Stocks Extend Recent Gains

Charles Schwab: On the Market

Posted: 12/8/2017 4:15 PM EST

Stocks Extend Recent Gains

 

U.S. stocks advanced during the regular trading session to extend recent gains and finish the week mostly higher. The advance for equities was aided by a relatively upbeat read on the domestic labor market which followed favorable economic reports out of China and Japan. Treasury yields were mixed and the U.S. dollar was higher, while gold was little changed and crude oil prices rallied. 

The Dow Jones Industrial Average (DJIA) increased 119 points (0.5%) to 24,329, the S&P 500 Index was 15 points (0.6%) higher at 2,651, and the Nasdaq Composite advanced 27 points (0.4%) to 6,840. In moderate volume, 740 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil increased $0.67 to $57.36 per barrel and wholesale gasoline gained $0.02 to $1.72 per gallon. Elsewhere, the Bloomberg gold spot price moved $0.71 higher to $1,247.93 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% higher at 93.90. Markets were mixed for the week, as the DJIA and the S&P 500 Index increased 0.4% and the Nasdaq Composite declined 0.1%.

United Continental Holdings Inc. (UAL $64) increased its Q4 passenger revenue outlook after reporting a 5.1% increase in November traffic, and it announced a new $3 billion share repurchase program. Shares traded higher.

Western Digital Corp. (WDC $81) is gained solid ground amid media reports that the company and Toshiba Corp. (TOSYY $16) have reached a deal in principle to settle their chip dispute and could announce a formal agreement next week. Neither company commented on the report.

Cooper Companies Inc. (COO $227) reported fiscal Q4 earnings-per-share (EPS) of $1.78, or $2.65 ex-items, versus the $2.64 FactSet estimate, with revenues rising 8.0% year-over-year (y/y) to $562 million, above the projected $559 million. The medical device company issued 2018 EPS guidance that had a midpoint below expectations. Shares finished solidly lower.

November labor report shows job growth tops forecasts, consumer sentiment slips

Nonfarm payrolls (chart) rose by 228,000 jobs month-over-month (m/m) in November, compared to the Bloomberg forecast of a 195,000 increase. The rise of 261,000 seen in October was revised to a gain of 244,000 jobs. The total upward revision to the job gains in October and September was 3,000.

Excluding government hiring and firing, private sector payrolls increased by 221,000, versus the forecasted gain of 195,000, after rising by 247,000 in October, revised from the 252,000 increase that was initially reported. The Department of Labor said employment continued to trend up in professional and business services, manufacturing and healthcare.

The unemployment rate remained at 4.1%, matching estimates, while average hourly earnings were up 0.2% m/m, below projections of a 0.3% increase and versus October's downwardly revised 0.1% decrease. Y/Y, wage gains were 2.5% higher, versus estimates of a 2.7% increase and October's downwardly revised 2.3% rise. Finally, average weekly hours ticked higher to 34.5 from October's unrevised 34.4 rate, where it was forecasted to remain.

Rate hike expectations for when the Fed concludes its meeting next week remained elevated following the relatively favorable employment report but the softer-than-expected wage growth and downward revision to the prior month may have caused some uncertainty regarding the pace of rate hikes in 2018. As we head toward the New Year, Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, offers a look at the key issues to watch in his latest, Schwab Sector Views: 18 Thoughts Heading into '18, pointing out that business optimism is elevated, which could bolster already rising capital investments. This could help support a continuation of the strong labor market.
Schwab's Chief Investment Strategist Liz Ann Sonders points out that capital spending (capex) is likely to be an economic highlight in 2018 and coupled with the continued rebound in productivity is good news for wages in her articles, Takin Care of Business: Several Important Kickers for a Strong Capex Cycle and One Thing Leads to Another: Productivity's Rebound.

The preliminary University of Michigan Consumer Sentiment Index (chart) declined to 96.8 in December, from 98.5 in November, and compared to expectations of an improvement to 99.0. The current economic conditions component of the survey improved but was more than offset by a decline in the expectations part of the report. The 1-year inflation forecast rose to 2.8% from November's 2.5% rate, while the 5-10 year inflation outlook ticked higher to 2.5% from the prior month's level of 2.4%.

Wholesale inventories (chart) were revised lower to a 0.5% m/m decline for October from the preliminary estimate of a 0.4% decrease, where it was forecasted to remain and compared to September's 0.1% gain. Sales grew 0.7% m/m, compared to forecasts of a 0.3% increase and September's upwardly revised 1.4% rise. The inventory-to-sales ratio—the amount of time it would take to deplete inventories at the current sales pace—dipped to a 1.25 months pace from September's 1.26 rate.

Treasuries finished mixed, with the yield on the 2-year note dipping 1 basis point (bp) to 1.79%, the yield on the 10-year note remaining at 2.37%, and the 30-year bond rate increasing 1 bp to 2.76%.

The U.S. dollar is extended its weekly gain and Treasury yields are diverged on the heels of the employment data, which followed favorable Chinese trade and Japanese GDP figures. Moreover, the markets cheered a breakthrough in the U.K. Brexit impasse, and a short-term government funding bill late yesterday that should help avoid a U.S. government shutdown this weekend. However, tax reform continues to be a main focus for the markets as the House and Senate grapple with reconciling key differences in their bills.

Schwab's Director of Tax and Financial Planning, Hayden Adams, CPA, offers analysis of the reconciliation process and what investors should be paying attention to, in his article, Tax Reform: What Investors Should Know.

If you have questions regarding how the potential tax overhaul may affect you as an investor, see Hayden's Tax Reform: Frequently Asked Questions.

Europe and Asia higher

European equity markets moved higher, with the markets cheering upbeat economic reports out of the U.S., China and Japan, which overshadowed an unexpected drop in German exports and mixed industrial and manufacturing production figures in the region. Financials led the way, bolstered by a long-awaited deal by regulators to complete the final batch of post-crisis capital rules, which offered clarity for the industry. The U.K. and European Union (EU) reached a deal on three key issues, including the Irish border, that paves the way to break the Brexit negotiation deadlock and likely leads to talks moving to the next phase ahead of next week's EU summit. However, the next stage would revolve around trade and headlines suggested this could be a lengthy process in getting an agreement, which appeared to weigh on the British pound versus the U.S. dollar. The Brexit breakthrough joined the agreement in the U.S. on a short-term government spending bill that likely avoids a near-term shutdown, though the markets continued to eye the U.S. tax reform reconciliation process.

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 euro dipped versus the greenback and bond yields in the region finished mixed.

Stocks in Asia finished higher as the U.S. markets rose to break a string of sluggishness, while economic reports in the region fostered some optimism. Japan's Q3 GDP was revised to a 2.5% quarter-over-quarter annualized pace of growth, from the preliminary estimate of a 1.4% rise, and versus expectations of an adjustment to a 1.5% rate of expansion. China's November exports and imports rose much more than expected resulting in an unexpected widening of the nation's trade surplus. The yen lost ground for a second day amid some rejuvenated global economic optimism, helping lift Japanese share prices. Stocks trading in mainland China and Hong Kong advanced, while securities trading in Australia and India also gained ground and South Korean equities ticked to the upside. The markets rebounded after a recent stumble and Schwab's Jeffrey Kleintop, CFA, and Randy Frederick, discuss in the video, It's All Relative: Why Stocks May Not Be Overvalued.

