Stocks Rise amid Earnings and Tax Reform Hopes

Charles Schwab: On the Market

Posted: 4/20/2017 4:15 PM ET

Stocks Rise amid Earnings and Tax Reform Hopes

U.S. stocks gained solid ground amid a plethora of mostly upbeat earnings reports and comments from the Treasury Secretary that tax reform is still a top priority for the Trump administration, which plans to release its proposal soon. Treasury yields extended a recovery to aid sentiment and financial stocks, while crude oil prices remained sluggish. Gold ticked slightly higher and the U.S. dollar was nearly unchanged. In economic news, leading indicators topped forecasts, but jobless claims rose more than expected.

The Dow Jones Industrial Average (DJIA) advanced 174 points (0.9%) to 20,579, the S&P 500 Index increased 18 points (0.8%) to 2,356, and the Nasdaq Composite increased 54 points (0.9%) to 5,917. In moderate volume, 866 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil declined $0.14 to $50.71 per barrel and wholesale gasoline was $0.01 higher at $1.67 per gallon. Elsewhere, the Bloomberg gold spot price increased $0.97 to $1,280.00 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 99.82.

Dow member Verizon Communications Inc. (VZ $48) reported 1Q earnings-per-share (EPS) of $0.84, or $0.95 ex-items, below the $0.96 FactSet estimate, as revenues decreased 7.3% year-over-year (y/y) to $29.8 billion, south of the projected $30.4 billion. VZ reaffirmed its full-year guidance. Shares traded lower.

Dow component Travelers Companies Inc. (TRV $119) posted 1Q profits of $2.17 per share, or $2.16 ex-items, versus the forecasted $2.37, as net premiums written rose 5.0% y/y to $6.5 billion, above the estimated $6.3 billion. TRV raised its quarterly dividend 7.5% to $0.72 per share, while authorizing an additional $5.0 billion in share repurchases. Shares saw pressure.

Dow member American Express Co. (AXP $80) announced 1Q EPS of $1.34, above the expected $1.28, with revenues declining 2.0% y/y to $7.9 billion, compared to the forecasted $7.8 billion. AXP reaffirmed its full-year outlook and shares were nicely higher.

eBay Inc. (EBAY $33) reported 1Q earnings of $0.94 per share, or $0.49 ex-items, versus the estimated $0.48, as revenues rose 4.0% y/y to $2.2 billion, roughly in line with expectations. EBAY issued 2Q guidance that missed forecasts, while it reaffirmed its full-year outlook. Shares finished lower.

Qualcomm Inc. (QCOM $52) posted fiscal 2Q EPS of $0.50, or $1.34 ex-items, versus the projected $1.19, as revenues increased 8.0% y/y to $6.0 billion, above the forecasted $5.9 billion. QCOM issued 3Q guidance with midpoints slightly below the Street's estimates. Shares closed modestly lower.

CSX Corp. (CSX $50) announced 1Q profits of $0.39 per share, or $0.51 ex-items, compared to the projected $0.43, with revenues rising 10.0% y/y to $2.9 billion, above the estimated $2.8 billion. Separately, the first major rail company to report earnings reported stronger-than-expected full-year EPS guidance, an 11.0% increase in its quarterly dividend to $0.20 per share, and a new $1.0 billion share repurchase program. CSX rallied.

Foot Locker Inc. (FL $77) rallied after the company noted that although 1Q was challenging, March sales rebounded well and it is now having a strong Easter selling period, with April same-store sales likely up low double digits. The upbeat commentary overshadowed its preannounced 1Q EPS results that missed forecasts.

Jobless claims rise, leading indicators top forecasts

Weekly initial jobless claims (chart) rose by 10,000 to 244,000 last week, above the Bloomberg forecast of 240,000, with the prior week’s figure being unrevised at 234,000. The four-week moving average dropped by 4,250 to 243,000, while continuing claims fell by 49,000 to 1,979,000, south of estimates of 2,024,000.

The Conference Board's Index of Leading Economic Indicators (LEI) (chart) for March rose 0.4% month-over-month (m/m), above projections of a 0.2% increase. Support came from the components pertaining to the yield curve, ISM new orders, building permits, stock prices, and consumer expectations, while jobless claims and average workweek weighed on the index.

The Philly Fed Manufacturing Index (chart) in April declined but remained solidly at a level depicting expansion (a reading above zero) after declining to 22.0 from 32.8 in March, and compared to estimates of a decline to 25.5.

Treasuries were lower, with the yields on the 2-year note and the 30-year bond gaining 2 basis points (bps) to 1.19% and 2.89%, respectively, while the yield on the 10-year note increased 3 bps to 2.24%.

Bond yields and the U.S. dollar have been under pressure as of late amid heightened geopolitical and political risks, comments about a strong dollar from President Donald Trump, and as "hard" economic data has continued to lag the "soft" data (confidence/survey-based), notably some cooler-than-expected inflation figures.

For a look at the moves in the bond markets despite Fed rate hikes and expectations of the Central Bank normalizing its balance sheet, see Schwab's Vice President of Trading and Derivatives, Randy Frederick's and Senior Fixed Income Research Analyst, Collin Martin's, CFA, video What's Driving the Ongoing Drop in Long-Term Bond Yields? on the Insights & Ideas page at www.schwab.com. Follow Randy on Twitter: @randyafrederick.

Also, for analysis of the economic data divergence and elevated geopolitical concerns, see our latest article, Data Divide: Are People Too Enthusiastic About the Economy? on the Insights & Ideas page at www.schwab.com, and Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, article, Missiles and Markets: An investor guide to geopolitical risks on the Markets & Economy page at www.schwab.com. Follow Schwab and Jeff on Twitter: @schwabresearch and @jeffreykleintop.

Tomorrow, the U.S. economic calendar will culminate for the week with releases expected to include the preliminary Markit Manufacturing PMI Index for April, with economists forecasting a slight uptick to 53.8 (a reading above 50 indicates expansion in activity) from the 53.3 registered for March's final read. The March existing home sales report will round out the day, with expectations of a 2.2% month-over-month (m/m) rise to an annualized rate of 5.6 million units.

Europe gains ground and Asia mostly higher

European equities finished mostly higher, as the markets sifted through mostly positive earnings reports on both sides of the pond. Also, bond yields in the region continued to show some signs of a reprieve in the recent pressure which appeared to underpin sentiment. However, oil & gas issues modestly extended weakness on the recent softness in crude oil prices. The markets showed some resiliency amid remaining political uncertainty as the U.K. heads for an election in June, while Brexit negotiations have begun, France is expected hold the first round of its key Presidential election this weekend, and a German election later this year looms. For more on the political front in the region, see Schwab's Jeffrey Kleintop's, CFA, and Randy Frederick's videos, "Brexit" Underway: How Can Investors Prep Now That Article 50 Has Been Triggered? and Why Should the French Presidential Election Be Important to Investors? on the Insights & Ideas page at www.schwab.com. Also, check out our article, Brexit Begins: What's Next for the U.K.?, on the Insights & Ideas page at www.schwab.com, while Director of International Research, Michelle Gibley CFA, offers her article, Europe Votes: Could More Countries Reject the EU? on the International Investing page at www.schwab.com. In economic news, eurozone construction output rose solidly in February. The euro and British pound were higher versus the U.S. dollar.

