) is in talks with private equity firm Leonard Green & Partners regarding a buyout which would take the retailer private, per people familiar with the matter. Neither entity has commented on the report. Shares were nicely higher.

Centene Corp. (CNC $98) announced an agreement to acquire substantially all of the assets of privately-held health insurer Fidelis Care for $3.75 billion, subject to certain adjustments, allowing the company to enter the New York Market. CNC rallied.

Shares of Western Digital Corp. (WDC $86) fell after Toshiba Corp's (TOSYY $18) announcement to enter into a memorandum of understanding (MoU) to speed up talks regarding the sale of its memory chip unit with a rival group led by Bain Capital Private Equity LP. WDC said it was disappointed with Toshiba's actions. WDC is leading a group bidding to acquire Toshiba's chip unit.

Wholesale price inflation misses forecasts, mortgage applications jump

The Producer Price Index (PPI) (chart) showed prices at the wholesale level in August were up 0.2% month-over-month (m/m), versus the Bloomberg expectation to rise 0.3%, after July's unrevised 0.1% dip. The core rate, which excludes food and energy, rose 0.1%, compared to forecasts of a 0.2% advance and July's unrevised 0.1% decline. Y/Y, the headline rate was 2.4% higher, below projections of a 2.5% increase, and the core PPI rose 2.0% last month, south of estimates of a 2.1% gain. In July, producer prices were 1.9% higher and up 1.8% for the headline and core rates, respectively.

Tomorrow, the economic calendar will complete the picture of the August inflation landscape with the release of the Consumer Price Index, projected to rise 0.3% and 0.2% m/m for the headline and core rates respectively, accelerating from the 0.1% gains posted in July. Y/Y, prices are expected to be 1.8% and 1.6% higher respectively, after the 1.7% gains registered the month prior and below the Fed's target 2.0% rate. Stubbornly low inflation has caused expectations for another Fed rate hike this year to fade, but the Central Bank is still expected to announce the beginning of shrinking its gargantuan $4.5 trillion balance sheet following next week's monetary policy meeting.

As noted in the latest Schwab Market Perspective: A Preview of Coming Attractions?, how the Fed ultimately threads the needle and when it begins the process of unwinding its balance sheet will be closely watched and could result in times of increased market volatility. Read more on the Markets & Economy page at www.schwab.com and follow us on Twitter: @schwabresearch.

The MBA Mortgage Application Index jumped 9.9% last week, following the previous week's 3.3% gain. The increase came as an 8.9% rise in the Refinance Index was met with a 10.9% gain for the Purchase Index. The average 30-year mortgage rate declined 3 basis points (bps) to 4.03%.

Treasuries dipped, with the yields on the 2-year note and the 30-year bond ticking 2 bps higher to 1.35% and 2.79%, respectively, while the yield on the 10-year note advanced 3 bps to 2.19%. 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.

Bond yields and the U.S. dollar have rebounded this week from the former's November lows and the latter's levels not seen since early 2015, aided by eased geopolitical and domestic political concerns, as well as less-than-feared estimates of the economic cost impact of Hurricane Irma.

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, with the debt ceiling debate being extended to December, 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's domestic docket will also include weekly initial jobless claims, expected to have increased by 2,000 to a level of 300,000.

Europe and Asia mixed

European equity markets pulled back modestly in late-day action to finish mixed, with the Stoxx Europe 600 Index finishing flat after posting five sessions of gains. Energy stocks traded to the upside as crude oil prices moved higher. However, mining issues finished lower amid weakness in industrial metals prices, bogging down U.K. stocks, along with caution ahead of tomorrow's monetary policy decision by the Bank of England (BoE). Ahead of the decision, U.K. employment growth topped forecasts for July, but wage growth lagged estimates, on the heels of yesterday's hotter-than-expected inflation statistics. Technology stocks were choppy after rallying into yesterday's Apple iPhone unveiling, which appeared to foster some concerns about the timing of when customers can place orders for the device. The euro and the British pound fell versus the U.S. dollar and bond yields in the region finished mixed. In other economic news, eurozone industrial production rose modestly in July to match expectations.

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.

