Markets Mixed in Lackluster Session

Charles Schwab: On the Market

Posted: 11/27/2017 4:15 PM EST

Markets Mixed in Lackluster Session

 

U.S. equities finished mixed with energy stocks finding pressure amid a drop in crude oil prices ahead of this week's OPEC production meeting. However, consumer discretionary stocks got a boost on upbeat holiday spending data, while an unexpected jump in new home sales to a decade high also added some optimism. Treasury yields were little changed and the U.S. dollar ticked higher, while gold gained modest ground. 

The Dow Jones Industrial Average (DJIA) rose 23 points (0.1%) to 23,581, the S&P 500 Index declined 1 point to 2,601, and the Nasdaq Composite fell 11 points (0.2%) to 6,879. In moderate volume, 766 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil decreased $0.84 to $58.11 per barrel and wholesale gasoline was $0.01 higher at $1.79 per gallon. Elsewhere, the Bloomberg gold spot price increased $6.05 to $1,294.42 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.2% higher to 92.92.

Meredith Corp. (MDP $67) announced an agreement to acquire Time Inc. (TIME $18) for $18.50 per share in cash, for a total transaction value of about $2.8 billion, including the assumption of debt. Shares of both companies rallied.

The retail sector was mostly higher with the markets paying attention to reports on how the holiday shopping season unofficially kicked off during the Black Friday weekend, and bolstered by today's online shopping deals known as Cyber Monday. According to Adobe Analytics, online sales on Thanksgiving Day and Black Friday rose 17.9% year-over-year (y/y) to about $7.9 billion and are estimated to be up 16.5% today to a record $6.6 billion.

Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, notes in our article, Holiday Shopping Season: Are Consumers Set to Stuff Some Stockings?, that we do think the picture entering the season is a positive one, with unemployment low, wages trending higher and consumer confidence the highest in almost 17 years. There are 32 days between Thanksgiving and Christmas this year, the second largest number of days possible between the two holidays. And Christmas falls on a Monday, giving shoppers one last weekend to ring the register. However, Brad cautions investors that at this point this rosy picture for consumers doesn't mean you should run out and buy retailers as discussed in his latest Schwab Sector Views: 'Tis the Season…Almost.

New home sales surprisingly jump to kick off busy week

New home sales (chart) unexpectedly jumped to the highest since October 2007, rising 6.2% month-over-month (m/m) in October to an annual rate of 685,000 units, versus the Bloomberg forecast calling for a drop to 625,000 units and the downwardly revised 645,000 unit pace in September. The median home price was up 3.3% y/y to $312,800. New home inventory fell to 4.9 months of supply at the current sales pace from 5.2 in September.

Sales surged m/m in the Northeast and jumped in the Midwest, while also rising solidly in the South and West. New home sales are based on contract signings instead of closings. Sales of properties in which construction has not yet started reached the highest in over a decade, suggesting housing starts could start to accelerate. The heightened confidence and status of the consumer appears to be translating into increased willingness to make major purchases, adding credence to Schwab's Brad Sorensen's, CFA, latest analysis of how important the consumer is not only to the holiday season but for the overall economy in his latest Schwab Sector Views.

The Dallas Fed Manufacturing Activity Index dropped more than expected but remained solidly in expansion territory (a reading above zero). The index fell to 19.4 in November from 27.6 in October—the highest since March 2006—and versus forecasts of a decline to 24.0.

Today's reports kick off the week that will return to normal operating hours and bring plenty of reports and events for the markets to contend with. OPEC will conduct a production meeting, the Senate could vote on its tax reform plan that differs significantly from the House's plan that passed two weeks ago, and Fed Chairwoman Janet Yellen is expected to address the Joint Economic Committee of Congress. Moreover, we will get a number of economic reports, continuing with tomorrow's releases of Consumer Confidence, forecasted to show sentiment remains elevated at a level of 124.0 for November, but slightly lower than the 125.9 posted in October, as well as the advance goods trade balance, wholesale inventories, the Richmond Fed Manufacturing Index and the S&P CoreLogic Case-Shiller Home Price Index. Late in the week, investors will be treated to the second look (of three) at Q3 GDP, the Fed's Beige Book, personal income and spending, Markit's Manufacturing PMI Index, the ISM Manufacturing Index, and November auto sales.

As noted in the latest Schwab Market Perspective: Incredible, Amazing…Unstop-a-bull?, the bull market continues to be undisturbed by myriad actual or potential negative events and momentum favors the bulls for the foreseeable future. However, elevated valuations and growing investor complacency pose risks that could lead to a long-awaited pullback and/or a pickup in volatility from today’s extremely low base.

Treasuries were little changed, as the yield on the 2-year note and the 30-year bond were flat at 1.74% and 2.77%, respectively, while the yield on the 10-year note dipped by 1 bp to 2.34%. The yield curve has flattened and the U.S. dollar has found pressure as of late with the markets grappling with tax reform uncertainty, subdued inflation expectations, and broad-based global economic growth.

Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend notes in his latest commentary, Tax Reform Bills Progress, but Many Hurdles Remain, we believe the prospects for a tax reform bill being signed into law before the end of the year are improving, but a number of tricky steps must still be overcome. Schwab's Chief Investment Strategist Liz Ann Sonders points out in her newest article, Green Grass and High Tides: Earnings Stellar But Not Without Risk, both earnings and revenues were strong; and importantly, the "beat rates" were well above average. The outlook for 2018 is bright, but we are on watch for an expectations bar that gets set too high.

Europe dips despite eased German political concerns, Asia mostly lower

European equity markets finished mostly lower, even as the euro dipped slightly after a recent run to a two-month high versus the U.S. dollar. Energy issues saw noticeable pressure as crude oil prices fell ahead of this week's OPEC production meeting, while the markets shrugged off cooling political concerns in Germany after reports suggested coalition talks could resume after collapsing last week. This joins deadlocked U.K. Brexit talks and festering U.S. tax reform uncertainty to keep the markets on edge. However, Spanish stocks rose slightly amid eased concerns as polls ahead of next month's vote in Catalonia are showing pro-Spain parties have as much support as pro-independence forces, per Bloomberg. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, and Vice President of Trading and Derivatives Randy Frederick point out in the video, Political Risk: How Should Investors Respond?, that a long history of these developments shows us that holding a well-diversified portfolio may buffer the short-term market moves that are often the result. So, investors should avoid overreacting to the political and geopolitical drama and stick to their long-term financial plans. The British pound was little changed versus the greenback and bond yields in the region finished mostly lower.

Stocks in Asia finished mostly to the downside, with technology issues weighing heavily on South Korean equities, while the Bank of Korea is expected to raise rates after its monetary policy meeting later this week. Mainland Chinese stocks and those traded in Hong Kong declined, with sentiment being hampered by the recent rally in the nation's bond yields, which appears to be fostering some profit-taking after this year's strong gains, while a report showed growth in the country's industrial profits slowed in October. Schwab's Jeffrey Kleintop, CFA, offers a look at the global market rally seen this year that has been fostered by the broadest economic growth in a decade and is expected to continue in 2018 in his latest article, 5 Reasons Investors Should Give Thanks. Japanese securities traded slightly to the downside, with the yen gaining ground late in the session amid the continued pressure on the U.S. dollar amid yield curve concerns and political uncertainty, but markets in Australia and India bucked the trend, finishing modestly higher.

The international economic calendar will be light tomorrow, with reports slated for release to include import prices and consumer confidence from Germany, and consumer confidence from France.

Record High Rally Pauses

Charles Schwab: On the Market

Posted: 10/30/2017 4:15 PM EDT

Record High Rally Pauses

 

U.S. equities took a breather from their recent tech-fueled rally to fresh record highs ahead of a heavy slate of economic and earnings reports, with investors eyeing Dow member Apple's results and the Fed monetary policy decision later in the week. Caution also ensured amid uncertainty ahead of President Trump's pick for the next Fed Chief this week. Treasury yields and the U.S. dollar gave back some of their recent runs, despite an upbeat personal spending report and solid read on regional manufacturing activity. Crude oil and gold are moved higher.