Stocks nudge higher on week as tech rebounds and tax reform moves closer

U.S. stocks finished the week modestly higher with economic data continuing to paint a positive global backdrop, while the weekend passage of the Senate's tax reform bill fostered optimism that the most sweeping overhaul effort in decades was moving closer to President Donald Trump's desk. Moreover, the tech sector rollover that had pressured the markets as of late, reversed to the upside as the week matured to help nudge the markets into positive territory and the Nasdaq mostly recover early losses. Energy stocks lagged behind as crude oil prices moved to the downside. The U.S. dollar moved noticeably higher and Treasury yields ticked to the upside in choppy trading with political uncertainty in Europe also garnering attention.

Next week, fiscal policy focus will share the spotlight with monetary policy as the Federal Open Market Committee (FOMC) is highly expected to conclude its Wednesday meeting with a 25 bps increase to its target fed funds rate to 1.50% (economic calendar). However, the accompanying updated FOMC projections and Chairwoman Janet Yellen's final press conference shortly after the decision will likely garner the most attention as the markets try to gauge the pace of rate hikes in 2018. The decision will also be joined by releases next week including: JOLTS Job Openings report, the NFIB Small Business Optimism Index, the Consumer Price Index (CPI), the Producer Price Index (PPI), retail sales, Markit's business activity reports, and industrial production and capacity utilization.

As noted in the latest Schwab Market Perspective: The Big Picture Heading into 2018, a better-than-expected 2017 appears to be morphing into a solid start to 2018, but it is unlikely to be as smooth a ride. We believe the bull market still has room to run but it could shape up to be a bumpier ride as expectations and sentiment are elevated. U.S. economic growth appears to be picking up, but with the Federal Reserve tightening policy and inflation likely to heat up, we appear to be in the latter stages of the cycle. Global markets are also poised to have an unprecedented year of performance; which is unlikely to be repeated, but conditions around the world still look largely supportive of further gains.

International reports due out next week to look out for include: Australia—employment change. China—CPI and PPI, lending statistics, retail sales, and industrial production. India—CPI, industrial production, and trade balance. Japan—machine orders, industrial production and capacity utilization, and the Q4 Tankan Large Manufacturing Index. Eurozone—European Central Bank monetary policy decision, industrial production, Markit's business activity reports, and the trade balance, along with German investor sentiment and CPI. U.K.—the Bank of England monetary policy decision, CPI, employment change, and retail sales.

Financial Review

Trifecta of Records

Sinclair Noe — October 11, 2017

Podcast: Play in new window | Download (Duration: 13:15 — 7.6MB)

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DOW + 42 = 22,872 (Record)
SPX + 4 = 2555 (Record)
NAS + 16 = 6603 (Record)
RUT – 1 = 1506
10 Y un = 2.35%
OIL + .39 = 51.31
GOLD + 3.60 = 1292.10

Cryptocurrency

• Number of Currencies: 874
• Total Market Cap: $156,026,671,244
• 24H Volume: $2,398,072,736

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	4,850.1	$80.49B	$1.21B	50.50%	1	+0.52%	+14.92%
	Ethereum	ETH	304.63	$28.94B	$260.03M	10.84%	0.0628673	+0.41%	+4.26%
	Ripple	XRP	0.26500	$10.32B	$161.04M	6.72%	0.00005519	+0.95%	+20.90%
	Bitcoin Cash	BCH	311.00	$5.22B	$123.95M	5.17%	0.0646502	-0.60%	-12.01%
	Litecoin	LTC	50.900	$2.72B	$56.85M	2.37%	0.0105321	+0.26%	-0.29%
	Dash	DASH	297.00	$2.26B	$26.15M	1.09%	0.0612835	-0.35%	-1.68%
	NEM	XEM	0.21342	$1.93B	$2.68M	0.11%	0.00004419	-0.78%	-0.78%
	NEO	NEO	30.170	$1.51B	$33.17M	1.38%	0.00623998	+0.23%	-0.83%
	IOTA	MIOTA	0.48320	$1.35B	$6.68M	0.28%	0.0001002	+0.33%	-9.64%
	Monero	XMR	87.58	$1.33B	$20.99M	0.88%	0.0181158	+0.12%	-2.62%

The Dow Industrials, S&P 500 and Nasdaq Composite all closed at record highs. With the S&P 500 up 14 percent in 2017, investors are betting on strong earnings growth across the S&P 500. Banks take the focus as JPMorgan Chase and Citigroup report results on Thursday, with analysts warning that results in the sector will largely be held back by low trading volumes compared with a year earlier.

Profits at companies in the S&P 500 stock index are expected to increase by 4.6% in the July-thru-September quarter, once corporations have finished reporting results, according to earnings-tracker Thomson Reuters. That’s a sharp deceleration from the 10%-plus gains in the first two quarters of 2017.

The Federal Reserve released the minutes from their September 20^th FOMC meeting. At that meeting, the Fed decided to begin quantitative tightening, by selling off some of the Treasuries and mortgage backed securities held on their balance sheet; they also left interest rates unchanged.

It is widely expected the Fed will hike rates at the December meeting but the minutes reveal policymakers are a bit skeptical. Inflation is still well below the Fed’s target of 2%. They don’t want to wait until inflation goes flying past 2% but they are also at a loss to explain why inflation remains stubbornly low.

Minutes portray the Fed as roughly divided into three camps. The first, which included “many” Fed officials, thought another increase in interest rates “later this year” was likely to be warranted “if the medium-term outlook remained broadly unchanged.”

The second camp, comprising fewer officials, said they were data-dependent and were looking for “confidence that inflation was moving up.” And the remaining “few” said rate hikes should be deferred until inflation “was clearly on a path toward the Fed’s symmetric 2% objective over the medium term.” Bottom line is that the Fed will probably hike rates in December.

For the “data dependent” camp, they are at a disadvantage. The hurricanes have skewed economic reports on inflation and jobs. The September jobs report showed a loss of 33,000 jobs, breaking an 83-month string of consecutive gains, but today’s JOLT survey shows the labor market remains strong.

The Job Openings and Labor Turnover Survey showed job openings in the country fell slightly to 6.08 million in August from a record 6.14 million in July. Some 5.43 million people were hired and 5.23 million lost their jobs. Job openings declined for most industries, though the biggest drop was in education. Educational employment is always hard to capture at the start and end of school years.

Hurricane Harvey may have also had a negative impact at the end of the month. The quits rate among private-sector employees was unchanged at 2.4%. It slipped a notch to 2.1% if government workers are included. Quitting a job is a positive because people voluntarily quit one job before accepting another, hopefully better job. Many firms complain they can’t find enough skilled workers, but available jobs tend to stay open longer. We still have not seen companies willing to pay more to make a good hire.

If you have a Twitter account, or just follow the news, you know that Trump takes credit whenever the stock market hits a record high. It’s a routine that has played out in 2017. The bull market has been running since mid-2009. Trump had nothing to do with the first 7-1/2 years of that rally.