Stocks in Asia finished mixed after a couple days of gains that came courtesy of eased geopolitical concerns and estimates suggesting the economic cost impact in the U.S. of Hurricane Irma will be smaller than expected. Tech stocks finished mixed as the markets digest Apple's new iPhone launch, with some expressing concerns over the late timing of pre-order and on-sale dates. Also, the markets awaited tomorrow's BoE monetary policy decision and inflation data in the U.S. Japanese stocks extending a string of gains as the yen held onto recent weakness, while Indian shares ticked higher, despite late reports from yesterday showing consumer price inflation was slightly hotter than expected and industrial production growth missed forecasts. Australian securities finished flat and South Korean equities declined. Mainland Chinese stocks nudged higher, while shares in Hong Kong declined. 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.

The international economic calendar for tomorrow will lead with consumer inflation and employment data from Australia, retail sales and industrial production from China, industrial production and capacity utilization from Japan and wholesale prices from India. Limited releases from across the pond will include CPI from Italy and France, as well as the aforementioned Bank of England monetary policy decision.

Equity Exchanges Mostly Lower After Flat Retail Sales

Charles Schwab: On the Market

Posted: 8/12/2016 4:15 PM ET

Equity Exchanges Mostly Lower After Flat Retail Sales

After yesterday's record-setting performance, U.S. stocks finished mostly lower, though the Nasdaq eked out a gain, on the heels of a disappointing July retail sales report, which coupled with some softer-than-expected China data to dampen sentiment. Treasuries rallied and the U.S. dollar was lower as additional domestic data revealed an unexpected decline in wholesale price inflation. Gold was lower and crude oil prices finished higher.

The Dow Jones Industrial Average (DJIA) decreased 37 points (0.2%) to 18,575, the S&P 500 Index shed 2 points (0.1%) to 2,184 and the Nasdaq Composite added 5 points (0.1%) to 5,233. In moderate volume, 698 million shares were traded on the NYSE and 1.5 billion shares changed hands on the Nasdaq. WTI crude oil was $1.00 higher at $44.49 per barrel, wholesale gasoline added $0.01 to $1.37 per gallon and the Bloomberg gold spot price declined $3.28 to $1,335.50 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.1% lower to 95.72. Markets were mostly flat but slightly higher for the week, as the DJIA and the Nasdaq increased 0.2% and the S&P 500 advanced nearly 0.1%.

J.C. Penney Co. Inc. (JCP $11) reported a 2Q loss ex-items of $0.05 per share, better than the $0.14 per share shortfall that FactSet had estimated, as revenues rose 1.5% year-over-year (y/y) to $2.9 billion, roughly in line with forecasts. 2Q same-store sales grew 2.2% y/y, mostly matching estimates. JCP reaffirmed its full-year guidance and shares finished higher.

Nordstrom Inc. (JWN $51) posted 2Q earnings-per-share (EPS) of $0.67, above the expected $0.56, with revenues declining 1.4% y/y to $3.7 billion, roughly in line with forecasts. Quarterly same-store sales decreased 1.2% y/y, compared to the projected 2.2% drop. JWN raised its full-year EPS outlook and reaffirmed its revenue guidance. Shares rallied.

NVIDIA Corp. (NVDA $63) achieved 2Q profits of $0.40 per share, topping the projected $0.37, as revenues rose 24.0% y/y to $1.4 billion, roughly matching estimates. NVDA issued stronger-than-expected 3Q revenue guidance. Shares gained solid ground.

Retail sales, inflation and consumer sentiment data miss expectations

Advance retail sales (chart) for July were flat month-over-month (m/m), versus the Bloomberg forecast of a 0.4% gain and June's upwardly revised 0.8% rise. Last month's sales ex-autos were lower by 0.3%, compared to the expected 0.1% increase, and following June's upwardly revised 0.9% rise. Sales ex-autos and gas dipped 0.1%, versus estimates of a 0.3% rise, and compared to June's favorably revised 0.8% increase. Finally, the retail sales control group, a figure used to help calculate GDP, was flat, compared to the projected 0.3% rise and June's unrevised 0.5% increase. Auto and nonstore retail sales—which include online spending—were bright spots but performance elsewhere was lackluster, with sales at gasoline stations falling solidly.

The Producer Price Index (PPI) (chart) in July declined 0.4% m/m, versus expectations of a 0.1% increase. The core rate, which excludes food and energy, decreased 0.3%, compared to forecasts of a 0.2% rise. Y/Y, the headline rate was down 0.2%, versus projections of a 0.2% rise, and the core PPI was 0.7% higher, below estimates of a 1.2% gain. For analysis of the inflation environment on the bond markets, see Schwab's Fixed Income Director Collin Martin's, CFA, article titled, Do TIPS Make Sense When Inflation is Low?, at www.schwab.com/onbonds and follow Schwab on Twitter: @schwabresearch.