The Dow Jones Industrial Average (DJIA) fell 85 points (0.4%) to 23,349, the S&P 500 Index decreased 8 points (0.3%) to 2,573, and the Nasdaq Composite ticked 2 points lower to 6,699. In moderate volume, 871 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.25 to $54.15 per barrel and wholesale gasoline lost $0.01 to $1.71 per gallon. Elsewhere, the Bloomberg gold spot price rose $2.87 to $1,276.22 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% lower at 94.50.

Lennar Corp. (LEN $56) announced an agreement to merge with CalAtlantic Group Inc. (CAA $49) in a transaction valued at $9.3 billion, including $3.6 billion of net debt. Under the terms of the deal, each share of CAA stock will be exchanged for 0.885 shares of LEN. Shares of CAA rallied over 20%, while LEN traded lower.

Vistra Energy Corp. (VST $19) and Dynegy Inc. (DYN $12) announced an agreement to combine, with the latter merging into the former, creating a company projected to have a market capitalization in excess of $10 billion. Under the terms of the deal, DYN shareholders will receive 0.652 shares of VST for each share owned. VST fell and DYN traded solidly higher.

Personal income and spending rise, with the latter topping forecasts

Personal income (chart) rose 0.4% month-over-month (m/m) in September, matching the Bloomberg forecast, and compared to August's unrevised 0.2% increase. Personal spending gained 1.0% last month, above expectations of a 0.9% increase, and versus August's unrevised 0.1% gain. The September savings rate as a percentage of disposable income was 3.1%. The PCE Deflator was 0.4% higher, in line with expectations and versus the prior month's unrevised 0.2% gain. Compared to last year, the deflator was 1.6% higher, matching estimates and compared to August's unrevised 1.4% rise. Excluding food and energy, the PCE Core Index was 0.1% higher m/m, matching expectations, and the index was 1.3% higher y/y, in line with estimates calling for it to match August's unrevised increase.

The Dallas Fed Manufacturing Activity Index unexpectedly jumped further into expansion territory (a reading above zero). The index rose to 27.6 in October—the highest since March 2006—from 21.3 in September, and versus forecasts of a dip to 21.0. Manufacturing activity has ramped up along with business capital spending (capex) and Schwab's Chief Investment Strategist Liz Ann Sonders points out that capex may be in for an even sharper recovery in her article, Takin Care of Business: Several Important Kickers for a Strong Capex Cycle.

Treasuries were higher, as the yield on the 2-year note decreased 2 basis points (bps) to 1.57%, while the yields on the 10-year note and the 30-year bond rate dropped 4 bps to 2.37% and 2.88%, respectively.

Treasury yields and the U.S. dollar have given back some gains seen as of late, that have come courtesy of Fed leadership speculation, an upbeat global economic outlook, and optimism regarding U.S. tax reform. Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend and Vice President of Trading and Derivatives, Randy Frederick, discuss tax reform in the video, Where Does Tax Reform Stand?.

This week, earnings season will remain robust, but a fully-loaded economic calendar will likely go a long way in shaping market direction, continuing tomorrow with the S&P CoreLogic Case-Shiller Home Price Index, with economists anticipating that home prices in the 20-city composite increased 5.9% y/y during August and 0.40% m/m on a seasonally-adjusted basis, as well the Consumer Confidence Index, forecasted to have moved higher to a level 121.4 for October following the 119.8 posted in September. The Chicago Purchasing Managers Index will also be reported, expected to have moved lower for this month to a reading of 60.0 from the 65.2 registered in the month prior, while the Employment Cost Index will sum up the day's docket.

However, the headlining events for the week will likely be the midweek Federal Open Market Committee (FOMC) monetary policy decision, the ISM Manufacturing and non-Manufacturing 

Indexes, monthly auto sales, and the nonfarm payroll report.

A flood of upbeat earnings reports from some heavyweights in the tech sector bolstered the markets to end last week and Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, offers timely analysis of our outperform rating we have held for some time on the group in his latest, Schwab Sector Views: Technology Trick or Treat?. As noted in the latest Schwab Market Perspective: Stocks Aren't so Spooky, we believe the bull market will continue, and suggest investors remain at their target allocations, but worry a bit about complacency. Third quarter earnings season has been solid so far and economic growth has picked up. But the pick of the next Fed chair—expected this week—could cause an uptick in volatility. Globally earnings have been strong as well and are helping to support stocks, but geopolitical and trade issues could cause some consternation.

Europe and mixed ahead of monetary policy decisions, data

European equity markets finished mixed, with Spanish stocks rallying amid apparent eased political concerns as the Spanish government called for elections in December after taking control of Catalonia last week in response to the region's parliament declaring independence. Economic data in the region was mostly positive, with German retail sales rising for September, while eurozone economic confidence improved more than expected for this month. Global monetary policy remained in focus as this week's decisions in the U.S. and Japan will be followed by Thursday's announcement from the Bank of England amid the backdrop of stalled Brexit talks and last week's dovish takeaway from the European Central Bank's decision to trim and extend its stimulus measures. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers analysis of the global monetary policy front in his article, How the Shift by Central Banks May Affect the Stock Market, and talks with Randy Frederick in the video about Is An Optimistic Outlook for Global Equities Warranted?. The euro and British pound traded higher versus the U.S. dollar, while bond yields in the region were lower.
 
Stocks in Asia finished mixed, with the markets taking a breather that has been bolstered by late last week's host of favorable earnings reports out of the U.S. tech sector. Japanese stocks finished flat, pausing from a recent run that has taken the island nation's markets to highs not seen since 1996, with the yen choppy and a report showing the nation's retail sales rose in line with forecasts. Also, traders awaited the Bank of Japan monetary policy decision tomorrow, which will be followed by Wednesday's Fed decision. Mainland Chinese stocks and those traded in Hong Kong were bogged down by flared-up concerns as the bond markets came under pressure. The upbeat earnings sentiment also supported markets in India and South Korea, while strength in the energy sector helped lift Australian securities.

A slew of data from Japan in addition to the Bank of Japan's monetary policy meeting will highlight tomorrow's international economic calendar, including employment data, industrial production, construction orders, housing starts and trade figures, while a look at China's manufacturing activity is set for release, as well as GDP, CPI, PPI and consumer spending from France, PPI and CPI from Italy, and CPI and GDP from the Eurozone.

Geopolitics Pressure Stocks

Charles Schwab: On the Market

Posted: 9/25/2017 4:15 PM EDT

Geopolitics Pressure Stocks

 

U.S. equities finished lower, as a fresh threat from North Korea exacerbated already-downtrodden sentiment that followed results from Germany's national election over the weekend that looks to complicate government coalition negotiations. Treasury yields were lower, despite a surprising jump in a regional manufacturing report, and the U.S. dollar was higher after the euro saw pressure following the election results, while gold and crude oil prices rallied.

The Dow Jones Industrial Average (DJIA) declined 54 points (0.2%) to 22,296, the S&P 500 Index lost 6 points (0.2%) to 2,497, and the Nasdaq Composite tumbled 56 points (0.9%) to 6,371. In moderate volume, 842 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq. WTI crude oil rose $1.56 to $52.22 per barrel and wholesale gasoline was $0.04 higher at $1.67 per gallon. Elsewhere, the Bloomberg gold spot price increased $13.80 to $1,311.10 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.5% higher at 92.67.

Dow member General Electric Co. (GE $25) announced that it has agreed to sell its GE Industrial Solutions business to Swiss engineering company, ABB Ltd. (ABB $25), for $2.6 billion. GE gained modest ground and shares of ABB dipped.