Stocks in Asia finished mostly higher, showing some resiliency in the face of the recent weakness in crude oil prices and festering geopolitical and political uncertainty as a key French election looms and the U.K. approved a surprising snap election for June. The markets digested the mostly upbeat earnings reports in the U.S., while the yen held onto yesterday's rebound and Japan posted stronger-than-expected trade figures that added to recent upbeat Chinese economic data. Equities trading in Japan and mainland China finished flat, while shares in Hong Kong, South Korea, Australia and India gained ground. For analysis of the global landscape, see Jeffrey Kleintop's, CFA, article, Top Five Trade Issues Investors Should Be Watching. Get both these articles on the International Investing page at www.schwab.com.

The international economic docket for tomorrow will yield the Nikkei Manufacturing PMI Index and the Tertiary Industry Index from Japan, retail sales from the U.K., industrial orders from Italy and preliminary Markit Manufacturing PMI reads for France, Germany and the Eurozone.

Stocks Finish Mixed as Dow Ekes Out a Gain

Charles Schwab: On the Market

Posted: 2/16/2017 4:15 PM ET

Stocks Finish Mixed as Dow Ekes Out a Gain

U.S. equities managed a mixed finish with the Dow turning positive in the final hour of trading as stocks seemingly paused from their recent rally which saw major domestic indexes advancing for five-straight sessions. Treasury yields and the U.S. dollar also pulled back despite an upbeat read on U.S. housing construction activity and a surge in regional manufacturing activity. Gold and crude oil prices were higher, while in equity news, Dow member Cisco topped earnings expectations.

The Dow Jones Industrial Average (DJIA) increased 8 points to 20,620, the S&P 500 Index shed 2 points (0.1%) to 2,347, and the Nasdaq Composite declined 5 points (0.1%) to 5,815. In moderate volume, 853 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil ticked $0.25 higher to $53.36 per barrel and wholesale gasoline decreased $0.03 to $1.52 per gallon. Elsewhere, the Bloomberg gold spot price rose $5.15 to $1,238.85 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.7% lower at 100.48.

Dow member Cisco Systems Inc. (CSCO $34) reported fiscal 2Q earnings-per-share (EPS) ex-items of $0.57, one penny above the FactSet estimate, as revenues declined 2.0% year-over-year (y/y) to $11.6 billion, roughly in line with forecasts. CSCO issued 3Q guidance that mostly matched expectations. Separately, the company raised its quarterly dividend by 11.5% to $0.29 per share. Shares moved nicely higher.

NetApp Inc. (NTAP $41) posted fiscal 3Q EPS ex-items of $0.82, above the projected $0.74, with revenues rising 1.0% y/y to $1.4 billion, roughly in line with forecasts. NTAP issued 4Q earnings guidance that bested expectations. NTAP rallied.

Kraft Heinz Co. (KHC $87) announced adjusted 4Q operating profit of $1.9 billion, just shy of the $2.0 billion estimate, as revenues declined 3.7% y/y to $6.9 billion, compared to the forecasted $6.7 billion. KHC raised its target for cost savings by the end of 2017 as a result of its multi-year integration program but raised its outlook for the programs costs. Shares were solidly lower. 

CBS Corp. (CBS $65) reported 4Q EPS ex-items of $1.11, one penny above estimates, as revenues decreased 1.9% y/y to $3.5 billion, below the anticipated $3.6 billion. CBS dipped. 

Avon Products Inc. (AVP $5) tumbled after the company posted adjusted profits of $0.01 per share, below the expected $0.09, as revenues declined 2.0% y/y to $1.6 billion, roughly in line with forecasts.

Schwab’s Chief Investment Strategist Liz Ann Sonders offers a look at the earnings front in her latest article, Better Days: Earnings Growth Picks Up Sharply in 2017, noting that the market's march to all-time highs brought valuations up with it; but courtesy of better earnings growth ahead, valuations are not stretched to the extreme. Read more at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders.

Housing construction activity tops forecasts, regional manufacturing jumps again

Housing starts (chart) for January declined 2.6% month-over-month (m/m) to an annual pace of 1,246,000 units, above the Bloomberg forecast of a 1,226,000 unit rate. December starts were upwardly revised to an annual pace of 1,279,000. Starts on single-family units grew m/m, while multi-family starts moved lower. Building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, rose 4.6% m/m in January to an annual rate of 1,285,000, after December's favorably revised 1,228,000 rate, and north of the expected annual pace of 1,230,000 units. Permits for multi-family units jumped m/m to overshadow a decline in single-family structures.

Weekly initial jobless claims (chart) increased 5,000 to 239,000 last week, below forecasts of 245,000, with the prior week’s figure unrevised at 234,000. The four-week moving average rose by 500 to 245,250, while continuing claims declined by 3,000 to 2,076,000, north of estimates of 2,050,000.

The Philly Fed Manufacturing Index (chart) in February jumped further into a level depicting expansion (a reading above zero) after surging to 43.3—the highest since early 1984—from 23.6 in January, and compared to estimates of a decline to 18.0.

Treasuries were higher, as the yields on the 2-year and 10-year notes fell 4 basis points (bps) to 1.21% and 2.45%, respectively, and the 30-year bond rate declined 2 bps to 3.06%. For a look at bond investing, see the video by Schwab's Vice President of Trading and Derivatives, Randy Frederick and Schwab's Fixed Income Director, Collin Martin, CFA, titledCan Bond Portfolios Benefit from "Floaters" in a Rising Rate environment, at www.schwab.com/insights.

Treasury yields and the U.S. dollar have retreated somewhat from recent rallies, and the stock markets modestly pulled back from record high territory. These moves were bolstered by this week's hawkish testimony from Federal Reserve Chairwoman Janet Yellen that kept the possibility of a March rate hike on the table. Moreover, economic data has remained favorable and the markets have shifted attention to President Donald Trump's reflationary policy promises, notably tax reform, away from exacerbated concerns about global trade and immigration.

For a look at the 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. Finally, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers his latest article, Simple Indicators In A Complex World, noting that while markets may exhibit increasing volatility, we believe the bull market is being supported by tangible and effective indicators of global growth. For more useful indicators see Jeff's article, Five Reasons to Stay Invested Despite Heightened Uncertainty. Read these articles at www.schwab.com/oninternational, and follow Jeff on Twitter: @jeffreykleintop.

Tomorrow, the U.S. economic calendar will deliver the Leading Index, which is expected to have increased 0.5% in January, matching the increase in December.

European equities retreat on data and following recent run, Asia mixed

European equities finished lower, with the euro and British pound gaining ground on the U.S. dollar and bond yields seeing some pressure. The global markets pulled back after a recent rally, highlighted by record highs in the U.S. that has been fostered by optimism of U.S. President Trump's reflationary policy promises and upbeat economic data. However, European political uneasiness continues to fester ahead of some key elections in the region. For analysis of the U.S. and European political fronts, see Schwab's Jeffrey Kleintop's, CFA, article, President Trump and Global Trade: How Will Campaign Promises Play Out? and Director of International Research, Michelle Gibley's, CFA, article, Europe Votes: Could More Countries Reject the EU? at www.schwab.com/oninternational. The earnings front weighed on stocks in the region, while the markets showed little reaction to the minutes from the European Central Bank's January policy meeting that showed the central bank remained committed to a "very substantial degree of monetary accommodation." For global market investing analysis, see Schwab's Jeffrey Kleintop's, CFA, articles, The CURE for a calm Market: Four risks for 2017, and 5 Reasons International Stocks May Underperform In 2017. Read these articles at www.schwab.com/oninternational.