The preliminary University of Michigan Consumer Sentiment Index (chart) ticked higher to 90.4 this month from July's 90.0 level, and compared to the expected 91.5 figure. The economic conditions portion of the report deteriorated, though the outlook component improved. The 1-year inflation outlook fell to 2.5% from 2.7%, while the 5-10 year inflation estimate remained at 2.6%.

Business inventories (chart) increased 0.2% m/m in June, above forecasts of a 0.1% rise, and matching May's unrevised gain. Sales jumped 1.2%, and the inventory-to-sales ratio—the time it would take to deplete inventories at the current sales pace—dipped to 1.39 months pace from May's 1.40 rate.

Today's mixed data appeared to catch the markets by surprise and likely dampened Fed rate hike expectations. However, as noted in the recent Schwab Market Perspective: Is the Recent Rally for Real?, the healthy job market and subsequent higher wages after years of stagnation, along with a continued solid housing sector, appear poised to buoy consumer confidence and retail sales in the second half. We believe the bull market will continue, but risks remain and bumps are inevitable. Read more at www.schwab.com/marketinsight.

Treasuries were higher, with the yields on the 2-year note and the 30-year bond declining 4 basis points (bps) to 0.71% and 2.23%, respectively, while the yield on the 10-year note fell 5 bps to 1.51%. For more analysis on the bond markets see the video from Schwab's Managing Director of Trading and Derivatives, Randy Frederick and Collin Martin, CFA, titled Tempered Expectations for Bond Returns: Why Hold Bonds?, at www.schwab.com/insights. Also, Schwab's Chief Fixed Income Strategist, Kathy Jones addresses in her latest article, What Does Strong Job Growth Mean for Bond Investors?, at www.schwab.com/marketinsight. Follow Randy and Kathy on Twitter: @randyafrederick and @kathyjones.

Europe flat amid a flood of global data

European equities finished little changed, with the global markets digesting some softer-than-expected economic reports in China and the U.S., along with a plethora of earnings and economic data in the region. Eurozone 2Q GDP came in at a 0.3% quarter-over-quarter rate to match forecasts as growth in German output topped forecasts but Italian GDP was unexpectedly flat. In other economic news, eurozone industrial production rose slightly more than expected for June, while U.K. construction output fell by a slightly smaller amount than expected.

Yesterday, the Stoxx Europe 600 Index erased the sharp drop that ensued following the late-June vote in the U.K. to leave the European Union (EU), known as a Brexit. Pledges by central banks, notably the Bank of England, which last week cut its benchmark interest rate and surprisingly boosted its asset purchases, along with some relatively upbeat global economic data have helped ease concerns about the impact of the Brexit vote. For more, read Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, latest Schwab Sector Views: Brexit's Impact on Sectors, Part Two at www.schwab.com/marketinsight. Also, Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, offers Three Reasons Why Now is Not the Time to Retreat from Global Diversificationand Five ways investors can make the most of slower growth. Read both articles at www.schwab.com/oninternational and be sure to follow Jeff on Twitter: @jeffreykleintop. The euro rose and the British pound was lower versus the U.S. dollar, while bond yields in the region declined.

Stocks in Asia moved higher to close out the week, following yesterday's gains in the U.S. and Europe, as crude oil prices rebounded solidly and earnings reports were mostly better than expected. Also, the markets shrugged off a plethora of July Chinese economic data that slightly missed forecasts. Japanese equities returned to action following yesterday's holiday break, managing gains that were bolstered by some weakness in the yen. Chinese stocks advanced with property-related issues leading the way on optimism that merger activity in the group could accelerate, per Bloomberg. China's industrial production and retail sales both grew but missed forecasts, while a double-digit rise in fixed asset investment matched expectations. After the closing bell, Chinese new yuan loans and aggregate financing—a gauge of total credit issued—both came in well short of estimates, while Hong Kong's 2Q GDP returned to growth after contracting in 1Q. Amid the flood of data, Schwab's Jeffrey Kleintop, CFA, offers in his article, Trust but Verify: Five Independent Indicators of China's Economy and Schwab's Director of International Research, Michelle Gibley, CFA, discusses 5 Reasons China Won't Crash the Global Economy in 2016. Read both articles at www.schwab.com/oninternational. Australian securities found some support from resource-related issues, while South Korean equities also ticked higher. Finally, some strength in banking stocks helped push Indian listings higher.

Choppy week yields simultaneous record highs in U.S.