Genuine Parts Co. (GPC $94) announced an agreement to acquire European auto parts and tool distributor, Alliance Automotive Group, for a total purchase price of about $2.0 billion. GPC rallied on the deal.

Target Corp. (TGT $59) announced that it will raise its minimum hourly wage for all team members to $11 in October, along with a commitment to increase the minimum to $15 by the end of 2020. TGT also reiterated its most recent sales and EPS guidance for Q3 and full-year. Shares finished lower.

Treasury yields dip, U.S. dollar up, geopolitics and political uncertainty reign

Treasuries were higher, as the yield on the 2-year note dipped 1 basis point (bp) to 1.42%, the yield on the 10-year note declined 3 bps to 2.22%, and the 30-year bond rate decreased 2 bps to 2.77%.
Treasury yields have dipped after a recent rally and the U.S. dollar extended its bounce from multi-year lows hit earlier this month amid lingering global monetary policy uncertainty, while the euro saw pressure after a national election in Germany. Geopolitical concerns flared-up in late-morning action to exacerbate sentiment following reports that North Korea's foreign minister said President Trump's latest comments amount to a declaration of war. The markets continue to digest last week's monetary policy decision from the Fed, which expectedly signaled an October start for the reduction of the Central Bank's massive $4.5 trillion balance sheet, but resuscitated expectations for another rate hike in December. The Fed's decision is discussed by Schwab's Chief Investment Strategist Liz Ann Sonders in her commentary, The Fed's on the QT, on the Market Commentary page at www.schwab.com, where you can also find Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, analysis of the global monetary policy front in his article, How the Shift by Central Banks May Affect the Stock Market. Follow Liz Ann and Jeff on Twitter: @lizannsonders and @jeffreykleintop.

The Dallas Fed Manufacturing Activity Index surprisingly jumped further into a level depicting expansion (a reading above zero). The index rose to 21.3 in September—the highest since February—from 17.0 in August, and versus the Bloomberg forecast of a decline 11.5.

The week's economic calendar will begin to heat up tomorrow with some housing data in the form of the S&P CoreLogic Case-Shiller Home Price Index, expected to show the 20-city composite increased 5.7% year-over-year for the month of July, matching that seen the month prior, as well as new home sales, with economists forecasting a 2.5% month-over-month rise in August to a level of 585,000 units following July's decline. Rounding out the day will be the Conference Board's Consumer Confidence Index, anticipated to indicate a slight downtick to a level of 120.0 for September, from the 122.9 posted in August. Other notable reports this week include: preliminary durable goods orders, personal income and spending, the final look at Q2 GDP, the Chicago PMI Index and the final September University of Michigan Consumer Sentiment Index. A host of Fedspeak is poised to garner attention, culminating with Fed Chairwoman Janet Yellen's speech on inflation, uncertainty and monetary policy, which will include a Q&A segment. As noted in the latest Schwab Market Perspective: A Cat and Mouse Fall, volatility has ramped up a bit in the traditionally-slow final weeks of summer, which could be a preview of a bumpy fall for investors. Solid economic data and strong corporate earnings should allow the bull market to continue, but fiscal and monetary uncertainties present risks. Read more on the Market Commentary page at www.schwab.com, and follow us on Twitter: @schwabresearch.

Europe dips as German election and geopolitics eyed, Asia mixed 

European equity markets finished mostly lower, with political uncertainty ensuing after the weekend's national election in Germany where Chancellor Angela Merkel won a fourth term but her margin of victory fostered concerns about the potential complex negotiations in forming a coalition government. For analysis of the political front, see Schwab's Jeffrey Kleintop's, CFA, and Vice President of Trading and Derivatives, Randy Frederick's video, Political Risk: How Should Investors Respond?, on the Insights & Ideas page at www.schwab.com. Follow Jeff and Randy on Twitter: @jeffreykleintop and @randyafrederick.

Also, the markets were pressured late in the day as U.S. stocks fell on reports of North Korea's latest threat toward the U.S. The euro fell versus the U.S. dollar, with an unexpected decline in German business confidence for September likely adding to the pressure. The euro held onto losses after European Central Bank (ECB) President Mario Draghi noted today in a speech that the ECB will keep as much monetary policy support in place that the region needs to complete its transition to a new balanced growth trajectory characterized by sustained price stability.

The British pound dipped late in the session versus the greenback, while Brexit negotiations resume today on the heels of last week's speech by U.K. Prime Minister Theresa May, which appeared to disappoint as it lacked details on the path to leave the European Union. For a look at the Brexit process, see our article, Brexit Begins: What's Next for the U.K?, on the Insights & Ideas page at www.schwab.com. Financials saw some pressure and led to the downside as bond yields in the region were mostly lower and as the Bank of England called for banks to hold additional capital.

 Stocks in Asia finished mixed as the markets reacted to a national election in Germany, while anticipating a call for a snap election in Japan. For analysis of global investing amid this backdrop, see Schwab's Jeffrey Kleintop's, CFA, and Randy Frederick's video, Is An Optimistic Outlook for Global Equities Warranted?, on the Insights & Ideas page at www.schwab.com. The yen came under pressure to boost Japanese equities, along with some upbeat manufacturing data and reports that Prime Minister Abe will announce a new economic package. After the closing bell, Abe called for the snap election after saying he will dissolve the lower house of parliament this week, while announcing an $18 billion economic package. However, stocks in China and Hong Kong came under pressure amid increased measures to curb the housing market. Recent data showing China's property prices have been cooling had fostered some speculation that this could slowdown government measures to curb the housing market. Meanwhile, securities traded in South Korea and India lost ground, and markets in Australia finished flat.

For tomorrow, the international economic calendar will hold consumer price inflation from Japan, consumer sentiment from South Korea, import prices from Germany, and sentiment data from France.

Stocks Mixed on Data and Persistent Weakness in Tech

Charles Schwab: On the Market

Posted: 7/31/2017 4:15 PM ET

Stocks Mixed on Data and Persistent Weakness in Tech

U.S. stocks finished mixed, as investors weighed relatively upbeat global economic data and continued uncertainty surrounding the tech sector. Treasury yields and the U.S. dollar were little changed, while crude oil moved above $50/barrel and gold was slightly higher. M&A activity was in focus after Discovery Communications agreed to acquire Scripps Networks Interactive for nearly $15 billion.

The Dow Jones Industrial Average (DJIA) advanced 61 points (0.3%) to 21,891, the S&P 500 Index was 2 points (0.1%) lower at 2,470, and the Nasdaq Composite declined 27 points (0.4%) to 6,348. In heavy volume, 1.0 billion shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil gained $0.46 to $50.17 per barrel and wholesale gasoline was $0.03 higher at $1.68 per gallon. Elsewhere, the Bloomberg gold spot price inched $0.57 higher to $1,270.21 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 92.85.

Discovery Communications Inc. (DISCA $27) announced an agreement to acquire Scripps Networks Interactive Inc. (SNI $87) for $90.00 per share in cash and stock, valued at about $14.6 billion. Under the terms of the deal Scripps shareholders will receive $63.00 per share in cash and $27.00 per share in Class C Common shares of Discovery stock. Shares of DISCA saw pressure on the news and as the company reported Q2 earnings that missed forecasts. SNI was modestly higher as rumors of the deal recently boosted its shares and the company lowered its guidance after posting softer-than-expected Q2 revenues.

Dynavax Technologies Corp. (DVAX $16) surged over 70% after an advisory committee for the U.S. Food & Drug Administration (FDA) supported the company's safety claim regarding its Hepatitis B vaccine candidate, prompting some analysts to upgrade the stock.

Pending home sales jump, regional manufacturing activity continues to show growth

Pending home sales rose 1.5% month-over-month (m/m) in June, versus the Bloomberg projection of a 1.0% increase, and following the upwardly revised 0.7% drop registered in May. Compared to last year, sales were 0.7% higher. Pending home sales reflect contract signings and are used as a gauge of the pipeline of existing home sales, which dipped slightly more than expected in June.