Stocks in Asia finished mixed following another day of record highs in the U.S., with the markets focusing on the recent rally in the U.S. dollar that has come courtesy of upbeat economic data, preserved March Fed rate hike expectations, and optimism regarding U.S. President Trump's reflationary policy pledges. Japanese equities declined, as the yen regained some of a recent drop. South Korean stocks dipped, while Indian listings rose. Australian securities ticked higher, on the heels of an upbeat employment report. Stocks trading in mainland China and Hong Kong advanced. For our analysis of the global markets, see Schwab's Director of International Research, Michelle Gibley's, CFA, 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.

Stocks Trade Down Despite Upbeat Domestic Data

Charles Schwab: On the Market

Posted: 1/19/2017 4:15 PM ET

Stocks Trade Down Despite Upbeat Domestic Data

U.S. stocks traded lower despite some strong domestic economic reports and ahead of tomorrow's inauguration of President-elect Trump. Treasuries and gold were lower, while the U.S. dollar and crude oil prices were higher. In equity news, earnings were in focus, headlined by solid results from Netflix.

The Dow Jones Industrial Average (DJIA) decreased 72 points (0.4%) to 19,732, the S&P 500 Index was 8 points (0.4%) lower at 2,264 and the Nasdaq Composite declined 16 points (0.3%) to 5,540. In moderate volume, 753 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil increased $0.23 to $52.12 per barrel and wholesale gasoline shed $0.02 to $1.53 per gallon. Elsewhere, the Bloomberg gold spot price ticked $0.44 higher to $1,204.74 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—rose 0.2% to 101.12.

Netflix Inc. (NFLX $138) reported 4Q EPS of $0.15, above the $0.13 FactSet estimate, on a 35% year-over-year (y/y) jump in revenues to $2.4 billion, slightly above the $2.3 billion forecast. The media streaming service provider said an addition of 5.12 million net international subscribers drove quarterly growth, well above estimates of 3.75 million, and that it added 1.93 million net domestic subscribers, also above projections. Shares rallied.

Shares of CSX Corp. (CSX $46) finished solidly higher after the Wall Street Journal reported that Harrison Hunter, outgoing Chief Executive Officer of Canadian Pacific Railways Ltd. (CP $150), will team up with activist investor Paul Hilal to take on CSX in pursuit of a leadership position at the U.S. railway, according to a person familiar with the matter. Billionaire hedge fund manager Bill Ackman, who Hilal worked with for years before starting his own fund, recruited Hunter five years ago to instigate a successful proxy fight against CP to replace it’s then-CEO, Fred Green by mid-2012. CP announced that Keith Creel will replace Hunter and become President and CEO effective Jan 31, 2017. Shares of CP were higher, as the news overshadowed its earnings miss, and lower-than-expected revenues for the 4Q.

BB&T Corp. (BBT $45) posted a 4Q profit, excluding charges, of $0.73 per share, in line with the FactSet estimate, on revenues of $2.7 billion, a shade lower than the $2.8 billion expected. The North-Carolina lender’s Chairman and CEO Kelly S. King said, "While higher interest rates created $34M in pre-tax charges, revenue growth was strong, expense control was solid and we are well-positioned for future interest rate increases." Shares traded lower.

Economic news upbeat

Housing starts (chart) for December rose 11.3% month-over-month (m/m) to an annual pace of 1,226,000 units, above the Bloomberg forecast of a 1,200,000 unit rate. November starts were upwardly revised to an annual pace of 1,102,000. Single-family units rose a modest 4.0% m/m, and multi-unit construction jumped a whopping 53.9% m/m, while both indicators were also higher compared to last year. Building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, inched 0.1% lower m/m in December to an annual rate of 1,210,000, after November’s favorably revised 1,212,000 rate, and below the expected annual pace of 1,230,000 units. Permits for single-family and multi-family units were higher m/m. Compared to the same period last year, single family permits were up, while multi-family permits were lower.

Weekly initial jobless claims (chart) declined 15,000 to 234,000 last week, below forecasts of 254,000, with the prior week’s figure revised to 249,000 from 247,000. The four-week moving average decreased by 10,250 to 246,750, the lowest level in the average since November 1973, while continuing claims fell by 47,000 to 2,046,000, south of estimates of 2,083,000.

The Philly Fed Manufacturing Index (chart) in January jumped further into a level depicting expansion (a reading above zero) after surging to 23.6 from 19.7 in December, and compared to estimates of a decline to 16.0.

Treasuries were mostly lower with the yield on the 2-year note nearly unchanged at 1.22%, the yield on the 10-year note advancing 4 bps to 2.47%, and the 30-year bond rate increasing 3 bps to 3.04%.

Treasury yields and the U.S. dollar have seen erratic moves as of late, courtesy of ramped up political uncertainty ahead of President-elect Donald Trump's inauguration this week and volatility in the currency markets following comments from Trump, as well as Brexit remarks from U.K. Prime Minister May. Schwab's Chief Fixed Income Strategist, Kathy Jones discusses the bond markets and the recent rally in the greenback in her articles, Changing Conditions: A Bond Market FAQ and Will the U.S. Dollar Bull Market Continue in 2017?, at www.schwab.com/marketinsight. Follow Kathy on Twitter: @kathyjones.

Tomorrow, the U.S. economic calendar will be void of any major releases.

Europe and Asia mixed

European equities finished mixed, paring an early lift from strong economic data in the U.S., after dovish comments from European Central Bank (ECB) President Mario Draghi following the Central Bank’s decision to leave its benchmark interest rate unchanged, as widely expected. The ECB also kept its asset purchase program in place, where it will continue its purchases of 80 billion euros until March, at which time it will then lower that amount to 60 billion euros through the rest of the year. At his customary press conference following the decision, Draghi elicited a dovish tone, indicating that the recent uptick in inflation was due to oil and base effects. Draghi also reiterated the ECB’s recent stance that it would increase the size and scope of its quantitative strategy in the event that financial conditions tightened or its outlook worsened. Other economic news in the region was light, with Spain’s trade deficit narrowing in November, while prices at the wholesale level in Switzerland were a bit cooler than forecasts. The euro cooled and was modestly lower following Draghi’s comments, and the British pound gained ground vs. the U.S. dollar, while bond yields in the region were higher.

Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, notes in his latest article, The CURE for a calm Market: Four risks for 2017, that after a calm post-election climb, developments in China, United Kingdom, Russia, and Europe may bring a return of stock market volatility. However, Jeff points out that better and broader global economic growth should help offset these risks and result in stock market gains for 2017. Read these articles at www.schwab.com/oninternational, where you can also find Jeff's commentary, 5 Reasons International Stocks May Underperform In 2017. Follow Jeff on Twitter: @jeffreykleintop.

Stocks in Asia finished mixed in lackluster trading ahead of the inauguration of U.S. President-elect Donald Trump, as concerns over potential trade policy changes lingered, while a host of key Chinese economic data is slated for release tonight. Japanese equities rose, buoyed by a continued decline in the yen versus the U.S. dollar, while Australian listings gained ground following a better-than-expected employment report in the nation. Chinese stocks lost ground, with yesterday’s decline in crude oil a drag on energy issues. Liquidity/currency concerns remained a focus as the government injected funds into the system ahead of the Lunar New Year holiday, which begins at the end of this month. Some caution may have also kept markets in the Asian nation in check ahead of the release of its 4Q GDP report tonight, as well as Friday’s upcoming inauguration of President-elect Trump. For more on China, see Schwab's Director of International Research, Michelle Gibley's, CFA, article, 5 Big Risks Posed by China (And Why They Shouldn't Crash Global Markets in 2017).