U.S. stocks finished little changed for the week in choppy action as the global markets continued to grapple with a divergent and uncertain monetary policy landscape, along with mixed earnings and economic reports. With earnings season coming down the home stretch, results from the retail sector were mostly upbeat in contrast to Friday's disappointing July retail sales report. Per data compiled by Bloomberg, of the 457 companies in the S&P 500 that have reported thus far, nearly 56% have topped sales forecasts, while about 78% have bested profit projections. Dampened Fed rate hike expectations weighed on the U.S. dollar and Treasury yields, while supply speculation bolstered crude oil prices. Energy and consumer discretionary stocks showed some strength, partially offset by weakness in financial and healthcare issues. On Thursday, the S&P 500, Dow and Nasdaq simultaneously posted record highs for the first time since December 1999, while European markets erased the heavy losses seen in the wake of the Brexit vote fallout.

Schwab's Jeffrey Kleintop, CFA, notes in his article, Earnings estimates are rebounding: what it means for stocks, the end of the downtrend in earnings estimates over the past year and a half has helped to support stocks in recent months, even in the face of negative geopolitical developments. However, if earnings estimates should roll back over due to a shock or deterioration in the global economic data, stocks are unlikely to be as resilient to geopolitical developments. Read the whole article at www.schwab.com/marketinsight.

Economic lineup set for week ahead

Next week's U.S. economic calendar will bring an abundance of reports, with Wednesday's release of the minutes from the Federal Reserve's July meeting likely to garner some attention. Schwab's Liz Ann Sonders communicates in her recent article A Hopeful Transmission: Fed Holds Rates Steady, But…, that it’s clear the FOMC would like to continue to normalize rates, albeit gradually. Although no specific timing was mentioned, the FOMC repeated that it expects “economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate.” Read the whole article at www.schwab.com/marketinsight and be sure to follow Liz Ann on Twitter: @lizannsonders.

Some housing data may command attention in the form of the NAHB Housing Market Index, housing starts and building permits. As noted in the Schwab Market Perspective, the housing market is continuing to look healthy, with new home sales rising another 3.5% in June. Read the whole perspective at www.schwab.com/marketinsight.

Additional notable reports expected to be released include the Empire Manufacturing Index, Consumer Price Index, Industrial Production and Capacity Utilization, and the Leading Index.

Next week's international reports: Japan—preliminary 2Q GDP, industrial production and capacity utilization, trade data, machine tool orders and the All Industry Activity Index. U.K.—house prices, CPI, PPI, employment data and retail sales. Germany—the Wholesale Price Index, CPI, preliminary 2Q GDP, PPI and the Zew Economic Sentiment Survey. Eurozone—preliminary 2Q GDP, trade data, construction output and CPI.

A Week of Uncertainty

Charles Schwab: On the Market

Posted: 7/29/2016 4:15 PM ET

A Week of Uncertainty

U.S. equities ended today's session in the same fashion as it has seen all week, mixed and near the flat line, as investors continued to search for some sort of catalyst amid another sundry of divergent reports on both the equity and economic fronts. Meanwhile, a much softer-than-expected 2Q U.S. GDP report was offset somewhat by relatively favorable reads on consumer sentiment and regional manufacturing activity. Treasuries were higher, as was gold, while the U.S. dollar tumbled, and crude oil prices inched higher.

The Dow Jones Industrial Average (DJIA) fell for the fifth-straight session, shedding 24 points (0.1%) to 18,432, while the S&P 500 Index added 4 points (0.1%) to 2,174 and the Nasdaq Composite increased 7 points (0.1%) to 5,162. In heavy volume, 1.2 billion shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq. WTI crude oil was $0.46 higher at $44.60 per barrel, wholesale gasoline gained $0.02 to $1.32 per gallon and the Bloomberg gold spot price jumped $18.04 to $1,353.79 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—plunged 1.3% to 95.52. Markets were mixed for the week, as the DJIA lost 0.8%, the S&P 500 Index ticked 0.1% lower, while the Nasdaq Composite advanced 1.2%.

Alphabet Inc. (GOOGL $791), the parent of Google, reported 2Q earnings-per-share (EPS) ex-items of $8.42, above the $8.04 FactSet estimate, as revenues excluding traffic acquisition costs (TAC) rose 22.1% year-over-year (y/y) to $17.5 billion, topping the expected $16.9 billion. Shares finished higher.