The Chicago Purchasing Managers Index (chart) declined more than expected but remained at a level depicting expansion (above 50), after falling to 58.9 in July from 65.7 in June, which was the highest since May 2014. Expectations called for a decrease to 60.0.

The Dallas Fed Manufacturing Activity Index surprisingly rose further into a level depicting expansion (a reading above zero). The index improved to 16.8 in July, from 15.0 in June, and compared to the expected decline to 13.0.

Today's reports begin a week that will see earnings continue to pour in and the economic calendar likely garnering attention given the recent action in bonds and currencies, while the markets appear a little less certain that another Fed rate hike this year is in the offing. Tomorrow, we will get a look at national manufacturing activity in July with the releases of the ISM Manufacturing Index, projected to dip to 56.5 from 57.8 in June, and the final Markit Manufacturing PMI Index, expected to be unrevised at 53.2 and up from June's 52.0 level. Readings above 50 for both depict expansion. We will also get a look at the health of the consumer and inflation, with the release of June personal income and spending, forecasted to match May's m/m gains of 0.4% and 0.1%, respectively, while the core PCE Index—a Fed favored gauge of inflation—is projected to remain at a 1.4% year-over-year rate and below the Fed's 2.0% target. Tomorrow's monthly U.S. auto sales and construction spending reports are also likely to be in focus.

As noted in the latest Schwab Market Perspective: Are Danger Signs Rising…or Will the Bull Run Continue?, a solid earnings season should contribute to a continuation of the bull market in stocks, along with economic data that is showing a robust labor market, but few signs of inflation building. Dangers are lurking, however, and the possibility of a decent-sized pullback has grown over the past couple of months, in light of monetary policy and geopolitical uncertainties. While we would likely view such a move as healthy, it can be disconcerting. Stay diversified and be prepared to guard against overreacting to any such move. Read more on the Markets & Economy page at www.schwab.com.

Treasuries were little changed, as the yields on the 2-year and 10-year notes, along with the 30-year bond, were all flat at 1.35%, 2.29% and 2.90%, respectively. Bond yields have shown some relative signs of life after recent pressure though the U.S. dollar remains hampered. The markets continue to grapple with geopolitical and global monetary policy uncertainties, exacerbated by last week's unchanged Fed monetary policy decision, as discussed by Schwab's Chief Investment Strategist Liz Ann Sonders in her latest article, Fed Keeps it on the QT. Liz Ann notes that the decision was unanimous, and the addition of the words "relatively soon" point to a September start point to balance sheet shrinkage, or quantitative tightening (QT). Next up is the Jackson Hole annual conference, at which Yellen will speak, which could provide an opportunity to further steer the consensus around QT's timing. There is a September timing risk however, given that we could be in the midst of a debt ceiling stand-off, so stay tuned. Read more on the Markets & Economy page at www.schwab.com and follow Liz Ann on Twitter: @lizannsonders.

The political front remains a source of market uncertainty in the wake another failed attempt at health care reform as discussed in Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend's article, Health Care Reform: What Investors Should Know, on the Insights & Ideas page at www.schwab.com.

Europe mixed, Asia mostly higher following data and amid geopolitical uncertainty

European equities finished mixed in late-day action, with basic materials and oil & gas issues finding some support from upbeat economic data in the region, which followed relatively favorable reports out of Asia. However, the rally in technology issues continued to pause as analysts grapple with valuation concerns as earnings season rolls on. Also, consumer goods stocks were pressured by tobacco companies in the wake of late Friday's FDA announcement that it plans to crackdown on nicotine levels in cigarettes. The euro and British pound both moved higher in late-day action versus the U.S. dollar to apply some pressure on the markets, ahead of this week's monetary policy decision from the Bank of England, while core eurozone consumer price inflation estimate came in slightly hotter than expected. Bond yields in the region finished mixed. German retail sales rose more than expected in June, while the eurozone unemployment rate unexpectedly dipped. Stocks appeared to shrug off flared-up geopolitical concerns in the wake of another missile test by North Korea late last week. For a look at global investing, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, latest article, An important benefit to global investors is back after 20 years on the Markets & Economy page at www.schwab.com. Follow Jeff on Twitter: @jeffreykleintop.

Stocks in Asia finished mostly to the upside, with the markets digesting some economic data, along with the continued global earnings season. Japanese equities declined, with the yen gaining ground to overshadow an upbeat read on the nation's industrial production, which rebounded more than expected in June. However, stocks traded in mainland China and Hong Kong rallied following upbeat earnings from some key companies in the nation, and as manufacturing and non-manufacturing reports continued to suggest expansion in July, with the latter showing growth in activity out of the key services sector accelerated. Australian securities advanced those traded in India also rose ahead of this week's monetary policy decisions from the two countries. Meanwhile, South Korean stocks ticked only slightly higher, showing some late-day resiliency in the face of late last week's missile test from North Korea. Amid this backdrop and as South Korean and Indian markets remain near all-time highs, Schwab's Jeffrey Kleintop, CFA, offers his articles, Missiles and Markets: An investor guide to geopolitical risks on the Markets & Economy page at www.schwab.com, as well as, The Long Period of Underperformance for Emerging Market Stocks May Finally Be Over on the International Investing page.

Markit Manufacturing PMI readings from across the globe will dominate tomorrow's international economic calendar, while other items of note include PPI and trade data from South Korea, auto sales from Japan, employment figures from Germany and GDP from the Eurozone.

Stocks Diverge Amid Economic Data, Uncertainty

Charles Schwab: On the Market

Posted: 6/26/2017 4:15 PM ET

Stocks Diverge Amid Economic Data, Uncertainty

U.S. equities finished mixed and near the unchanged mark, as a rise in financials, despite a decline in Treasury yields, were offset by continued volatility in technology issues that hamstrung the Nasdaq. Crude oil prices moved higher and gold was lower, while the U.S. dollar was unchanged. On the economic front, durable goods orders missed forecasts, while some regional manufacturing activity remained in expansion territory.

The Dow Jones Industrial Average (DJIA) rose 15 points (0.1%) to 21,410, the S&P 500 Index was nearly a point higher to 2,439, while the Nasdaq Composite lost 18 points (0.3%) to 6,247. In moderate volume, 795 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq. WTI crude oil gained $0.37 to $43.38 per barrel and wholesale gasoline was $0.01 higher at $1.43 per gallon. Elsewhere, the Bloomberg gold spot price decreased $12.77 to $1,243.94 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 97.43.

Nestle SA (NSRGY $88) got a boost to help the European markets move higher amid the disclosure that hedge fund Third Point, ran by activist investor Dan Loeb, has accumulated a $3.5 billion stake in the company. Third Point is encouraging Nestle to sell its stake in cosmetics maker L'Oreal SA (LRLCY $44), increase leverage for share buybacks and adopt a formal profitability target, among other suggestions, per Bloomberg.

Avis Budget Group Inc. (CAR $28) jumped on the announcement that it has entered into an agreement regarding self-driving car fleet management with Google parent Alphabet Inc. (GOOGL $972).

Durable goods orders miss

May preliminary durable goods orders (chart) dropped 1.1% month-over-month (m/m), compared to the Bloomberg estimate of a 0.6% decline, and April's 0.8% decrease was revised to a 0.9% fall. Ex-transportation, orders were 0.1% higher m/m, compared to forecasts of a 0.4% gain and versus April's unrevised 0.5% decline. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, decreased 0.2%, versus projections of a 0.4% increase, and the upwardly revised 0.2% rise posted in the month prior.