While there have been times this year when the so-called Trump trade — or the promise of business-friendly policies — has undoubtedly been responsible for the gains, there have also been long stretches when other factors were driving returns.

Earnings growth exploded for the first- and second-quarter reporting periods, which largely occurred in April and July. The S&P 500 saw profit growth of 14% during the first three months of the year and 11% for the second quarter, its best stretch since 2011. Trump had nothing to do with that earnings growth. At some point the bull market will end. If Trump takes credit for the past 9 months, he must also be willing to take the blame when the market inevitably crashes, but you know this is a one-way street.

Today, Trump tweeted: “It would be really nice if the Fake News Media would report the virtually unprecedented Stock Market growth since the election. Need tax cuts.” As a matter of economics, Trump’s tax pitch is nonsensical. “Virtually unprecedented stock market growth” is not a problem for tax cuts to solve. The argument for tax cuts is that they might boost a sluggish economy.

During a recession or depression, tax cuts may provide stimulus to get money circulating through the economy, especially if the tax cuts are directed at the middle class. A tax cut directing half the benefits to the richest percentile is more likely to distort the price action of already extended valuations – something that never ends well.

Republicans have “basically just given up on trying to pay for the tax cuts that they’re going to do. They’re now just trying to figure out what size of tax cut could they pass and how could they put together a coalition of 50 percent plus one. A tax cut now would explode the deficit, at the exact time when the Fed is starting quantitative tightening.

Considering the Fed won’t be the big buyer of all that debt, you could reasonably expect debt prices to tumble, pushing yields much higher and slowing economic growth. And this is a tax plan predicated on dynamic scoring and much faster economic growth. The timing for this tax plan is completely wrong. And that is one reason why Trump is having a hard time trying to sell it.

Japan’s main stock index rose to its highest level in almost 21 years on Wednesday. In large part, Japan’s stronger stock market is part of a global rise in optimism. But Japan has some of its own good news to share. Japan’s gross domestic product has expanded for six consecutive quarters, the first time it has gone that long without a contraction in 11 years.

Unemployment is at multi-decade lows, and corporations are experiencing a surge in profits. Even Japan’s longtime economic bugbear — persistent wage and price deflation — has eased, with both consumer prices and incomes showing modest gains.

Spanish authorities gave Catalonia’s separatist leader five days to explain whether his ambiguous statement on secession was a formal declaration of independence and warned that his answer dictated whether they would apply never-used constitutional powers to curtail the region’s autonomy.

Threatening to invoke a section of the Spanish Constitution to assert control over the region, Prime Minister Mariano Rajoy said Catalan president Carles Puigdemont’s response to the central government’s ultimatum would be crucial in deciding “events over the coming days.”

Puigdemont announced on Tuesday that he was using the victory in a banned Oct. 1 referendum to proceed with a declaration of Catalan independence, but proposed freezing its implementation for a few weeks to allow for dialogue and mediation with the government in Madrid.

Airlines are feeling the impact of a brutal hurricane season. Delta Air Lines said net income fell 6% to nearly $1.2 billion during its July to September quarter, with $120 million of the decline blamed on Hurricane Irma last month. JetBlue Airways, meanwhile, projected that operating income could be affected by as much as $105 million through the end of the year.

Meanwhile, Delta Air Lines pledged not to pay import duties on Bombardier’s jetliner, which was socked in the last two weeks with 300 percent tariffs by the U.S. Commerce Department. It’s possible Delta will delay deliveries of the C Series planes, which are scheduled to begin next year. The airline is also considering “various other plans” if the preliminary duties are finalized, he said without elaborating. Delta last year agreed to buy at least 75 of the jets at a list price of more than $5 billion.

Luxury handbag maker Coach is changing its name to Tapestry. Perhaps they are changing names because they think the new name is a good metaphor, or something – but I think they’re just Carole King fans.

Modest Losses Heading into the Weekend

Charles Schwab: On the Market

Posted: 11/18/2016 4:15 PM ET

Modest Losses Heading into the Weekend

U.S. equities finished out the last trading day of the week with slight losses, as the election-fueled bull market run paused. However, the U.S. dollar extended its rally on yesterday's solid economic data and comments from Fed Chair Yellen that bolstered December rate hike expectations. Meanwhile, financials continued to move higher and energy stocks got a boost from a turn upward for crude oil prices. Treasuries and gold were lower.

The Dow Jones Industrial Average (DJIA) lost 36 points (0.2%) to 18,868, the S&P 500 Index declined 5 points (0.2%) to 2,182 and the Nasdaq Composite fell 12 points (0.2%) to 5,322. In moderately-heavy volume, 930 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.38 to $46.36 per barrel, wholesale gasoline gained $0.01 to $1.46 per gallon and the Bloomberg gold spot price was $8.31 lower at $1,208.11 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% higher at 101.32. Markets were higher for the week, as the DJIA rose 0.1%, while the S&P 500 Index gained 0.8% and the Nasdaq Composite jumped 1.6%.

Salesforce.com Inc. (CRM $78) reported 3Q earnings-per-share (EPS) ex-items of $0.24, above the $0.21 FactSet estimate, as revenues rose 25.0% year-over-year (y/y) to $2.1 billion, roughly in line with forecasts. CRM raised its full-year EPS and revenue guidance. Shares were solidly higher.

Williams-Sonoma Inc. (WSM $53) posted 3Q EPS of $0.78, one penny north of forecasts, with revenues rising 1.1% y/y to $1.3 billion, roughly in line with expectations. 3Q same-store sales declined 0.4% y/y, compared to the estimated 1.4% gain. WSM issued 4Q earnings and sales guidance that was below the Street's projections. Shares were lower.

Shares of Gap Inc. (GPS $26) fell sharply after the retailer noted challenging traffic trends during 3Q after reaffirming its full-year EPS outlook, which prompted some concerns among analysts regarding its 4Q performance, which includes the crucial holiday shopping season.

Leading indicators tick higher

The Conference Board's Index of Leading Economic Indicators (LEI) (chart) rose 0.1% month-over-month (m/m) in October, in line with the Bloomberg projection, and compared to the prior month's unrevised 0.2% increase. Support came from the components pertaining to the yield curve and average workweek, while the index was bogged down by jobless claims, ISM new orders and consumer expectations.

The Kansas City Fed Manufacturing Activity Index for November fell to 1 from October's unrevised 6 level, though a reading north of zero depicts expansion.

Treasuries finished lower, as the yield on the 2-year note ticked 2 basis point (bp) higher to 1.07%, the yield on the 10-year note gained 4 bps to 2.34%, while the 30-year bond was flat at 3.02%.

Bond yields have surged in the wake of President-elect Donald Trump's surprising victory in last week's election, which also saw the Republicans maintain control of Congress. For our latest analysis of the bond markets following the surprise election results, see Schwab's Chief Fixed Income Strategist, Kathy Jones' latest article, at www.schwab.com/onbonds, where you can also find Schwab's Director of Income Planning, Rob Williams' latest article, Can Bond Funds Make Sense When Interest Rates Rise?. Follow Kathy and Schwab on Twitter: @kathyjones and @schwabresearch.