Amazon.com Inc. (AMZN $759) posted 2Q profits of $1.78 per share, exceeding the estimated $1.11, with revenues rising 31.0% y/y to $30.4 billion, above the projected $29.6 billion. AMZN issued 3Q revenue guidance with a midpoint above expectations and shares were modestly higher.

Dow member Merck & Co. Inc. (MRK $59) announced 2Q EPS ex-items of $0.93, north of the forecasted $0.91, as revenues grew 1.0% y/y to $9.8 billion, roughly in line with estimates. Shares were slightly higher, as it raised the low end of its full-year profit outlook and increased its revenue guidance.

Dow component Exxon Mobil Corp. (XOM $89) reported 2Q earnings of $0.41 per share, well below the expected $0.64, as revenues fell 22.2% y/y to $57.7 billion, below the anticipated $58.0 billion. The company said its performance reflects sharply lower commodity prices, weaker refining margins and continued strength in the chemical segment. XOM traded solidly lower.

Dow member Chevron Corp. (CVX $102) posted a 2Q loss of $0.78 per share, including items pertaining to impairments and other non-cash charges that may be affecting comparability to the projected $0.32. Revenues fell 27.4% y/y to $29.3 billion, above the expected $28.3 billion. The company said its results reflect lower oil prices and its ongoing adjustment to a lower oil price world, while noting that its downstream business continued to perform well. Shares of CVX inched higher.

United Parcel Service Inc. (UPS $108) achieved 2Q earnings of $1.43 per share, roughly in line with forecasts, as revenues increased 3.8% y/y to $14.6 billion, mostly matching projections. UPS reaffirmed its full-year EPS guidance. Shares were lower.

For more on the global earnings landscape, see Schwab's Chief Global Investment Strategist, Jeffrey Kleintop's, CFA, article, Earnings estimates are rebounding: what it means for stocks, at www.schwab.com/marketinsight, and be sure to follow Jeff on Twitter: @jeffreykleintop.

First read on 2Q GDP disappoints

The first look (of three) at 2Q Gross Domestic Product (chart), the broadest measure of economic output, showed a quarter-over-quarter (q/q) annualized rate of expansion of 1.2%, from the downwardly revised 0.8% expansion in 1Q, and well below the 2.5% growth forecasted by Bloomberg. Personal consumption came in slightly south of forecasts, rising 4.2%, following the positively adjusted 1.6% increase recorded in 1Q, and versus the 4.4% gain that was projected. The preliminary 2Q GDP report showed the solid gain in personal consumption was accompanied by favorable contributions from exports and imports, though output was negatively impacted by private inventory investment, residential and nonresidential fixed investment, and state and local government spending.

On inflation, the GDP Price Index came in at a 2.2% rise, above expectations of a 1.9% increase, from an upwardly revised 0.5% gain seen in 1Q, while the core PCE Index, which excludes food and energy, increased 1.7%, matching forecasts, and following the upwardly revised 2.1% growth in 1Q.

The final July University of Michigan Consumer Sentiment Index (chart) was revised to 90.0 from the preliminary level of 89.5, and compared to expectations of a slight rise to 90.2. Expectations and current conditions components of the report were both revised higher. The index was down compared to June's level of 93.5. The 1-year inflation outlook ticked higher and the 5-10 year inflation forecast held steady.

The Chicago Purchasing Managers Index (chart) remained in expansion territory (above 50), dipping to 55.8 in July from 56.8 in June—which was the highest since January 2015—and versus expectations of a decline to 54.0.

The 2Q Employment Cost Index (chart) grew by 0.6% q/q, matching forecasts and the increase posted in 1Q.

Today's data was in line with our view in the latest Schwab Market Perspective: New Records…Same Skepticism, that wages and housing appear to be helping bolster spending and confidence among the all-important consumer, while business confidence and spending remain hamstrung. Additionally, some inflation measures heating up may force the Federal Open Market Committee's (FOMC) hand and we believe the risk of an actual inflation problem remains low; but we could have an inflation scare. Read more at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch.

Treasuries finished higher following the GDP report, with the yield on the 2-year note declining 6 basis points (bps) to 0.66%, while the yields on the 10-year note and the 30-year bond fell 5 bps to 1.45% and 2.18%, respectively. Bond yields have been mixed in the wake the FOMC leaving its monetary policy stance unchanged this week as discussed by Schwab's Chief Investment Strategist, Liz Ann Sonders in her commentary, A Hopeful Transmission: Fed Holds Rates Steady, But…

For more on the bond market moves, see Schwab's Chief Fixed Income Strategist, Kathy Jones discusses in her recent article titled, With a Whimper Instead of a Bang: Is the Great Bond Bull Market Over?. Read both articles at www.schwab.com/marketinsight and follow Liz Ann and Kathy on Twitter: @lizannsonders and @kathyjones.