Indian securities advanced and South Korean equities inched higher as the recent volatility in the U.S. dollar continues to be a factor on emerging markets. Schwab's Michelle Gibley, CFA, offers timely analysis of emerging markets in her latest article, 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.

The international economic docket for tomorrow will include department store sales from Japan, PPI from Germany and retail sales from the U.K. In addition to the aforementioned Chinese GDP report, the country is expected to deliver reads on industrial production and retail sales.

Market Gains in Bumpy Action

Charles Schwab: On the Market

Posted: 11/17/2016 4:15 PM ET

Market Gains in Bumpy Action

U.S. equities finished the trading session with gains in choppy action, as investors weighed elevated Fed rate hike expectations following comments from Chair Yellen, a host of upbeat economic data, and mixed earnings reports. Treasury yields continued their ascent and the U.S. dollar was higher, while crude oil prices dipped and gold was solidly lower.

The Dow Jones Industrial Average (DJIA) rose 36 points (0.2%) to 18,904, the S&P 500 Index gained 10 points (0.5%) to 2,187 and the Nasdaq Composite increased 39 points (0.7%) to 5,334. In moderately-heavy volume, 838 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq. WTI crude oil ticked $0.15 lower to $45.42 per barrel, wholesale gasoline was $0.02 higher at $1.34 per gallon and the Bloomberg gold spot price dropped $7.75 to $1,217.24 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.5% higher at 100.95.

Dow member Wal-Mart Stores Inc. (WMT $69) reported 3Q earnings-per-share (EPS) ex-items of $0.98, above the $0.96 FactSet estimate, as revenues increased 0.7% year-over-year (y/y) to $118.2 billion, north of the projected $118.6 billion. 3Q U.S. Walmart same-store sales rose 1.2% y/y, compared to the expected 1.4% increase. WMT issued 4Q same-store sales guidance with a midpoint below forecasts, while raising the low end of its full-year EPS outlook. Shares were solidly lower. 

Best Buy Co. Inc. (BBY $46) posted 3Q EPS of $0.62, well above the estimated $0.47, with revenues rising 1.4% y/y to $9.0 billion, versus the projected $8.9 billion. 3Q domestic same-store sales grew 1.8% y/y, compared to the expected 1.0% increase. BBY issued stronger-than-expected 4Q and full-year profit guidance. Shares rallied.

Dow component Cisco Systems Inc. (CSCO $30) announced fiscal 1Q earnings ex-items of $0.61 per share, north of the expected $0.59, as revenues rose 1.0% y/y to $12.4 billion, topping the forecasted $12.3 billion. CSCO issued softer-than-expected 2Q EPS and revenue guidance. Shares finished solidly lower. 

L Brands Inc. (LB $70) reported 3Q profits of $0.42 per share, exceeding the projected $0.40, on previously reported revenues of $2.6 billion. LB issued 4Q profit guidance that missed the Street's estimates. Shares were higher in choppy trading.

Housing construction activity jumps, jobless claims fall

Housing starts (chart) for October surged 25.5% month-over-month (m/m) to an annual pace of 1,323,000 units, above the Bloomberg forecast of a 1,156,000 unit rate. September starts were upwardly revised to an annual pace of 1,054,000. Starts hit more than a nine-year high, as a surge in multi-family structures was met with a sharp rise in single-family construction. Building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, rose 0.3% m/m in October to an annual rate of 1,229,000, after September's unrevised 1,225,000 rate, and above the expected annual pace of 1,193,000 units.

Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, offers a look at the housing market in his latest article, Real Estate Sector: Marketperform, noting positives of low interest rates, an improving economy and supportive apartment trends. However, Brad maintains a marketperform rating on the group, due to possible counterbalancing issues of rising rates and a changing consumer, while the apartment trends could be at an inflection point. Read more at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch.

The Consumer Price Index (CPI) (chart) was up 0.4% m/m in October, matching estimates, while September's 0.3% increase was unrevised. The core rate, which strips out food and energy, ticked 0.1% higher m/m, below expectations of a 0.2% rise, and matching September's unrevised increase. Y/Y, prices were 1.6% higher for the headline rate, in line with forecasts, while the core rate was up 2.1%, below projections of a 2.2% increase. September y/y figures showed an unrevised 1.5% rise and 2.2% increase for the headline and core rates respectively.

Weekly initial jobless claims (chart) fell by 19,000 to 235,000 last week, below forecasts of an increase to 257,000, as the prior week figure was unrevised at 254,000. The four-week moving average dropped by 6,500 to 253,500, while continuing claims fell by 66,000 to 1,977,000, south of the estimated level of 2,030,000. For a look at employment, see Schwab's Chief Investment Strategist Liz Ann Sonders' article, Welcome to the Working Week: An Update on Jobs, at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders.

The Philly Fed Manufacturing Index (chart) in November declined but remained at a level depicting expansion (a reading above zero) after decreasing to 7.6 from 9.7 in October, compared to estimates of a drop to 7.8.

Federal Reserve Chairwoman Janet Yellen is testifying before the Joint Economic Committee, suggesting that a December rate hike is likely. Yellen noted 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. As noted in the latest Schwab Market Perspective: Is the Fog Starting to Lift?, "full" employment is at least in sight, housing is recovering, economic growth has improved and inflation is heating up. As such, the Fed funds futures markets are pointing to a rate hike at the Fed's final meeting of the year in December. That may remove some uncertainty, but questions will remain as to the path and frequency of rate hikes in 2017 and beyond. We continue to believe the Fed will be able to go slow in normalizing rates, as they have stated they want to do, but signs of rising inflation could force its hand. Read more at www.schwab.com/marketinsight.

Treasuries finished lower following the data and Yellen's comments, as the yield on the 2-year note ticked 2 basis points (bps) higher to 1.02%, the yield on the 10-year note gained 6 bps to 2.28%, and the 30-year bond rate rose 7 bps to 3.00%. For our latest analysis of the rally in bond yields following the surprise election results, see Schwab's Chief Fixed Income Strategist, Kathy Jones' latest article, Change Is in the Air: A Post-Election Look at Bonds at www.schwab.com/onbonds, and follow Kathy on Twitter: @kathyjones.

For more analysis of the election, see Schwab's 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. 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.

Rounding out the week, tomorrow's economic calendar will yield the Index of Leading Economic Indicators, forecasted to have ticked 0.1% higher m/m during October following the 0.2% gain registered in September.

Europe mostly higher, Asia mixed as U.S. election posturing fades

European equities posted a late-day advance to finish mostly higher, with the volatile global market reaction to last week's surprising U.S. election cooling, likely vectoring attention to earnings and economic data and the heightened expectations of a December U.S. Fed rate hike. The plethora of data in the U.S., coupled with comments from Fed Chair Yellen appeared to preserve elevated rate hike expectations. Oil & gas issues were standout winners, despite a modest rise in crude oil prices, while technology, telecommunications and basic materials all moved higher. In economic news in the region, eurozone consumer price inflation came in a bit cooler than expected m/m in October, while the y/y rise matched forecasts. U.K. retail sales jumped more than expected in October. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers a World Tour: An Around The World Look At the Economic Landscape, at www.schwab.com/oninternational and follow Jeff on Twitter: @jeffreykleintop. The euro declined and the British pound was little changed after giving up early gains versus the U.S. dollar, while bond yields in the region were mixed.