With the markets being driven by posturing since Donald Trump's surprising Presidential election victory last week, see Schwab's Chief Investment Strategist Liz Ann Sonders' and Senior Vice President with the Schwab Center for Financial Research, Mark Riepe's, CFA, video titled The Election's Over, so What's Next for Markets? at www.schwab.com/insights. Follow Liz Ann on Twitter: @lizannsonders. Also, Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, Could Tax Cuts Really Happen in 2017?, as part of our election 2016 commentary at www.schwab.com/insights/category/election-2016.

Europe declines, Asia mixed as monetary policy and politics command attention

European equities finished mostly lower, with cooled post U.S. election-posturing allowing the markets to focus on diverging global monetary policy and a host of looming political events in Europe. Schwab's Director of International Research, Michelle Gibley, CFA, offers analysis of the European political landscape in her latest article, Europe Votes: Could More Countries Reject the EU?. Michelle notes that upcoming votes in Europe could create market volatility, but resolving outstanding political uncertainty could be good for stocks and the economy. Read more at www.schwab.com/oninternational. Yesterday, Federal Reserve Chairwoman Janet Yellen signaled that a rate hike "could well become appropriate relatively soon," while warning about the risks to financial stability and frequency of tightening monetary policy of holding the fed funds rate at its current level for too long. European Central Bank President Mario Draghi said today that the current monetary policy support will be key for the economic outlook in coming years, while adding that it does not yet see a consistent strengthening of underlying price dynamics, per Bloomberg. The euro and British pound fell versus the U.S. dollar, while bond yields in the region finished mixed. Technology issues moved higher, though basic materials, oil & gas and utilities stocks saw some pressure.

Stocks in Asia finished mixed, with fading U.S. election fallout giving way to elevated Fed rate hike expectations in the wake of yesterday's plethora of stronger-than-expected data and comments from Fed Chair Yellen that signaled a December rate increase may be on track. Japanese equities gained ground, with the yen extending a slide versus the U.S. dollar to take the index to an 11-month high and technically entering a bull market. The gain came as yesterday the Bank of Japan began its first bond market operation since the September decision to change its monetary policy direction to focus on managing the yield curve. For our latest analysis of Japan's monetary policy, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, article, Going Godzilla: What has the Bank of Japan Unleashed?.

Mainland Chinese stocks declined amid continued caution toward the real estate market as the government has cracked down on buying activity, while a report showed growth in October new home prices slowed m/m, but securities traded in Hong Kong advanced, snapping a two-session losing streak. Australia's markets rose, with strength in financials being accompanied by a rally in technology issues. South Korean listings and those traded in India both declined, with emerging markets remaining choppy in the wake of the U.S. election. Following the past week of U.S. election-fueled market volatility, Schwab's 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 all these articles from Jeff at www.schwab.com/oninternational, and follow him on Twitter: @jeffreykleintop.

Stocks continue election run

The Dow, S&P 500 and Nasdaq all threatened record territory as stocks extended a rally stemming from last week's surprising Presidential victory by Donald Trump. Moreover, Fed rate hike expectations remained elevated, bolstered by some strong economic data and Fed Chair Janet Yellen's Congressional testimony where she signaled a December hike was likely. Housing starts surged to more than a nine-year high, jobless claims tumbled to the lowest level since 1973, and retail sales easily topped expectations. Treasury yields and the U.S. dollar both added to rallies, with the yield on the 10-year note hitting levels not seen in about a year. Financials led the way, while healthcare issues gave back some of last week's post-election rebound. Energy was also a standout winner as crude oil prices overcame some of a recent plunge. The retail sector dominated the earnings front, highlighted by Best Buy Co. Inc. (BBY $45) and Target Corp. (TGT $76), though results were mixed as Dow members Wal-Mart Stores Inc. (WMT $69) and Home Depot Inc. (HD $128) both fell as their reports disappointed the Street. Outside the retail sector, Dow component Cisco Systems Inc. (CSCO $30) dropped to help limit gains for the Dow after issuing softer-than-expected 2Q guidance. With 3Q earnings season largely in the books, the growth rate for the S&P 500 sits at 3.0%, poised to post y/y growth for the first time since 1Q 2015, per data compiled by FactSet.

Although next week will be shortened by market closures on Thursday's Thanksgiving holiday, focus on the fallout from the election and elevated Fed rate hike expectations are likely to continue. As such, the U.S. economic calendar is poised to command attention, with the release of key reads on existing and new home sales, durable goods orders, Markit's preliminary Manufacturing PMI Index, and the final University of Michigan Consumer Sentiment Index.

International reports headlining a light week of data include: Japan—trade balance and the Consumer Price Index (CPI). Eurozone—Markit's business activity reports, as well as 3Q GDP and business confidence reports out of Germany. U.K.—3Q GDP.

Uncertainty Keeps Markets Rangebound

Charles Schwab: On the Market

Posted: 10/31/2016 4:15 PM ET

Uncertainty Keeps Markets Rangebound

U.S. equities finished modestly lower and near the unchanged mark, as investors look ahead to monetary policy meetings out of the U.S., the U.K. and Japan, as well as Friday's domestic jobs report, to gain more clarity. M&A activity dominated the equity front, headlined by Dow member General Electric's oil and gas combination with Baker Hughes and CenturyLink's tie-up with Level 3 Communications. Treasuries were modestly higher, following mixed economic data, while crude oil prices continued to selloff, exacerbated by disappointing OPEC talks over the weekend. Gold was higher, while the U.S. dollar was nearly flat.

The Dow Jones Industrial Average (DJIA) declined 19 points (0.1%) to 18,142, the S&P 500 Index was nearly unchanged at 2,126 and the Nasdaq Composite ticked nearly 1 point lower to 5,189. In heavy volume, 1.0 billion shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil tumbled $1.84 to $46.86 per barrel, wholesale gasoline ticked $0.03 lower to $1.42 per gallon and the Bloomberg gold spot price rose $2.58 to $1,278.05 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 98.35.

Dow member General Electric Co. (GE $29) announced that it will combine its oil and gas business with Baker Hughes Inc. (BHI $55). Under the terms of the deal, Baker Hughes shareholders will receive a special one-time cash dividend of $17.50 per share and 37.5% of the new company. GE will own 62.5% of the company and the transaction is expected to close in mid-2017. Both GE and BHI finished lower.

CenturyLink Inc. (CTL $27) announced an agreement to acquire Level 3 Communications Inc. (LVLT $56) for $66.50 per share in cash and stock, in a transaction valued at about $34.0 billion, including the assumption of debt. Under the terms of the deal, LVLT shareholders will receive $26.50 per share in cash and a fixed exchange ratio of 1.4286 shares of CTL for each share they own. Shares of CTL were lower, while LVLT gained solid ground. Both companies separately reported 3Q earnings results, with CenturyLink topping profit forecasts and matching revenue expectations, while Level 3 missed estimates.