As noted in the latest Schwab Market Perspective: Shifting Sentiment?, investors may be questioning the durability of the U.S. bull market, but we believe strong earnings growth and a solid economy will continue to support further gains, but more volatility should be expected. Economic confusion may be contributing to investor skepticism, with the labor market continuing to tighten and housing in good shape, but inflation has been in retreat along with commodity prices. Meanwhile, for the first time in a while, the Fed sounded slightly more hawkish at its June meeting. Read more on the Markets & Economy page at www.schwab.com and follow us on Twitter: @schwabresearch.

The Dallas Fed Manufacturing Activity Index declined more than expected but remained at a level depicting expansion (a reading above zero). The index decreased to 15.0 in June, from 17.2 in May, and compared to the expected decline to 16.0.

The political front remains in focus amid this week's Senate healthcare bill battle, while Capitol Hill continues to debate the debt ceiling and the markets are looking for any developments on tax and regulatory reforms. As such, Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, Washington Midyear Update: 4 Key Issues for Investors to Watch, on the Insights & Ideas page at www.schwab.com.

Treasuries finished higher, as the yield on the 2-year note fell 2 basis points (bps) to 1.33%, the yield on the 10-year note dipped 1 bp to 2.13% and the 30-year bond rate is decreased 2 bps to 2.70%. Bond yields remain depressed amid the economic confusion and political uncertainty and Schwab's Chief Fixed Income Strategist, Kathy Jones delivers her Bond Market Mid-Year Outlook: Redefining the Borders of 'Lower for Longer' on the Fixed Income page at www.schwab.com. Follow Kathy on Twitter: @kathyjones.

Tomorrow's economic calendar will begin with the S&P/Case-Schiller Home Price Index, forecasted to show the 20-city composite rose 5.9% year-over-year and 0.45% on a seasonally-adjusted basis month-over-month in April, as well as the Consumer Confidence Index, with economists expecting a slight downtick to a level of 116.0 for June from the 117.9 posted in May, and the Richmond Fed Manufacturing Index will round out the day.

Europe higher on eased Italian bank concerns, Asia mostly higher as oil stabilizes

European equities finished broadly higher, with financials getting a boost from news that Italy has moved to bailout two ailing regional banks, while a read on German business confidence unexpectedly improved for June. Oil & gas issues gave up a modest advance as crude oil prices were choppy in the wake of a recent tumble. The euro and British pound ticked higher versus the U.S. dollar, while bond yields in the region finished mixed. The markets shrugged off festering political turmoil overseas, including upcoming elections in Italy and Germany later this year and as the U.K. preps for intensified Brexit negotiations. For more on the political front, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, and Vice President of Trading and Derivatives, Randy Frederick's video, Political Risk: How Should Investors Respond?, on the Insights & Ideas page at www.schwab.com, where you can also find our article, Brexit Begins: What's Next for the U.K?. Follow Jeff and Randy on Twitter: @jeffreykleintop and @randyafrederick.

Stocks in Asia finished mostly higher to begin the week, with crude oil prices stabilizing after last week's drop, while Chinese markets led the way amid optimism about MSCI inclusion of mainland shares and speculation that state-backed funds were helping support the markets, per Bloomberg. Both mainland Chinese stocks and those traded in Hong Kong advanced. Japanese equities ticked higher, with the yen nudging lower, while securities in Australia and South Korea finished higher. Markets in India were closed for a holiday. For a look at the global landscape, see the video from Schwab's Jeffrey Kleintop, CFA, What's the Current State of the Global Economy? on the Insights & Ideas page at www.schwab.com.

Tomorrow's international economic calendar will include consumer sentiment from South Korea as well as business and consumer confidence from Italy.

Stocks Recover Most Early Losses in Mixed Finish

Charles Schwab: On the Market

Posted: 3/27/2017 4:15 PM ET

Stocks Recover Most Early Losses in Mixed Finish

U.S. stocks pared early losses and finished the regular trading session mixed with health-care shares leading the advance and financial listings lagging. Treasury yields and the U.S. dollar declined, crude oil prices were mixed and gold traded higher. In light economic news, some regional manufacturing activity slowed, but remained in expansion territory. Meanwhile, Cal-Maine Foods reported earnings, while DuPont and Dow Chemical received approval from the European Commission regarding their previously announced merger.

The Dow Jones Industrial Average (DJIA) lost 45 points (0.2%) to 20,551 and the S&P 500 Index shed 2 points (0.1%) to 2,342, while the Nasdaq Composite was 12 points (0.2%) higher at 5,840. In moderate volume, 826 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil ticked $0.24 lower to $47.73 per barrel and wholesale gasoline gained $0.01 to $1.63 per gallon. Elsewhere, the Bloomberg gold spot price increased $11.29 to $1,254.86 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—declined 0.4% to 99.19.

Cal-Maine Foods Inc. (CALM $38) reported fiscal 3Q earnings-per-share (EPS) of $0.09, well below the $0.19 FactSet estimate, as revenues fell 31.8% year-over-year (y/y) to $307 million, below the projected $325 million. The company said its results were affected by lower market prices and weaker demand trends y/y, reflecting the volatile market conditions in the egg industry. Shares overcame early weakness and closed higher.

Dow member  DuPont (DD $81) and Dow Chemical Co. (DOW $64) received approval from the European Commission regarding their planned merger, with some divestment conditions. The deal still needs approval from U.S. regulators. Shares of both companies finished higher.

Weatherford International PLC. (WFT $6) rallied after announcing a joint venture with Schlumberger NV(SLB $77) called OneStim to deliver products and services for the development of unconventional resource plays in the U.S. and Canada land markets. SLB ticked higher.

Sealed Air Corp. (SEE $44) fell after announcing the sale of its Diversey Care division and the food hygiene and cleaning business within its Food Care unit to Bain Capital Private Equity for about $3.2 billion. The company also announced a $1.5 billion increase to its share repurchase program. Analysts are noting that the $2.5 billion the company expects to receive in net proceeds from the transaction were a bit lighter than had been anticipated.

Regional manufacturing growth slows, with economic calendar set to heat up

The Dallas Fed Manufacturing Activity Index slowed more than expected but remained solidly at a level depicting expansion (a reading above zero), dropping to 16.9 in March, from 24.5 in February—the highest level since April 2006—and compared to the expected decline to 22.0.

Treasuries were higher, with the yield on the 2-year note nearly unchanged at 1.25%, the yield on the 10-year note dropping 4 basis points (bps) to 2.37%, and the 30-year bond rate decreasing 3 bps to 2.98%.

Treasury yields and the U.S. dollar have been under pressure as of late, and stocks pulled back from all-time highs, despite continued solid economic data, with the markets grappling with festering political uncertainty on both sides of the pond, exacerbated by last week's failed healthcare reform in the U.S. The greenback and bond yields have seen pressure despite this month's Fed rate hike, which included an apparent dovish tone and outlook for future rate increases that calmed concerns of accelerated hikes. For analysis, see the video by Schwab's Vice President of Trading and Derivatives, Randy Frederick and Senior Fixed Income Research Analyst, Collin Martin, CFA, titled, Fed Hiked Interest Rates, So Why Are Bond Yields Still So Low?, and Randy's and Schwab's Chief Fixed Income Strategist, Kathy Jones' video, Three Fed Hikes Seen in 2017: How Should Bond Investors Respond?, at www.schwab.com/insights. Follow Kathy and Randy on Twitter: @kathyjones and @randyafrederick.

The U.S. economic calendar will be relatively busy for the remainder of the week. A report that will likely garner a fair amount of attention is Thursday's release of the third and final read on 4Q GDP. However, when viewing the results our experts remind us in the recent Schwab Market Perspective: Teflon Market, that investors should remember that GDP growth is backward-looking and the stock market is forward looking; which is why leading economic indicators are more valuable "forecasting" tools for the stock market. We believe that economic growth is generally accelerating, but politics, both here and abroad, are keeping policy uncertainty high and should contribute to bouts of volatility. Read more at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch.