Stocks in Asia finished mixed with the recent surprise U.S. election positioning that has ramped up activity in the global markets for the past week continuing to fade, while crude oil prices resumed decline yesterday weighed on the energy sector. 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 Diversificationand why Your portfolio may be less diversified than you think. Japanese equities finished flat with some choppiness in the yen gaining attention as 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 Jeffrey Kleintop's, CFA, article, Going Godzilla: What has the Bank of Japan Unleashed?. Read all these articles at www.schwab.com/oninternational. Meanwhile, stocks in China, South Korea and Australia gained ground, but those traded in Hong Kong and India declined.

Tomorrow's international economic calendar will hold PPI from South Korea and Germany, while the eurozone will report CPI figures.

Stocks Shave Morning Losses

Charles Schwab: On the Market

Posted: 10/20/2016 4:15 PM ET

Stocks Shave Morning Losses

U.S. stocks closed just below the flatline, paring early losses that stemmed from a pullback in crude oil prices, which gave back nearly all of yesterday's gains. Also, traders weighed a jump in jobless claims, stronger-than-expected domestic new home sales data, some lackluster earnings reports and last night's final Presidential debate. Treasuries were mixed, the U.S. dollar gained ground and gold was lower.

The Dow Jones Industrial Average (DJIA) lost 40 points (0.2%) to 18,162, the S&P 500 Index shed 3 points (0.1%) to 2,141 and the Nasdaq Composite ticked 5 points (0.1%) lower to 5,242. In moderate volume, 776 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil decreased $1.19 to $50.63 per barrel, wholesale gasoline declined $0.02 to $1.49 per gallon and the Bloomberg gold spot price dipped $2.95 to $1,266.28 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% higher at 98.32.

Dow member American Express Co. (AXP $67) reported 3Q earnings-per-share (EPS) ex-items of $1.24, above the $0.97 FactSet estimate, as revenues declined 5.0% year-over-year (y/y) to $7.8 billion, north of the projected $7.7 billion. AXP raised its full-year profit outlook and reiterated its 2017 EPS guidance that was above expectations, and shares rallied.

Dow component Verizon Communications Inc. (VZ $49) posted 3Q profits ex-items of $1.01 per share, above the estimated $0.99, with revenues decreasing 6.7% y/y to $30.9 billion, below the projected $31.1 billion. VZ said it expects 2016 adjusted earnings to be at a level comparable to 2015. Shares were solidly lower.

Dow member Travelers Companies Inc. (TRV $1101) announced 3Q EPS ex-items of $2.40, exceeding the forecasted $2.38, as net written premiums rose 3.0% y/y to $6.4 billion, roughly in line with expectations. Shares saw solid pressure as the company's core loss ratio, a closely watched industry metric measuring the amount it is paying out in claims and expenses compared to premiums received, came in above expectations to cause some concern among analysts.

Walgreens Boots Alliance Inc. (WBA $81) reported fiscal 4Q earnings ex-items of $1.07 per share, above the expected $0.99, as revenues increased 0.4% y/y to $28.6 billion, compared to the forecasted $29.1 billion. WBA issued full-year EPS guidance that was roughly in line with estimates. Shares finished nicely higher.

eBay Inc. (EBAY $29) posted 3Q EPS ex-items of $0.45, one penny above forecasts, as revenues rose 6.0% y/y to $2.2 billion, mostly in line with estimates. EBAY issued 4Q guidance that was a bit shy of forecasts, while reaffirming its full-year EPS outlook and raising its revenue projection slightly. Shares fell sharply.

Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers an outlook for growth in earnings and the stock markets his latest article, Three Reasons Stocks May Avoid Another Lost Decade, at www.schwab.com/marketinsight, and follow Jeff on Twitter: @jeffreykleintop.

Existing home sales top forecasts, jobless claims jump

Existing-home sales in September increased 3.2% month-over-month (m/m) to a 5.47 million annual rate—the highest since June—compared to the Bloomberg forecast of a 5.35 million pace. August's figure was downwardly revised to a 5.30 million annual rate. Compared to last year, sales were 0.6% higher. The median existing-home price was up 5.6% y/y at $234,200. Housing supply came in at a 4.5-month pace at the current sales rate. All major regions saw an increase and distressed sales fell to a new low. National Association of Realtors (NAR) Chief Economist Lawrence Yun said the two-month slump in existing sales, which was impacted by competition for the minimal amount of homes for sale, reversed course convincingly in September. Yun added that there is hope the leap in sales to first-time buyers can stick through the rest of the year and into next spring.

As noted in the recent Schwab Market Perspective: Spinning Our Wheels, although we've seen some soft housing data lately, we continue to believe that a strong job market, low interest rates, and increasing in household formations will bolster the housing market and increase the already solid level of consumer confidence. For analysis of investing in real estate, see Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, article Real Estate Sector: Marketperform. Read both articles at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch.

Weekly initial jobless claims (chart) rose 13,000 to 260,000 last week, compared to forecasts of a rise to 250,000, as the prior week figure was upwardly revised by 1,000 to 247,000. The four-week moving average rose by 2,250 to 251,750, while continuing claims increased 7,000 to 2,057,000, north of the estimated level of 2,053,000.

The Conference Board's Index of Leading Economic Indicators (LEI) (chart) increased 0.2% m/m in September, matching projections, and compared to the prior month's 0.2% decline. Support came from the components pertaining to building permits, the yield curve, and jobless claims, while the index was bogged down by average workweek and stock prices.

The Philly Fed Manufacturing Index (chart) in October dipped but remained at a level depicting expansion (a reading above zero) after declining to 9.7 from 12.8 in September, compared to estimates of a decrease to 5.0.

Treasuries were mixed, with the yield on the 2-year note rising 2 basis points (bps) to 0.82%, the yield on the 10-year note ticking 1 bp higher to 1.75%, and the 30-year bond rate dipping 1 bp to 2.49%. Schwab's Chief Fixed Income Strategist, Kathy Jones discusses the interest rate environment in her latest article, Are Bond Yields About to Rise?, at www.schwab.com/onbonds and follow Kathy on Twitter: @kathyjones.

Tomorrow, the U.S. economic calendar will be void of any major releases, but will heat back up next week with more housing data with looks at the new and pending home sales reports. Other releases of note will include a preliminary read on services sector activity for October from Markit and durable goods orders for September.

The markets continue to grapple with the uncertain U.S. political landscape as the November election looms and following last night's third and final Presidential debate. Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, Where Do the Candidates Stand? Key Issues for Investors, 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. Also, for a look at the election and the potential impact on sectors, see Schwab's Brad Sorensen's, CFA, latest Schwab Sector Views: Election Special at www.schwab.com/marketinsight.