Cardinal Health Inc. (CAH $69) reported fiscal 1Q earnings-per-share (EPS) ex-items of $1.24, above the $1.21 FactSet estimate, with revenues rising 14.0% year-over-year (y/y) to $32.0 billion, north of the expected $31.1 billion. Shares were nicely higher despite the company lowering its full-year EPS guidance, as its pharmaceutical segment profit is expected to be down y/y, due to generic pharmaceutical pricing and reduced levels of branded inflation.

Personal income and spending rise

Personal income (chart) was 0.3% higher month-over-month (m/m) in September, below the Bloomberg forecast of a 0.4% rise, and compared to August's unrevised 0.2% increase. Personal spending gained 0.5% last month, north of the expected 0.4% increase and versus August's downwardly revised 0.1% dip. The September savings rate as a percentage of disposable income was 5.7%. The PCE Deflator was up 0.2%, matching expectations. Compared to last year, the deflator was 1.2% higher, in line with estimates. Excluding food and energy, the PCE Core Index moved 0.1% higher m/m, matching expectations, and the index was up 1.7% y/y, in line with estimates.

For more on the consumer, see Schwab's Chief Investment Strategist Liz Ann Sonders' latest article, Vertigo: Effect of Spiking Healthcare Costs on Consumers, at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders.

The Chicago Purchasing Managers Index (chart) fell but clung to expansion territory (above 50), after dropping to 50.6 in October from 54.2 in September and versus expectations of a dip to 54.0. New orders, production and inventories declined, while order backlogs and employment rose.

The Dallas Fed Manufacturing Index improved to -1.5 for October, from September's unrevised -3.7 level, with economists forecasting an increase to 2.0. A reading below zero denotes contraction in activity.

Treasuries were higher, as the yield on the 2-year note lost 1 basis point (bp) to 0.85%, while the yields on the 10-year note and the 30-year bond dipped by 3 bps to 1.83% and 2.59%, respectively. Bond yields have given back some of a recent rally that has come from some relatively upbeat economic data and elevated Fed rate hike expectations and Schwab's Chief Fixed Income Strategist, Kathy Jones notes in her article, Are Bond Yields About to Rise?, the shift to higher yields is likely to be slow, in our view, but markets don’t appear to be prepared for the change. We suggest investors prepare for a potential rise in bond yields by trimming exposure to bonds with either long durations or high credit risk. Read more at www.schwab.com/onbonds and follow Kathy on Twitter: @kathyjones.

A heavy week of data will continue tomorrow, with key reads on October manufacturing activity, courtesy of the ISM Manufacturing Index and the final Markit Manufacturing PMI Index (economic calendar). ISM's index is projected to tick higher to 51.7 from 51.5 in September, while Markit's index is estimated to be unrevised at 53.2, and up from September's 51.5 level. Readings above 50 denote expansion. As well, construction spending will be reported, forecasted to have risen 0.5% m/m during September, following the 0.7% decline seen in August.

However, Wednesday's monetary policy decision from the Federal Open Market Committee (FOMC) and Friday's October nonfarm payroll report are poised to command most of the attention, with traders looking to clear up uncertainty regarding a December rate hike.

As noted in the recent Schwab Market Perspective: Looking Past the Election, economic data continues to support a sluggish growth narrative, although there are glimmers of hope that we could see at least a modest acceleration in 2017. Barring a surprise move on Wednesday, which could jolt the market as odds of a hike at that meeting remain low, the focus on the Fed will move back to the forefront following the election, with all eyes on the December meeting. Fed members have been preparing the market and investors for a hike, and we believe, after several false starts, it will actually follow through this time around. Perhaps equally as important will be the message the Fed sends around the next two meetings regarding what it may be looking to do into 2017. Read more at www.schwab.com/marketinsight. Be sure to follow Schwab on Twitter: @schwabresearch.

Finally, with U.S. political risk hamstringing the global markets Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, Final Clinton-Trump Debate Sets Up a Sprint to the Finish Line, as part of our election 2016 commentary at www.schwab.com/insights/category/election-2016, where you can also find timely analysis of The Stock Market and Election Cycles.

Europe sees red, Asia mixed amid lingering uncertainty

European equities finished lower, with oil & gas issues seeing pressure after talks over the weekend between the Organization of the Petroleum Exporting Countries (OPEC) yielded no new developments regarding a production cut. Also, global sentiment was stymied by flared-up U.S. Presidential uncertainty as the November election looms, while Italian banking concerns resurfaced. In economic news, preliminary eurozone 3Q GDP rose at a 0.3% quarter-over-quarter (q/q) pace, matching forecasts and 2Q's expansion, while output grew 1.6% year-over-year, in line with estimates and the prior quarter's gain. However, German retail sales unexpectedly dropped in September. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers timely analysis of the global economic picture in his article, World Tour: An Around The World Look At the Economic Landscape, at www.schwab.com/oninternational, and follow Jeff on Twitter: @jeffreykleintop. The euro was lower versus the U.S. dollar and British pound reversed to the upside in late-day action, while bond yields in the region dipped.

Stocks in Asia finished mixed, as the global markets remain uncertain regarding the presidential race in the U.S., while the world monetary policy landscape continues to garner attention, with decisions looming in the U.S. and U.K. this week, and the Bank of Japan expected to announce its policy stance tomorrow. For our latest analysis of Japan's monetary policy, see Schwab's Jeffrey Kleintop's, CFA, article, Going Godzilla: What has the Bank of Japan Unleashed?, at www.schwab.com/oninternational. The persistent pressure on crude oil prices also bogged down the energy sector, exacerbated by no production cut agreement following weekend talks between OPEC. Stocks in Japan dipped on the heels of a disappointing September industrial production report, which may have overshadowed some weakness in the yen and the announcement that the nation's three largest shipping companies agreed to combine their container operations. Mainland Chinese equities and those traded in Hong Kong also dipped, while South Korean listings declined markedly, even as a report showed the country's industrial production unexpectedly rose in September. Strength in Australian mining issues gave that nation's markets a boost, as China strengthened its currency, more than offsetting sluggishness in oil & gas stocks and a drop in the tech sector. Finally, markets in India were closed for a holiday.

Tomorrow, the economic calendar overseas will focus primarily on the Asia/Pacific region, with South Korea set to release CPI and the trade balance, as well as China's trade balance and manufacturing and non-manufacturing PMIs, and Japan's manufacturing PMI. In addition to the aforementioned monetary policy meeting of the Bank of Japan, the Reserve Bank of Australia will also meet to discuss policy, with no change to its benchmark rate expected.

Markets Lose on Trifecta of Events

Charles Schwab: On the Market

Posted: 8/2/2016 4:15 PM ET

Markets Lose on Trifecta of Events

U.S. equities finished solidly lower amid a triple dose of negativity, with global sentiment dampened on festering European banking concerns, disappointment surrounding Japan's stimulus measures, as well as a drop into bear market territory for crude oil prices. Meanwhile, dismal July domestic auto sales figures didn't help matters. Treasuries were mixed on the heels of a divergent domestic personal income and spending report, the U.S. dollar was lower and gold moved higher.