Reports expected on tomorrow's docket include the advanced goods trade balance, forecasted to show that the deficit narrowed to $66.4 billion in February from $68.8 billion the month prior, and Consumer Confidence, expected to move to a level of 114.0 for March from the 114.8 registered in February. Additional releases will include the Richmond Fed Manufacturing Index, anticipated to have ticked lower to 15 from 17 in March (a reading above zero indicates expansion in activity) and the S&P CoreLogic Case-Shiller Home Price Index.

Europe and Asia lower as politics continued to stymie sentiment

European equities finished lower, with basic materials leading to the downside as the pullback in the global markets persisted. Political uneasiness continued to fester, bolstered by last week's failed U.S. healthcare reform measures, which appeared to foster concerns about the implications for President Trump to get his business-friendly agenda through Congress. Moreover, next month's key French election looms, U.K. Brexit concerns lingered as the nation is expected to trigger article 50 this week to formally begin negotiations to leave the European Union,  and German regional elections showed positive results for Chancellor Angela Merkel. For analysis of the European political front, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, and Randy Frederick's video, Why Should the French Presidential Election Be Important to Investors? at www.schwab.com/insights, and Director of International Research, Michelle Gibley's CFA, article, Europe Votes: Could More Countries Reject the EU? at www.schwab.com/oninternational. Follow Jeff on Twitter: @jeffreykleintop. The political front overshadowed a positive read on German business sentiment, which improved to the highest level since July 2011. The euro and British pound rallied as the U.S. dollar continued a slide, while bond yields in the region finished lower.

Stocks in Asia finished mostly lower, with global political uncertainty lingering and volatility accelerating, exacerbated by last week's failed healthcare reform efforts in the U.S. Also, the markets may have been looking to some key Chinese economic data later in the week. The yen rallied to weigh on Japanese equities, while stocks trading in South Korea and India declined. Mainland Chinese shares and those trading in Hong Kong both dipped and Australian securities were also lower. For analysis of markets in Asia, see Schwab's Director of International Research Michelle Gibley's, CFA, recent article, Fed Rate Hikes May Benefit Japanese Stocks, and Jeffrey Kleintop's, CFA, commentary, The Fed has China in a Tough Spotat www.schwab.com/oninternational.

Tomorrow, the international economic calendar will be light, offering a consumer confidence read from Australia and industrial orders from Italy.

Markets Indifferent to Start the Week

On the Market

Posted: 2/27/2017 4:15 PM ET

Markets Indifferent to Start the Week

U.S. equities spent most of the day hugging the flatline, finishing with modest gains, with tomorrow's speech to Congress by President Donald Trump appearing to keep conviction in check. Equity news was in short supply, but the economic calendar showed durable goods orders and pending home sales missed estimates, while another read on regional manufacturing activity hit a multi-year high. Treasury yields and crude oil prices ticked higher, while gold was lower and the U.S. dollar was little changed.

The Dow Jones Industrial Average (DJIA) rose 16 points (0.1%) to 20,837, the S&P 500 Index added 2 points (0.1%) to 2,370, and the Nasdaq Composite gained 17 points (0.3%) to 5,862. In moderate volume, 834 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil inched $0.06 higher to $54.05 per barrel and wholesale gasoline was unchanged at $1.74 per gallon. Elsewhere, the Bloomberg gold spot price declined $5.83 to $1,251.36 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 101.13.

Berkshire Hathaway Inc. (BRK/B $171) reported 4Q earnings-per-share of $1.78, compared to the FactSet estimate of $1.82, though results out of its insurance unit exceeded the Street's forecasts. Shares were modestly higher.

Sotheby's (BID $46) posted 4Q EPS of $1.20, or $1.35 ex-items, versus the projected $1.17, as revenues declined 8.1% year-over-year (y/y) to $309 million, topping the expected $269 million. Shares were sharply higher. The auction house said it had a number of strong 4Q sales and the results reflect growing confidence in the market.

Core durable goods orders miss, while regional manufacturing activity hits multi-year highs

January preliminary durable goods orders (chart) rose 1.8% month-over-month (m/m), compared to the Bloomberg estimate of a 1.6% rise and December's downwardly revised 0.8% decline. Ex-transportation, orders declined 0.2% m/m, compared to forecasts of a 0.5% gain and versus December's upwardly revised 0.9% increase. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, decreased 0.4%, versus projections of a 0.5% increase, and following the favorably revised 1.1% increase in the month prior.

The Dallas Fed Manufacturing Activity Index unexpectedly rose further into a level depicting expansion (a reading above zero), increasing to 24.5 in February—the highest level since April 2006—from 22.1 in January, and compared to the expected dip to 19.4.

Pending home sales fell 2.8% m/m in January, versus projections of a 0.6% gain, and following the downwardly revised 0.8% increase registered in December. Compared to last year, sales were 2.7% higher. Pending home sales reflect contract signings and are used as a gauge of the pipeline of existing home sales, which rose more than expected in January to the fastest pace since February 2007.

Today's data kicks off a fully-loaded economic docket for the week, as the markets grapple with the possibility of a March Fed rate. Tomorrow will be one of the heaviest days, with reports slated for release to include the second look (of three) at 4Q GDP, with economists expecting the headline figure to be revised higher to a 2.1% quarter-over-quarter annualized expansion from the 1.9% posted in the first report, and personal consumption to tick higher to 2.6% from the 2.5% initially recorded, while the report's inflation figures are expected to remain the same. As well, the advanced goods trade balance is forecasted to show that the deficit widened to $66.0 billion in January from $65.0 billion the month prior, and Consumer Confidence will be released, forecasted to move to a level of 53.5 for February from the 50.3 registered in January. Rounding out the day will be the Chicago Purchasing Manager's Survey, the Richmond Fed Manufacturing Index, and the S&P CoreLogic Case-Shiller Home Price Index. Also, President Donald Trump will deliver his speech in front of Congress tomorrow evening.

Treasuries were lower, as the yields on the 2-year and 10-year notes rose 5 basis points (bps) to 1.20% and 2.37%, respectively, while the 30-year bond rate gained 3 bps to 2.98%. 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 and the U.S. dollar remain in focus, with the stock markets remaining near all-time highs, amid festering political and monetary policy uncertainty, along with signs that the economy continues to gain momentum. As noted in the latest Schwab Market Perspective: Not So Fast!, elevated earnings and economic expectations could lead to a pullback or more sideways action but we believe the bull market in U.S. stocks will continue. If economic data continues to surprise on the upside, a March rate hike is likely to be on the table; while there is an additional risk that the Fed may be forced to speed up the tightening process should inflation accelerate from here. Read more at www.schwab.com/marketinsight, where you can also find Schwab's Chief Fixed Income Strategist, Kathy Jones' article, What would a shake-up at the Fed mean for bond investors?. Follow Kathy on Twitter: @kathyjones. Finally, for a look at the U.S. political front, see Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend's latest article, Washington's Way: Why Trump's Policy Changes Could Take Time, at www.schwab.com/insights.

Europe ticks higher despite political uncertainty, Asia sees declines to begin the week

European equities nudged higher, shrugging off festering political concerns and a possible thwarted merger agreement among some key exchanges. The British pound overcame early pressure that stemmed from a report from the London Times which suggesting that another Scottish independence vote could be in the offing. The news came amid heightened political risk in the U.S. and Europe with the former dealing with high expectations of promised reflationary policy pledges and the latter facing a looming key French Presidential election. However, Italian political uneasiness cooled off after former Prime Minister Renzi suggested he will not push for early elections. For more on the global markets and the European political risk, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, latest article, The stock market sees nothing to worry about—that may be about to change. Jeff notes that Europe's economy is performing the best in many years on many key measures and stock markets are currently behaving as if there is nothing to worry about, but that may be about to change now that we are within 45 trading days of the French Presidential election. He concludes that savvy investors should be prepared for a rise in volatility in global stock markets in the coming months. Read more at www.schwab.com/oninternational, and be sure to check out Jeff's article, Five Reasons to Stay Invested Despite Heightened Uncertainty. Follow Jeff on Twitter: @jeffreykleintop. In economic news, eurozone economic confidence improved modestly but slightly missed expectations for February. The euro traded higher versus the U.S. dollar and bond yields in the region were mixed.