Europe overcomes early weakness, Asia ticks higher

European equities overcame early weakness and finished mostly higher, with the markets reacting to the unchanged monetary policy decision from the European Central Bank (ECB). Stocks found support as the customary press conference by ECB President Mario Draghi appeared to ease recently flared-up tapering concerns. Draghi noted that he thinks an abrupt ending to bond purchases is unlikely, while adding that a sudden stop is not present in anybody's mind, per Bloomberg. He also said the Governing Council did not discuss prolonging or tapering at this meeting and suggested it could be decided on at its December meeting when fresh economic projections are delivered. The euro reversed lower and the British pound lost ground versus the U.S. dollar, while bond yields in the region finished mostly lower.

Also, last night's final U.S. Presidential debate garnered attention, while financials received a boost from Draghi's comments, continuing to rebound on the heels of recent upbeat earnings from the group in the U.S. and a reprieve from elevated concerns toward the European banking sector. For analysis of the potential impacts of flare-up in the European banking sector uneasiness, see Schwab's Fixed Income Director Collin Martin's, CFA, article titled, European Bank Stress: What Does It Mean for the Preferred Securities Market? at www.schwab.com/marketinsight. Earnings season ramped up and results were mixed, with Nestle SA(NSRGY $75) posting softer-than-expected sales, while Deutsche Lufthansa AG(DLAKY $12) rallied after the airline raised its profit outlook. In other economic news, U.K. retail sales unexpectedly came in flat in September, missing forecasts of a modest gain. Schwab's 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.

Stocks in Asia finished mostly higher, with yesterday's rally in crude oil prices on some bullish U.S. government oil inventory data supporting the energy sector, while the yen gave back some of a recent advance and the global markets digested the third and final U.S. Presidential debate. The markets may have treaded with some caution ahead of today's monetary policy decision in Europe. Japanese equities advanced on the weakness in the yen, while mainland Chinese stocks finished flat and those traded in Hong Kong rose slightly. China's muted moves come on the heels of yesterday's plethora of economic data that flashed mixed signals as 3Q GDP grew 6.7% y/y to match expectations and ease concerns about a slowing of the world's second-largest economy, though a separate report showed September industrial production missed forecasts. For more on China, see Schwab's Director of International Research Michelle Gibley's, CFA, article, 5 Big Risks Posed by China (And Why They Shouldn't Crash Global Markets in 2017)at www.schwab.com/oninternational.

South Korean stocks finished little changed and Indian securities gained ground, after yesterday's modest decline. Australian equities ticked higher, with an unexpected decline in the nation's September employment change likely keeping gains in check.

The international economic calendar for tomorrow will be light, yielding property prices from China and public sector net borrowing from the U.K.

Uncertainty Continues

Charles Schwab: On the Market

Posted: 8/18/2016 4:15 PM ET

Uncertainty Continues

U.S. equities traded in a narrow range and finished modestly higher with investors nervously weighing yesterday's seemingly dovish July Fed meeting minutes, mixed earnings results from Dow member's Wal-Mart and Cisco Systems, and upbeat economic data. Energy issues got a boost from a rally in crude oil prices, while Treasuries and gold also gained ground, but the U.S. dollar was lower.

The Dow Jones Industrial Average (DJIA) increased 24 points (0.1%) to 18,598, the S&P 500 Index gained 5 points (0.2%) to 2,187 and the Nasdaq Composite added 11 points (0.2%) to close at 5,240. In moderate volume, 744 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq. WTI crude oil rose $1.47 to $48.22 per barrel, wholesale gasoline added $0.04 to $1.49 per gallon and the Bloomberg gold spot price gained $3.96 to $1,352.69 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.6% lower at 94.11.

Dow member Wal-Mart Stores Inc. (WMT $74) reported 2Q earnings-per-share (EPS) ex-items of $1.07, above the $1.02 FactSet estimate, as revenues increased 0.5% year-over-year (y/y) to $120.9 billion, topping the expected $120.2 billion. 2Q U.S. same-store sales at Walmart rose 1.6% y/y, exceeding the forecasted 1.0% gain. WMT raised its full-year adjusted EPS guidance. Shares were nicely higher.

Dow component Cisco Systems Inc. (CSCO $30) posted fiscal 4Q EPS of $0.63, north of the estimated $0.60, with revenues rising 2.0% y/y to $12.6 billion, roughly in line with forecasts. The company issued slightly softer-than-expected 1Q guidance. CSCO announced a restructuring, which will eliminate up to 5,500 positions from its global workforce. CSCO finished lower.

L Brands Inc. (LB $78) announced 2Q profits of $0.70 per share, above the $0.62 expectation, on previously reported revenues of $2.9 billion. Despite reporting 3Q EPS guidance that came in below forecasts, the retailer raised its full-year earnings outlook. L Brands traded solidly higher.

NetApp Inc. (NTAP $34) reported fiscal 1Q EPS ex-items of $0.46, above the forecasted $0.36, as revenues declined 3.1% y/y to $1.3 billion, roughly in line with expectations. NTAP issued 2Q guidance that was mostly in line with estimates. NTAP rallied over 17%.

With 2Q earnings season wrapping up, Schwab's Chief Investment Strategist, Liz Ann Sonders discusses in her latest commentary, With a Little Help From My Friends: On Africa, Economy and Earnings whether earnings growth can squeak its way back into the green in the third quarter, at www.schwab.com/marketinsight. Follow Liz Ann on Twitter: @lizannsonders.

Jobless claims decline, leading indicators top forecasts 

Weekly initial jobless claims (chart) decreased 4,000 to 262,000 last week, versus the Bloomberg estimate of a dip to 265,000, with the prior week's figure unrevised at 266,000. The four-week moving average rose 2,500 to 265,250, while continuing claims gained 15,000 to 2,175,000, north of the estimated level of 2,145,000.

The Philly Fed Manufacturing Index (chart) in August moved back to at a level depicting expansion (a reading above zero) after rising to 2.0 from -2.9 in July, in line with estimates.

The Conference Board's Index of Leading Economic Indicators (LEI) (chart) increased 0.4% month-over-month (m/m) in July, above projections calling for it to match June's unrevised 0.3% gain. Support came from the components pertaining to jobless claims, average workweek, stock prices and the yield curve.

Treasuries finished higher in choppy action, as the yields on the 2-year and 10-year notes declined 2 basis points (bps) to 0.71% and 1.53%, respectively, while the 30-year bond rate ticked 1 bp lower to 2.25%. Bond yields declined yesterday after the release of the Fed's July policy meeting minutes that showed members remained divided and continued to be data dependent regarding the timing of the next rate increase. For analysis on the fixed income markets see the video from Schwab's Managing Director of Trading and Derivatives, Randy Frederick and Collin Martin, CFA, titled Tempered Expectations for Bond Returns: Why Hold Bonds?, at www.schwab.com/insights. Follow Randy and Schwab on Twitter: @randyafrederick and @schwabresearch.

Tomorrow’s economic calendar will take a break, as no notable reports are scheduled for release.

Europe higher, Asia mixed following data and Fed minutes

European equities finished to the upside, with the Stoxx Europe 600 Index gaining ground for the first time in five sessions, amid a plethora of mixed earnings reports, while mining issues continued a string of gains to lift the basic materials sector. Oil & gas issues led the way, with crude oil prices adding to a recent rally. The global markets digested yesterday's look at the U.S. Fed's July meeting that appeared to dampen imminent rate hike expectations as the Central Bank noted that it remains data dependent. The euro moved higher on the U.S. dollar, which saw pressure following the Fed's report, while bond yields in the region were mostly lower. The British pound rallied versus the greenback on the heels of a much larger-than-expected rise in U.K. July retail sales. The report joins separate releases this week that have shown jobless claims unexpectedly fell and inflation surprisingly rose in July. The data is offering the first glimpses at the impact of the late-June vote in the U.K. to leave the European Union, known as a Brexit, and likely easing concerns. For more on the potential impact of the Brexit vote, see the Schwab Center for Financial Research's article, Brexit: What Investors Should Know, at www.schwab.com/marketinsight.