The Dow Jones Industrial Average (DJIA) fell 91 points (0.5%) to 18,314, the S&P 500 Index declined 14 points (0.6%) to 2,157 and the Nasdaq Composite tumbled 46 points (0.9%) to 5,138. In moderately-heavy volume, 931 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq. WTI crude oil lost $0.55 to $39.51 per barrel, wholesale gasoline inched $0.01 higher to $1.31 per gallon, while the Bloomberg gold spot price rose $12.30 to $1,365.45 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.7% lower at 95.09.

Dow member Procter & Gamble Co. (PG $87) reported fiscal 4Q earnings-per-share (EPS) ex-items of $0.79, above the $0.74 FactSet estimate, as revenues decreased 3.0% year-over-year (y/y) to $16.1 billion, versus the projected $15.8 billion. PG warned that core 1Q EPS will be disproportionately affected by foreign exchange headwinds and the impact of lost finished product sales to its Venezuelan subsidiaries. Shares finished higher.

Dow component Pfizer Inc. (PFE $36) posted 2Q EPS ex-items of $0.64, two cents above expectations, with revenues growing 11.0% y/y to $13.2 billion, versus the projected $13.0 billion. PFE reaffirmed its full-year guidance and shares were lower.

CVS Health Corp. (CVS $98) announced 2Q EPS ex-items of $1.32, above the expected $1.30, as revenues rose 17.6% y/y to $43.7 billion, below the forecast $44.3 billion. CVS issued 3Q earnings guidance that was mostly above expectations, and raised its full-year profit outlook. Shares were nicely higher. 

The major automakers reported U.S. July sales today, with Ford Motor Co's (F $12) sales falling 2.8%, below the FactSet estimate of a 0.3% decrease, while General Motors Co's (GM $30) sales dropped 1.9%, compared to the projected 0.1% dip. Fiat Chrysler Automobiles NV's (FCAU $6) Chrysler brand's sales ticked 0.3% higher y/y, compared to the expected 2.3% gain. Toyota Motor Corp. (TM $110) posted a 1,5% y/y decline in sales, besting the 3.8% shortfall expected, and Volkswagen AG (VLKAY $29) saw an 8.1% y/y decline in sales for the month, well above the 20% plunge forecast. Shares of all five of the automakers were lower.

Personal income and spending report mixed

Personal income (chart) was 0.2% higher month-over-month (m/m) in June, below the Bloomberg forecast of a 0.3% rise and matching May's unrevised increase. Personal spending came in 0.4% higher m/m last month, north of expectations of a 0.3% gain and matching May's unrevised rise. The June savings rate as a percentage of disposable income was 5.3%. The PCE Deflator rose 0.1% m/m, below forecasts of a 0.2% increase. Compared to last year, the deflator was 0.9% higher, matching estimates. Excluding food and energy, the PCE Core Index was 0.1% higher m/m, in line with expectations, and the index was up 1.6% y/y, in line with estimates.

Treasuries were mixed, as the yield on the 2-year note dipped 1 basis point (bp) to 0.68%, while the yield on the 10-year note ticked 1 bp higher to 1.54%, and the 30-year bond rate gained 3 bps to 2.30%. Bond yields have rebounded somewhat from last week's drop that came courtesy of the Fed leaving its monetary policy unchanged and 2Q GDP growth decisively missing expectations.  

Schwab's Chief Investment Strategist, Liz Ann Sonders provides analysis of last week's Fed's decision in her commentary, A Hopeful Transmission: Fed Holds Rates Steady, But… and Schwab's Chief Fixed Income Strategist, Kathy Jones discusses in her article, 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.

Tomorrow the domestic economic calendar will bring some reads on the key services sector for July courtesy of the Institute for Supply Management's (ISM) non-Manufacturing Index and Markit's final Services PMI Index. ISM's index is projected to decline to 55.9 from 56.5 in June, and Markit's index is anticipated to be revised slightly higher to 51.0 from the preliminary level of 50.9, just shy of June's 51.4 figure. However, both reports are projecting continued expansion in the services sector as denoted by readings above 50.

Although last week's 2Q GDP report disappointed, the consumer spending component was a bright spot and today's personal spending data came in stronger than expected, suggesting the consumer may be poised to bolster the U.S. economy. As noted in the latest Schwab Market Perspective: New Records…Same Skepticism, the U.S. economy continues to show signs of improvement, with jobless claims reinforcing a healthier employment picture, wage growth starting to perk up, and housing continuing to be a bright spot and indicating better confidence among consumers. Read more at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch.

As well, the ADP Employment Change report is slated for release, forecast to show private sector payrolls added 170,000 jobs during July, as well as MBA Mortgage Applications.

Europe and Asia lower amid banking concerns and Japan stimulus details

European equities finished lower, with oil & gas issues remaining weak as the recent tumble in crude oil prices to bear market territory weighed on the energy sector. Financials led to the downside, amid festering uneasiness toward the Italian banking sector in the wake of late-Friday's European banking sector stress test results. Mixed earnings reports in the region, coupled with lackluster global economic data as of late and disappointment toward Japan's new stimulus measures weighed on the markets, overshadowing a rate cut in Australia today. Amid this backdrop, Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, offers Three Reasons Why Now is Not the Time to Retreat from Global Diversification. Read more at www.schwab.com/oninternational and be sure to follow Jeff on Twitter: @jeffreykleintop. The euro and the British pound were higher versus the U.S. dollar, while bond yields in the region gained ground. Switzerland's markets saw some pressure in a return to action following yesterday's holiday, on the heels of some disappointing retail sales and manufacturing data.

Stocks in Asia finished mostly lower with energy issues seeing pressure as crude oil prices continued to fall yesterday, entering bear market territory. Japanese equities dropped sharply, with the yen gaining ground late in the session, while the markets appeared to be disappointed by details of the government's fiscal stimulus package announced last week and approved after the markets closed. Markets in Australia declined, bogged down by oil & gas and basic materials issues, while failing to get a boost from the expected monetary policy decision from the Reserve Bank of Australia (RBA) to cut its benchmark interest rate by 25 bps to 1.50%. The RBA noted that the global economy is continuing to grow at a lower-than-average pace, with conditions becoming more difficult for a number of emerging markets, while inflation remains quite low. Jeffrey Kleintop, CFA, offers Five ways investors can make the most of slower growth, at www.schwab.com/oninternational. Meanwhile, Indian securities and those traded in South Korea's declined, but mainland Chinese listings bucked the trend to finish higher, rising for the first time in three sessions, led by property-related issues, and those traded in Hong Kong were closed due to the impact of tropical storm Nida on the region.

For tomorrow, the Markit Service PMI Indexes from around the globe will likely dominate the international economic calendar, with other reports scheduled for release to include wage data from Australia and retail sales from the Eurozone.

Stocks Mixed Ahead of Fed Meeting

Charles Schwab: On the Market

Posted: 7/26/2016 4:15 PM ET

Stocks Mixed Ahead of Fed Meeting

U.S. stocks finished the trading session mixed and near the flat line amid a slew of economic and earnings data, and some noticeable caution ahead of tomorrow's conclusion to the Fed's monetary policy meeting. Treasuries were modestly higher, crude oil prices were mixed, while the U.S. dollar was slightly lower and gold gained ground.