Asian stocks finished lower with the global market rally pausing amid continued U.S. and European political uncertainty, while data was on the light side. Japanese equities dropped, with the yen remaining choppy after a recent rebound, while Australian securities also declined. Stocks in mainland China and those traded in Hong Kong Hang cooled from rallies as of late, both finishing lower, and India's markets declined in its return to action following Friday's holiday break, while South Korean listing also lost ground. Schwab's Director of International Research, Michelle Gibley, CFA, provides some timely analysis of global investing in her 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 somewhat busy, with reports scheduled for release to include industrial production, construction orders, housing starts and retail sales from Japan, new home sales and business confidence from Australia, consumer confidence from the U.K., GDP and CPI from France, and CPI from Italy.

U.S. Stocks Outdo Global Markets

Charles Schwab; On the Market

Posted: 8/29/2016 :15 PM ET

U.S. Stocks Outdo Global Markets

U.S. equities bucked the global trend to finish solidly in the green, showing some resiliency in the face of the continued pressure on crude oil prices, as well as weakness overseas on increased Fed rate hike expectations. Favorable economic data likely lent some support, despite the global markets treading cautiously ahead of Friday's key August nonfarm payroll report. Treasuries and gold were higher, while the U.S. dollar was flat.

The Dow Jones Industrial Average (DJIA) rose 108 points (0.6%) to 18,504, the S&P 500 Index gained 11 points (0.5%) to 2,180, and the Nasdaq Composite increased 13 points (0.3%) to 5,232. In light volume, 647 million shares were traded on the NYSE and 1.4 billion shares changed hands on the Nasdaq. WTI crude oil lost $0.66 to $46.98 per barrel, wholesale gasoline declined $0.03 to $1.40 per gallon and the Bloomberg gold spot price increased $2.35 to $1,323.53 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was unchanged at 95.58.

Mylan NV (MYL $43) announced that it will launch the first generic EpiPen Auto-Injector at a list price of $300 for a two-pack carton, representing a discount of more than 50% to its branded EpiPen. The drug maker came under scrutiny last week for its pricing of its branded EpiPen shots at $600, which it said today that it will continue to sell. Shares were higher.

Personal income and spending rise as expected

Personal income (chart) was 0.4% higher month-over-month (m/m) in July, matching the Bloomberg forecast and compared to June's upwardly revised 0.3% increase. Personal spending came in 0.3% higher m/m last month—the fourth-straight monthly gain—in line with expectations and versus June's favorably revised 0.5% rise. The July savings rate as a percentage of disposable income was 5.7%. The PCE Deflator came in flat, as expected. Compared to last year, the deflator was 0.8% higher, matching estimates. Excluding food and energy, the PCE Core Index ticked 0.1% higher m/m, in line with expectations, and the index was up 1.6% y/y, above estimates of a 1.5% rise.

The Dallas Fed Manufacturing Index fell to -6.2 for August from July's unrevised -1.3 level with economists forecasting a decrease to -3.9. A reading below zero denotes contraction in manufacturing activity.

Treasuries finished higher, as the yield on the 2-year note declined 4 basis points (bps) to 0.81%, while the yields on the 10-year note and the 30-year bond dropped 7 bps to 1.57% and 2.22%, respectively. For analysis on the fixed income markets see the video from Schwab's Managing Director of Trading and Derivatives, Randy Frederick and Fixed Income Director Collin Martin, CFA, titled Tempered Expectations for Bond Returns: Why Hold Bonds? at www.schwab.com/insights and follow Randy on Twitter: @randyafrederick.

On the heels of last week's comments from Federal Reserve Chairwoman Janet Yellen and Vice Chair Stanley Fischer that suggested a September rate hike remains a possibility, this Friday's August nonfarm payroll report is poised to be a key focus for the global markets. The report will also be preceded by key reads on Manufacturing Purchasing Managers Indexes (PMIs) from ISM and Markit, the trade balance, Consumer Confidence, and August vehicle sales. Tomorrow will bring the Consumer Confidence Index, which economists expect to fall slightly to a level of 97.0 for August from July's 97.3, and the S&P CoreLogic Case-Shiller Home Price Index, forecasted to show prices in the 20-city composite rose 5.12% y/y in June, but ticked 0.1% lower m/m on a seasonally-adjusted basis  (economic calendar).

Schwab's Chief Fixed Income Strategist, Kathy Jones notes in her article, What Does Strong Job Growth Mean for Bond Investors?, recent strong job growth has improved the odds the Fed will raise short-term interest rates in the coming months and this has potentially negative implications for the U.S. bond market, which has put in a strong performance so far this year. The risk of higher rates appears greater than the potential for lower rates. We suggest investors keep the average duration of their portfolios within the short- to intermediate-term bond range to help reduce volatility, and consider holding Treasury Inflation-Protected Securities. Read more at www.schwab.com/onbonds and follow Kathy on Twitter: @kathyjones.

Europe lower on oil and Fed rate hike uneasiness, Asia mixed

European equities traded to the downside, amid lighter-than-usual volume as the U.K. markets were closed for a holiday. Fed rate hike expectations got a boost from Friday's comments from Federal Reserve Chairwoman Janet Yellen, which was followed by Fed Vice Chair Stanley Fischer's remarks that suggested rate hikes next month and in December could be possibilities. The euro and British pound finished lower versus the U.S. dollar, while bond yields in the region mostly dipped. Amid the elevated Fed rate hike expectations, utilities led to the downside, along with oil & gas issues, which saw pressure as crude oil prices declined on supply concerns and a stronger U.S. dollar. Political uncertainty lingered in the region as Spain's Prime Minister Rajoy is set to face a confidence vote tomorrow, per Bloomberg. For more on the global political landscape, see Schwab's Director of International Research, Michelle Gibley's, CFA, article, Performing Reformers: How Political Change Can Affect Stocks at www.schwab.com/oninternational, and be sure to follow Schwab on Twitter: @schwabresearch. Also, with global uncertainty remaining elevated to open the door for some possible increased volatility, Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, offers Three Reasons Why Now is Not the Time to Retreat from Global Diversification and why Your portfolio may be less diversified than you think. Read both articles at www.schwab.com/oninternational and be sure to follow Jeff on Twitter: @jeffreykleintop.

Stocks in Asia finished mixed on the heels of Friday's comments from the Fed's Yellen and Fischer that kept the possibility of a September rate hike in play. Mainland Chinese equities finished flat and those traded in Hong Kong declined, while the nation reported a year-over-year (y/y) acceleration in July industrial profits. Australian securities dropped amid weakness in basic materials and oil & gas stocks, while South Korean listings also declined. However, India's markets advanced, and stocks in Japan rallied as the yen weakened amid a rise in the U.S. dollar on the aforementioned Fed comments, as well as Bank of Japan Governor Kuroda's reiterated pledge to deploy further stimulus measures if needed. For more on Japan's potential increased stimulus measures see Jeffrey Kleintop's, CFA, article, What investors need to know about helicopter money at www.schwab.com/oninternational.

A host of economic reports from Japan will dominate tomorrow's international economic calendar, including labor data, personal income and consumption, retail sales and trade figures. From across the pond will come Germany's Import Price Index, housing prices from the U.K., CPI from Spain, retail sales from Italy, and confidence gauges from the Eurozone.