Stocks in Asia finished mixed with the global markets digesting yesterday's U.S. Fed July meeting minutes that showed policymakers remain in wait-and-see mode regarding the timing of the next rate hike. The U.S. dollar saw some pressure, boosting the Japanese yen, which weighed on Japanese stocks along with the nation's July trade report that showed exports and imports fell more than expected. Mainland Chinese equities declined on the heels of the country's home price report for July, which showed prices gained in fewer cities m/m. However, some stronger-than-expected earnings reports helped lift stocks in Hong Kong. Australia's markets decreased following a rally in the Australian dollar on the nation's employment report that showed job growth was much stronger than anticipated for last month. Indian securities advanced, as emerging markets found support from the weaker U.S. dollar as rate hike expectations were dampened. Finally, South Korean equities moved slightly higher. Amid the elevated uncertainty in the markets, Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, offers Three Reasons Why Now is Not the Time to Retreat from Global Diversification at www.schwab.com/oninternational and be sure to follow Jeff on Twitter: @jeffreykleintop.

Unlike the U.S., the international economic docket will be somewhat busy, with reports slated for release to include PPI from South Korea, Japan’s All Industry Index, PPI from Germany, Spain’s trade balance, and public sector net borrowing from the U.K.

Markets Pause Recent Run

Charles Schwab: On the Market

Posted: 7/21/2016 4:15 PM ET

Markets Pause Recent Run

U.S. equities were lower, bringing the recent run that has brought the Dow and S&P 500 to record highs to a rest, despite a host of upbeat earnings and economic reports. Treasuries finished higher as the fall in stocks was met with domestic economic reports that showed existing home sales unexpectedly rose, jobless claims surprisingly slipped and the Leading Index topped forecasts. Crude oil prices and the U.S. dollar were lower, while gold moved higher.

The Dow Jones Industrial Average (DJIA) fell 78 points (0.4%) to 18,517, the S&P 500 Index declined 8 points (0.4%) to 2,165 and the Nasdaq Composite lost 16 points (0.3%) to 5,074. In moderate volume, 800 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil was $1.00 lower at $44.75 per barrel, wholesale gasoline was unchanged at $1.36 per gallon and the Bloomberg gold spot price increased $15.42 to $1,331.48 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% lower at 96.93.

Dow member Intel Corp. (INTC $34) reported 2Q earnings-per-share (EPS) ex-items of $0.59, above the $0.54 FactSet estimate, as revenues rose 3.0% year-over-year (y/y) to $13.5 billion, versus the expected $13.6 billion. However, shares were solidly lower as the company's 2Q revenue growth out of its key data center unit missed analysts' forecasts. INTC issued 3Q and full-year revenue guidance with midpoints that exceeded forecasts.

General Motors Co. (GM $32) posted 2Q EPS ex-items of $1.86, well above the projected $1.52, with revenues growing 11.0% y/y to $42.4 billion, easily exceeding the expected $38.2 billion. GM raised its full-year profit outlook and shares were nicely higher.

Dow component Travelers Companies Inc. (TRV $117) announced 2Q profits ex-items of $2.20 per share, topping the forecasted $2.04, as net written premiums rose 3.0% y/y to $6.4 billion, mostly in line with estimates. TRV traded lower.

Dow member American Express Co. (AXP $63) reported 2Q EPS of $2.10, but that figure included a few one-time items that may make it not comparable to the Street's forecast of $1.96. Revenues declined 1.0% y/y to $8.2 billion, versus the forecasted $8.3 billion. AXP reaffirmed its full-year earnings guidance and shares came under pressure.

Qualcomm Inc. (QCOM $60) posted fiscal 3Q earnings ex-items of $1.16 per share, as revenues increased 4.0% y/y to $6.0 billion, topping the projected $5.6 billion. QCOM issued stronger-than-expected 4Q earnings and revenue guidance. QCOM gained solid ground.

Southwest Airlines Co. (LUV $37) announced 2Q EPS ex-items of $1.19, two cents below expectations, as revenues rose 5.3% y/y to $5.4 billion, roughly in line with projections. LUV said the fare environment remains challenging and shares were sharply lower.

eBay Inc. (EBAY $30) posted 2Q EPS ex-items of $0.43, one penny north of estimates, as revenues rose 6.0% y/y to $2.2 billion, mostly in line with projections. EBAY issued mostly stronger-than-expected full-year guidance and announced a $2.5 billion addition to its share repurchase program. Shares rallied.

Existing home sales unexpectedly rise, while jobless claims surprisingly dip

Existing-home sales in June rose 1.1% month-over-month (m/m) to a 5.57 million annual rate—the highest annual pace since February 2007—compared to the Bloomberg forecast of a 5.48 million pace. May's figure was revised lower to a 5.51 million annual rate. Compared to last year, sales were 3.0% higher and the median existing-home price was up 4.8% at $247,700. Housing supply came in at a 4.6-month pace at the current sales rate. Sales were lower in the Northeast and flat in the South, while rising in the West and Midwest. Single-family and condominium and co-op sales both grew.

June sales were bolstered by a greater share of sales to first-time buyers not seen in nearly four years and National Association of Realtors (NAR) Chief Economist Lawrence Yun said sustained job growth as well as this year's descent in mortgage rates is undoubtedly driving the appetite for home purchases. "Looking ahead, it's unclear if this current sales pace can further accelerate as record high stock prices, near-record low mortgage rates and solid job gains face off against a dearth of homes available for sale and lofty home prices that keep advancing," Yun added.

Weekly initial jobless claims (chart) dipped 1,000 to 253,000 last week, versus the Bloomberg estimate of an increase to 265,000, with the prior week's figure unrevised at 254,000. The four-week moving average declined by 1,250 to 257,750, while continuing claims dropped 25,000 to 2,128,000, south of the estimated level of 2,137,000.

The Philly Fed Manufacturing Index (chart) in July unexpectedly fell back to a level depicting contraction (a reading below zero) after falling to -2.9 from 4.7 in June, and compared to estimates calling for a dip to 4.5.

The Conference Board's Index of Leading Economic Indicators (LEI) (chart) increased 0.3% m/m in June, versus the projected 0.2% gain, and compared to May's unrevised 0.2% decline. Support came from the components pertaining to jobless claims and the yield curve.

Economic upside surprises have been numerous and broad-based helping propel the Dow and S&P 500 to all-time highs, as discussed by Schwab's Chief Investment Strategist Liz Ann Sonders notes in her latest article, 19th Nervous Breakout: Stocks Finally Reach New Highs, at www.schwab.com/marketinsight.

Treasuries finished higher, as the yield on the 2-year note lost 3 basis points (bps) to 0.68%, the yield on the 10-year note fell 2 bps to 1.56% and the 30-year bond rate dipped 1 bp to 2.30%. Bond yields had 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 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.