The Dow Jones Industrial Average (DJIA) declined 19 points (0.1%) to 18,474, while the S&P 500 Index gained nearly 1 point to 2,169 and the Nasdaq Composite closed 12 points (0.2%) higher to 5,110. In moderate volume, 810 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq. WTI crude oil was $0.21 lower at $42.92 per barrel, wholesale gasoline gained $0.01 to $1.34 per gallon and the Bloomberg gold spot price increased $4.26 to $1,319.86 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% lower at 97.13.

Dow member Verizon Communications Inc. (VZ $55) reported 2Q earnings-per-share (EPS) ex-items of $0.94, besting the FactSet consensus estimate by $0.02, while revenues fell just shy of forecasts and decreased 5.4% year-over-year (y/y) to approximately $30.5 billion. Additionally, yesterday VZ announced it has entered into a definitive agreement to acquire the operating business of Yahoo! Inc. (YHOO $39). Shares of VZ were lower. 

Dow component McDonald's Corp. (MCD $122) announced 2Q EPS of $1.25, falling short of the $1.39 Factset consensus estimate, while revenues declined 3.6% y/y to approximately $6.3 billion to roughly match expectations. Shares of VZ were lower. 

Dow constituent 3M Company (MMM $178) reported 2Q EPS of $2.08, one penny north of forecasts, while revenues were roughly flat y/y at approximately $7.7 billion, meeting expectations. MMM traded lower.

Dow member United Technologies Corp. (UTX $108) was nicely higher after the company declared 2Q EPS ex-items of $1.82, surpassing the $1.68 FactSet estimate, while revenues also beat estimates rising 1.3% y/y to $14.9 billion.

Dow participant DuPont (DD $69) announced adjusted 2Q EPS of $1.24, beating the FactSet estimate of $1.10, while revenues declined nearly 1% y/y to $7.1 billion, exceeding estimates. DD was higher

Dow component Caterpillar Inc. (CAT $83) announced 2Q earnings of $1.09 per share, above the $0.96 FactSet consensus estimate, while revenues came in at $659 million, a decrease of 3.8% y/y, which the company noted was primarily due to a $15 million unfavorable impact from lower average earning assets. Shares of CAT finished higher.

Eli Lilly and Company (LLY $82) reported 2Q EPS ex-items of $0.86, matching the FactSet consensus estimate, while revenues beat forecasts, jumping 12.6% y/y to $5.4 billion. LLY is ticking higher.

After the closing bell yesterday, Texas Instruments Inc. (TXN $71) reported 2Q EPS of $0.76, north of the $0.72 FactSet estimate, while revenues increased 1.3% y/y to $3.3 billion topping expectations. TXN was higher.

Services sector read unexpectedly declined, regional manufacturing data jumps higher

The preliminary Markit U.S. Services PMI Index for July ticked lower to 50.9 from June's final reading of 51.4, with a level above 50 indicating expansion in activity, and compared to the Bloomberg forecast calling for a modest rise to 52.0. The release is independent and differs from the Institute for Supply Management's (ISM) report, as it has less historic value and Markit weights its index components differently.

The Consumer Confidence Index (chart) ticked slightly lower to 97.3 in July from the downwardly revised 97.4 level in June and compared to the estimated decline to 96.0. The sentiment towards the present situation continued to rise after two months ago registering the lowest level since November, while expectations of business conditions moved lower. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—rose to 0.7 from the -0.5 posted in June.

The Richmond Fed Manufacturing Activity Index unexpectedly jumped into expansion territory (a reading above zero), surging to 10 in July from the -7 posted in June, while economists had anticipated the index to remain in contraction territory, forecasting a reading of -5.

New home sales (chart) increased 3.5% month-over-month (m/m) in June to an annual rate of 592,000 units and compared to forecasts of 560,000 units. The median home price rose 6.1% y/y to $306,700. The supply of new home inventory decreased to 4.9 months at the current sales pace as sales declined m/m in the Northeast and South and rose in the West and Midwest. New home sales are based on contract signings instead of closings.

The 20-city composite S&P/Case-Shiller Home Price Index showed a gain in home prices of 5.2% y/y in May, just shy of expectations for a 5.5% rise. Month/month (m/m), home prices were down by 0.05% on a seasonally adjusted basis for May, below forecasts of a 0.1% increase.

Treasuries were modestly hgier, as the yields on the 2-year and the 10-year note fell 2 basis points (bps) to 0.75% and 1.56%, respectively, while the 30-year bond rate ticked 1 bp lower to 2.28%. Bond yields have rebounded a bit as of late from record lows on some 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.

Tomorrow, the headlining event will likely be the conclusion of the Federal Open Market Committee's (FOMC) two-day monetary policy meeting, where it is widely expected that the FOMC will keep its stance unchanged. As noted in the latest Schwab Market Perspective: New Records…Same Skepticism, 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.

In addition to the FOMC, the economic calendar will hold the preliminary durable goods orders report, forecasted to show a 1.4% m/m decline for June, while ex-transportation, orders are expected to have increased 0.3% m/m. As well, pending home sales will be reported, expected to have risen 1.2% m/m in June, while MBA Mortgage Applications will round out the day's docket.

European equities mostly higher, Asia mixed as Japan falls and China rallies

European equites pared earlier declines and finished mostly higher in late-afternoon action with gains in commodity listings helping to ease losses in energy and bank issues. Traders may have exercised some caution ahead of this week's monetary policy decisions from the U.S. Federal Reserve and Bank of Japan and as more than 200 companies listed on the Stoxx Europe 600 Index are reporting earnings this week. The British pound continued its decline versus most of its peers today after a Bank of England policy maker said he's begun to favor immediate stimulus for the U.K. economy. Euro-area bonds finished lower as some early support from speculation that the European Central Bank (ECB) will extend stimulus measures in September faded. The ECB made no changes to its policy stance at last week's meeting. German 10-year bunds dipped to halt a three-day advance, ahead of the key central bank meetings later this week, while the euro lost ground versus the U.S. dollar. Meanwhile, it's been just over a month since the U.K. voted in favor of Brexit and Schwab's experts inform us in the most recent Schwab Market Perspective: New Records…Same Skepticism, that the Brexit aftermath on a global basis has been better than many had been expecting, leading to improved optimism that some of the more dire scenarios being painted won’t come to fruition. Read more at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch.

Stocks trading in Asia were mixed as Japanese shares declined on some fresh strength in the yen, while Chinese issues were nicely higher amid some economic optimism in the country. Japan's markets dropped on the heels of yesterday's decline for U.S. equities and as a read for producer price inflation came in slightly hotter than expected. Export related issues were among the worst performers as the yen rallied to extend gains from Monday ahead of Friday's conclusion to the Bank of Japan's two-day monetary policy meeting with the current majority of market participants expecting the central bank to ease monetary policy further. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, addresses the use of helicopter money—a term coined in 1969 by economist Milton Friedman to make a hypothetical point about inflation--being discussed by policy makers in Japan in order to boost growth and work their way out of Japan’s enormous debt load that stands at more than double the size of the economy, in his article, What investors need to know about helicopter money, at www.schwab.com/oninternational and be sure to follow Jeff on Twitter: @jeffreykleintop.