Drop in Crude Pressures Markets

Charles Schwab: On the Market

Posted: 7/25/2016 4:15 PM ET

Drop in Crude Pressures Markets

Despite more upbeat news on the manufacturing front, U.S. equities finished lower as a drop in crude oil prices weighed on energy issues, and caution appeared to prevail ahead of a heavy dose of economic reports this week, headlined by the FOMC's monetary policy meeting mid-week. Treasuries, the U.S. dollar and gold were also all lower.

The Dow Jones Industrial Average (DJIA) declined 78 points (0.4%) to 18,493, the S&P 500 Index lost 7 points (0.3%) to 2,168 and the Nasdaq Composite ticked 3 points (0.1%) lower to 5,098. In moderate volume, 763 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil was $1.16 lower at $43.13 per barrel, wholesale gasoline lost $0.03 to $1.33 per gallon and the Bloomberg gold spot price decreased $6.23 to $1,316.50 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% lower at 97.28.

In M&A action, Verizon Communications Inc. (VZ $56) announced it has entered into a definitive agreement to acquire the operating business of Yahoo! Inc. (YHOO $38) for approximately $4.8 billion. The deal is subject to customary closing conditions, approval by Yahoo's shareholders, and regulatory approvals, and is expected to close in 1Q of 2017. Yahoo added that, until the closing it will continue to operate independently, offering and improving its own products and services for users, advertisers, developers and partners. Shares of both companies were lower.

Kimberly-Clark Corp. (KMB $133) announced adjusted 2Q earnings-per-share (EPS) of $1.53, north of the $1.47 FactSet estimate, while revenues declined 1.2% year-over-year (y/y) to $4.6 billion, roughly in line with expectations. The company reaffirmed its full-year 2016 EPS guidance and stated that the restructuring program it began in October of 2014 is expected to be completed by the end of this year. KMB finished lower.

Sprint Corp. (S $6) announced a 1Q loss of $0.08 per share, matching the FactSet estimate, while revenues were flat y/y at $8.0 billion, also in line with forecasts. Sprint's CEO noted that the company experienced the highest first quarter postpaid phone net additions in nine years. S rallied over 25%.

Rockwell Collins Inc. (COL $84) reported fiscal 3Q EPS of $1.63, beating the FactSet consensus estimate of $1.59, while revenues rose 3.2% y/y to $1.3 billion, roughly matching forecasts. The company also announced that it has narrowed the range of its 2016 fiscal year EPS outlook to between $5.50 and $5.55, from the previously reported $5.45 to $5.65 range. Shares traded to the downside.

2Q earnings season is entering one of its busiest weeks and Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, provides some bottom-line analysis in his recent article Earnings estimates are rebounding: what it means for stocks. Jeff discusses how in the past month, headlines have been full of geopolitical risks including Brexit, a terror attack in France, and an attempted coup in Turkey. Yet global stocks are rallying—a different reaction than might have taken place earlier this year or last year. One reason for the change in stock market reaction: earnings expectations are back on the rise. Read the article at www.schwab.com/marketinsight and follow Jeff on Twitter: @jeffreykleintop.

Regional manufacturing activity tops estimates

The Dallas Fed Manufacturing Index ascended to -1.3 for July from June's unrevised -18.3 level with economists forecasting an improvement to -10.0. A reading below zero denotes contraction in manufacturing activity. The Dallas Fed noted that the production index component, a key measure of state manufacturing conditions, came in near zero after two months of negative readings, suggesting output stopped falling this month.

A ramp-up of earnings reports will be accompanied by a plethora of releases from the U.S. economic calendar this week, beginning in earnest tomorrow with the release of new home sales, which are forecasted to have risen 1.6% month-over-month (m/m) during June to an annual rate of 560,000, as well as the S&P/CaseShiller Home Price Index, with economists expecting a year-over-year (y/y) advance of 5.54% for May and a 0.2% increase m/m on a seasonally-adjusted basis. As well, investors will get the latest reads on consumer confidence, the Richmond Fed Manufacturing Index, and Markit's preliminary Manufacturing PMI Index.

Reports likely to be the headline events for the week, however, include Friday's first look (of three) at 2Q GDP, which will follow Wednesday's monetary policy decision from the Federal Open Market Committee (FOMC), with no changes expected to its current policy stance, while earnings season will continue to ramp-up. Schwab's experts tackle these topics in the latest Schwab Market Perspective: New Records…Same Skepticism, noting that while there’s a near unanimous opinion that the Federal Open Market Committee (FOMC) will stay put at its meeting this week, market expectations for a rate hike later this year have risen over the past couple of weeks, coming closer to what we have believed was the more realistic possibility. Read more at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch.

Treasuries finished lower, as the yield on the 2-year note rose 3 basis points (bps) to 0.74%, the yield on the 10-year note was unchanged at 1.57%, and the 30-year bond ticked 1 bp higher to 2.29%. Bond yields have rebounded as of late from record lows on favorable U.S. economic data, as well as eased U.K. Brexit concerns and expectations of a Fed rate hike this year. For analysis see the video from Schwab's Chief Investment Strategist, Liz Ann Sonders and Managing Director of Trading and Derivatives, Randy Frederick, titled Strong Jobs Report: Recession off the Table but Is Rate Hike Back On?, at www.schwab.com/insights. Follow Liz Ann and Randy on Twitter: @lizannsonders and @randyafrederick. Also, Schwab's Chief Fixed Income Strategist, Kathy Jones offers analysis in her recent article titled, With a Whimper Instead of a Bang: Is the Great Bond Bull Market Over?, at www.schwab.com/marketinsight. Follow Kathy on Twitter: @kathyjones.

Europe and Asia mixed after giving up early gains

European equities pared early gains and finished trading mostly lower as some initial support from better-than-expected business climate data released from Germany seemingly faded as the decline in crude oil prices weighed on energy issues. Business sentiment in Germany declined, but less than was forecasted according to the Ifo's recent survey results, suggesting a robust business climate in the wake of the Brexit vote and the recent string of terror attacks in Germany in the past few weeks. It's been just over a month since the U.K. voted in favor of Brexit and Schwab's experts inform us in the recent Schwab Market Perspective: New Records…Same Skepticism, that at the time of the vote we noted that the stock market typically recovered after initial shocks like Brexit, but that recovery usually took about three months. For the Brexit shock it took just three weeks. We believe there are three primary reasons that the global stock market has remained so resilient. To find out what they are, read the whole article at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch. In other economic news in the region, U.K. manufacturing confidence slipped to its lowest level since early 2009, adding to the haze of uncertainty that has been growing since the Brexit vote as the world awaits a clear plan and timeline from the British government in how it will negotiate its new relationship with the European Union. The euro and British pound advanced versus the U.S. dollar and bond yields in the region finished mixed higher.

Stocks in Asia finished mostly higher on Monday as investors may have been exercising some caution ahead of a couple of high-profile central bank monetary policy meetings taking place later this week in the U.S. and Japan. Japanese equities finished slightly to the downside, but mostly flat as the island nation reported a larger-than-expected trade surplus for June, though exports were shown to have declined for the ninth-consecutive month. With the Bank of Japan's upcoming meeting fast approaching, Schwab's Chief Global investment Strategist, Jeffrey Kleintop, CFA, discusses in his article, What investors need to know about helicopter money, how the return of deflation in Japan has led to heightened expectations for more unconventional monetary policy and some have even called for the use of so-called “helicopter money." Read the whole article at www.schwab.com/oninternational and be sure to follow Jeff on Twitter: @jeffreykleintop. Stocks traded in both Mainland China and Hong Kong finished slightly higher with some volatile trading occurring on lower-than-average volume as traders in the world's second largest economy may be searching for some economic clues as data from the country is expected to be light for the week. Meanwhile markets in Australia, South Korea's and India finished higher.

Reports on tomorrow's international economic calendar will be very sparse, with those scheduled for release to include inflation data from Japan and industrial production from Sweden.