Financials lead Europe higher, Asia mixed in reaction to Bank of Japan decision

European equities finished mostly higher, with financials leading the way, buoyed by a plethora of positive earnings results. Also a troubled Italian lender announced that it has received an alternative rescue proposal to help ease ramped up concerns in the nation's banking sector. The move for the sector came ahead of key European banking stress tests results that are due out after the closing bell in the U.S. Traders digested a smaller-than-expected expansion of stimulus measures out of Japan, as well as the softer-than-expected 2Q GDP in the U.S. These were accompanied by the preliminary estimate of 2Q eurozone GDP, which slowed to a q/q growth rate of 0.3%, as expected, from the 0.6% expansion posted in 1Q. Also, the eurozone consumer price inflation estimate for July came in hotter than anticipated. The euro and British pound gained ground on the U.S. dollar, while bond yields in the region were mostly lower. Amid the heightened volatility in the global markets following a plethora of data and monetary policy decisions, Jeffrey Kleintop, CFA, offers Three Reasons Why Now is Not the Time to Retreat from Global Diversification. Read more at www.schwab.com/oninternational.

Stocks in Asia finished mixed, with Japanese stocks posting wild swings in the wake of the Bank of Japan's (BoJ) monetary policy decision to hold off on more aggressive stimulus measures and instead just boost its buying program of exchange traded funds (ETFs). The yen rallied sharply following the decision, though BoJ Governor Kuroda reiterated that further easing will be done if needed and said the central bank has not hit a policy limit, per Bloomberg. For more on Japan's potential increased stimulus measures see Jeffrey Kleintop's, article, What investors need to know about helicopter money, at www.schwab.com/oninternational. Japanese equities were able to post gains after briefly falling sharply on the heels of the BoJ's decision. Ahead of the announcement, Japan reported cooler-than-expected core consumer price inflation and a larger-than-expected drop in household spending, while its industrial production grew more than anticipated for June.

Mainland Chinese shares declined, though stocks did post a solid monthly gain, buoyed by recent relatively favorable economic data, while those in Hong Kong fell sharply. Australian securities ticked higher, with healthcare and consumer services issues outweighing some weakness in basic materials stocks, while markets in India and South Korea traded lower.

Mixed week full of data and monetary policy decisions

U.S. stocks finished mixed on the week that saw 2Q earnings season reach its apex, while results from Dow member Apple Inc. (AAPL $104), Facebook Inc. (FB $125) and Alphabet Inc bolstered a solid gain for technology issues. For the 316 companies in the S&P 500 that have reported results thus far, 58% have topped revenue forecasts, while 81% have bested earnings expectations, per data compiled by Bloomberg. The global markets grappled with an unchanged monetary policy decision from the U.S. FOMC and a disappointing stimulus announcement from the Bank of Japan. Treasury yields and the U.S. dollar both came under pressure as the FOMC decision was followed by much softer-than-expected U.S. 2Q GDP growth. As such, crude oil prices fell to weigh on the energy sector. For analysis of the stock market sectors amid the heightened volatility and renewed pressure on oil prices and the U.S. dollar, see Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, latest Schwab Sector Views: Drilling Down on the Energy Sector at www.schwab.com/marktetinsight.

Another week of heavy data looms

With earnings season remaining robust, next week's domestic economic calendar will also be plentiful, headlined by key July services and manufacturing reports from the Institute for Supply Management (ISM) and Markit, while culminating with Friday's July nonfarm payroll report. U.S. economic data has been positive as of late helping push the Dow and S&P 500 to all-time highs in July as discussed by Liz Ann Sonders in her article, 19th Nervous Breakout: Stocks Finally Reach New Highs. Liz Ann offers one of her favorite mantras, "better or worse usually matters more than good or bad when it comes to the stock market," and lists a plethora of recent better-than-expected economic reports. She also points out that many—including the ISM readings—are leading indicators, but there are implications for Fed policy. Read more at www.schwab.com/marketinsight.

Other notable releases on next week's economic calendar include: personal income and spending, monthly auto sales, factory orders and the trade balance.

Along with manufacturing and services reports across the board, next week's international reports worth noting include: Australia—the Reserve Bank of Australia monetary policy decision. Eurozone—retail sales and German factory orders. U.K.—Bank of England monetary policy decision.