Stocks in China were the top performers in the region, led by consumer companies, while a 10-day volatility gauge dropped to a two-year low yesterday. Securities traded Hong Kong joined the advance, as casino stocks rallied following some upbeat earnings releases from the gambling sector. Australian listings ticked higher and speculation of a rate cut by the Reserve Bank of Australia hasn't deterred traders from doubling long positions on the country's dollar as they are wagering that the Reserve Bank of New Zealand may drop rates by a wider margin. Stocks in India declined, while separately the nation's market regulator announced a desire to slow down high frequency trading in the next three months. Lastly, South Korean equities rallied

Tomorrow's international economic calendar will offer inflation data from Australia, consumer sentiment from South Korea, PPI from France, consumer confidence from Germany, housing prices and GDP data from the U.K., and confidence measures from Italy.

Stocks Continue to Recover From Brexit Fallout

Charles Schwab: On the Market

Posted: 7/11/2016 4:15 PM ET

Stocks Continue to Recover From Brexit Fallout

U.S. equities finished higher, with the S&P 500 hitting an all-time high and European equities extending its rally to three days, as global growth concerns continued to ease on the heels of Friday's favorable domestic labor report as well as political events in Japan and the U.K. Treasuries were lower amid an empty economic calendar, while crude oil and gold also declined, and the U.S. dollar was higher. 2Q earnings season unofficially got started after the closing bell, after Alcoa posted a better-than-expected profit.

The Dow Jones Industrial Average (DJIA) rose 80 points (0.4%) to 18,227, the S&P 500 Index gained 7 points (0.3%) to 2,137, and the Nasdaq Composite added 32 points (0.6%) to 4,988. In moderate volume, 799 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil was $0.65 lower at $44.76 per barrel, wholesale gasoline added $0.02 to $1.39 per gallon and the Bloomberg gold spot price decreased $11.71 to $1,354.62 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% higher at 96.53.

Alliance Data Systems Corp. (ADS $210) got a boost from the disclosure of a 6.8% stake in the company from ValueAct Capital, which said it intends to have conversations with ADS management and board to discuss ways to enhance shareholder value. ValueAct said the topics of these conversations will cover a range of issues.

Dow members General Electric Co. (GE $32) and Microsoft Corp. (MSFT $53) announced a partnership that will make GE's Predix platform available on the Microsoft Azure cloud for industrial businesses. Shares of MSFT were higher, while GE was flat.

Alcoa Inc. (AA $10) posted a 2Q profit of $0.15 per share after the close, unofficially kicking off 2Q earnings season, above forecasts of $0.09, on revenues of $5.9 billion, also above analysts' expectations.

Per data compiled by FactSet, S&P 500 earnings are expected to decline 5.6% year-over-year (y/y), which would be the first time the index has recorded five consecutive quarters of declines since 3Q 2008 through 3Q 2009. As noted in the recent Schwab Market Perspective: Looking Beyond Britain, healthy job growth and the possible support to inflation from higher wages lead us to wonder if market expectations around Fed policy may have gone too far. The futures market indicates roughly no chance of a hike for the balance of the year; while rate cut expectations have come back in play. Some questions have come to light recently regarding what consequences the uncertainty in Europe and a potential strengthening of the U.S. dollar may have. We'll start to get an initial view on those questions in the next few weeks as 2Q earnings season ramps up. Read the whole article at www.schwab.com/marketinsight.

Bond yields rise as global growth concerns ease following Friday's jobs data

Treasuries finished lower , while the U.S. economic docket was void of any major reports today. The yield on the 2-year note rose 4 basis points (bps) to 0.65%, the yield on the 10-year note was up 7 bps to 1.42%, and the 30-year bond rate advanced 5 bps to 2.14%. On the heels of Friday's market calming, stronger-than-expected June labor report, bond yields are recovering somewhat from their recent drop that has come courtesy of the U.K. Brexit fallout, which exacerbated global growth concerns, as well as dampened expectations for a Fed rate hike this year. Against this backdrop, Schwab's Director of Income Planning, Rob Williams, provides investment analysis in his latest article, Market Stress: How Emotions Can Hurt and Help Your Portfolio at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch.

This week's economic calendar will heat back up, beginning with tomorrow's National Federation of Independent Business (NFIB) Small Business Optimism Index, expected to tick highert to a level of 94.0 for June from the 93.8 posted in May, as well as wholesale inventories, with economists anticipating a slightly 0.2% month-over-month increase for May, a decline from the 0.6% registered the month prior. Rounding out the day will be the Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, forecasted to show 5.5 million jobs were available in May, down from the 5.8 million in April.

Other key releases this week will include retail sales, the Consumer Price Index (CPI), the Producer Price Index (PPI), the Fed's Beige Book, industrial production and capacity utilization, along with the preliminary University of Michigan Consumer Sentiment Index for July.

Europe and Asia higher on eased growth concerns and stimulus optimism

European equities traded nicely higher for a third-straight session, with Friday's stronger-than-expected U.S. labor report helping ease global growth concerns and keep Fed rate hike expectations in check. Also, some apparent positive political developments around the world buoyed sentiment, headlined by a landslide victory for Japan's Prime Minister Abe's ruling coalition that is boosting stimulus hopes. Clarity on the next U.K. prime minister may have helped sentiment, as Home Secretary Theresa May was named the next British leader after Prime Minister Cameron announced that he will resign by Wednesday and May's lone competitor for the position dropped out. The markets calmed down from the flare-up in risk aversion on the heels of the U.K. vote in late June to leave the European Union, known as a Brexit, which exacerbated global growth concerns and fueled uncertainty in the world financial markets. For analysis on the impact of the Brexit vote, see the latest Schwab Sector Views: Sector Impact of Brexit from Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, at www.schwab.com/marktetinsight. The euro was flat and the British pound ticked higher versus the U.S. dollar, while bond yields in the region were mostly higher. In economic news, Italy's industrial production unexpectedly declined for May.

Stocks in Asia finished nicely higher, as election results out of Japan over the weekend added to eased global growth concerns in the wake of Friday's upbeat U.S. June employment report, which also appeared to simultaneously fail to reignite Fed rate hike concerns. Japanese equities surged amid a drop in the yen, with Prime Minister Abe's ruling coalition winning a decisive upper house election over the weekend to foster optimism of further stimulus measures. Also, Australian securities rallied after the nation's Prime Minister Turnbull declared a victory in elections that were done more than a week ago and were considered to be too close to declare that his coalition won enough seats to form a majority government. Schwab's Director of International Research, Michelle Gibley, CFA, offers a look at the global political landscape in her article, Performing Reformers: How Political Change Can Affect Stocks, at www.schwab.com/oninternational. Mainland Chinese stocks and those traded in Hong Kong rose, though the nation reported mixed reads on consumer and wholesale price inflation for June. Amid the upbeat global market mood, markets in both India and South Korea advanced.

Internationally, the economic calendar will hold inflation data out of Japan, as well as the island nation's Tertiary All-Industry Index, business confidence from Australia, India's trade balance, retail sales from the U.K., and CPI from Germany.