The only item on tomorrow's economic calendar is the preliminary Markit Manufacturing PMI Index, forecasted to tick higher to a level of 51.5 for July from the prior month's 51.3.

Europe and Asia mixed after ECB leaves policy stance unchanged

European equities finished mixed, as traders digested a plethora of divergent earnings and economic reports as well as the expected decision from the European Central Bank (ECB) to leave its monetary policy unchanged, with its benchmark rate at zero and the deposit rate in negative territory. The euro was lower versus the U.S. dollar, and bond yields in the region were modestly higher, as the markets paid close attention to ECB President Mario Draghi's customary press conference. Draghi noted that the euro area financial markets have weathered the spike in uncertainty and volatility on the heels of the June vote by the U.K. to leave the European Union (EU), known as a Brexit, "with encouraging resilience." He also noted that financing conditions remain highly supportive and continue to support its baseline scenario of an ongoing economic recovery and an increase in inflation rates. Draghi added that over the coming months when it has more information it will be in a better position to reassess the most likely paths of inflation and growth and the risks around those paths. He reiterated that the ECB will act if needed by using all available instruments within its mandate.

Amid the backdrop of heightened volatility in the region, Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, offers analysis for investors in his article, After the Brexit Vote: What Lies Ahead for Markets?, and gives us Three Reasons Why Now is Not the Time to Retreat from Global Diversification. Read both articles at www.schwab.com/oninternational and be sure to follow Jeff on Twitter: @jeffreykleintop. The British pound dipped versus the U.S. dollar. In other economic news, Switzerland's trade surplus narrowed in June, French business confidence unexpectedly improved in July, and U.K. retail sales missed forecasts in June.

Stocks in Asia finished mixed, though Japanese equities rose, continuing their recent rally as the yen remained under pressure amid reports that the Bank of Japan (BoJ) was considering a larger-than-expected stimulus plan. However, after the markets closed, the yen rallied as a radio interview with BoJ Governor Kuroda—that was pre-recorded in June—aired with him rejecting the idea of so-called helicopter money. It is important to point out that Kuroda had rejected the idea of adopting a negative interest rate policy (NIRP) just days before the BoJ did it early this year so the comments may be getting discounted. For more on Japan's potential increased stimulus measures see Jeffrey Kleintop's, article, What investors need to know about helicopter money, at www.schwab.com/oninternational. Mainland Chinese stocks advanced, rising for the first time in four days, while those traded in Hong Kong rose to enter a bull market, as it has rallied 20% off its February low, per Bloomberg. Australian securities increased, despite some continued weakness in basic materials stocks, but South Korea's markets dipped and India's bourse declined amid some concerns about earnings growth and banking sector loan quality.

For tomorrow, the international economic calendar will hold the preliminary Markit M

Financial Review

Heating Up

Sinclair Noe — June 16, 2016

Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB)

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DOW + 92 = 17,733
SPX + 6 = 2077
NAS + 9 = 4844
10 Y – .04 = 1.56%
OIL – 1.84 = 46.17
GOLD – 11.30 = 1281.20

Well, this was a strange day. The major market indices started the session lower and looked ready to slide into a sixth consecutive loss, but after about an hour of trade, prices started moving higher. Even with the weakness we have seen over the last week or so, the S&P 500 is still only a little more than 2% off its 2016 closing high for the year. From that perspective, can you recall a time when the S&P 500 was this close to a high for the year but where there was this much angst on the part of investors? At one point, the Dow was down almost 170 points, with a 280-point range from sessions low to session high.

Yesterday, the Federal Open Market Committee left the fed funds rate unchanged at 0.25% to 0.50%, as expected. And the Fed’s economic forecasts are even more pessimistic now than they were just a few months ago. Fed chair Janet Yellen held a press conference and mentioned the weak labor market, low business investment and productivity, and concerns about a possible Brexit next week. The Fed’s own forecast sees U.S. growth topping out at 2% in the long run, well below the nation’s historic 3.3% growth rate. Looming in the background is persistently weak global growth. Today, other central banks delivered their policy messages.

The Bank of Japan kept monetary policy steady and lowered its inflation forecast, stating the consumer price index’s year-on-year change is likely to be slightly negative or flat for the time being. The yen surged against the dollar following the news, sparking speculation on whether Japanese policymakers would intervene to halt the strengthening currency, while the Nikkei tumbled 3.1%.

Reiterating its warning that the franc is significantly overvalued, the Swiss National Bank left its negative interest rates unchanged at record lows, conserving ammunition ahead of a British vote on EU membership. As expected, the SNB held its deposit rate at negative-0.75%.

The Bank of England kept its key interest rate at a record low of 0.5% and made no changes to its 375-billion-pound asset-purchase program. The decision marked the last before the June 23 referendum in the U.K. on whether the country should stay or exit the European Union. And the bank warned that a Brexit “could materially alter the outlook for output and inflation.”

“Leave” has surged to a 6-point lead in an important Brexit survey. A new Evening Standard newspaper poll, conducted by the reputable polling firm Ipsos MORI, shows that 53% of respondents favor Leave while 47% favor Remain. This was the first time a poll conducted by Ipsos MORI poll had favored Leave. But both sides of the Brexit campaign have temporarily stopped campaigning after Jo Cox, a Member of Parliament was shot and killed while meeting with constituents in a library. The motive behind the shooting is unknown but many people think it might be Brexit related.

Investors continued to buy up investments considered safe in times of economic uncertainty: United States government bonds, and stocks with high dividends. The yield on the benchmark 10-year Treasury note dropped to 1.52% in intraday trading; the lowest since 2012.

The number of people seeking U.S. unemployment benefits rose last week, but to a low level that indicates employers are still cutting relatively few jobs. Weekly applications rose 13,000 to a seasonally adjusted 277,000, the highest in four weeks. The less volatile four-week average declined slightly to 269,250.

Consumer prices, or prices at the retail level, rose 0.2% in May largely because of higher gasoline prices and rising rents. Although the cost of most goods and services aren’t increasing much, fuel has become more expensive. The energy index climbed 1.2% in May. Rents also jumped 0.4% in May to mark the largest monthly gain since February 2007. And they are rising at the fastest 12-month pace in almost nine years: 3.4%.

Overall price pressures are still muted, however, as the price of groceries dropped 0.6% in May, and prices are now down 0.7% in the past year. The consumer price index has risen just 1% in the past 12 months. The core rate that excludes food and energy has risen at a sharper but still low 2.2% annual pace.

Confidence among U.S. homebuilders climbed to a five-month high in June. The National Association of Home Builders/Wells Fargo builder sentiment gauge rose to 60 from 58. Home builders report cheap borrowing costs and steady improvement in the labor market have bolstered Americans’ abilities to buy homes. Builder sentiment in the West reached a five-month high.

The Philly Fed index rebounded into expansionary territory in June, with the headline index rising to 4.7 from -1.8. The key forward-looking indicators all moved in the wrong direction, with sentiment on new orders, employment, unfilled orders, inventories and capital expenditure intentions all weakening, while the hours worked sub-index remained firmly in contractionary territory in June.

Arizona’s seasonally adjusted unemployment rate increased one-tenth of a percentage point from 5.5% in April to 5.6% in May. The U.S. seasonally adjusted unemployment rate decreased three-tenths of a percentage point from 5.0% in April to 4.7% in May. A year ago, the Arizona seasonally adjusted rate was 5.8% and the U.S. rate was 5.5%.

Arizona lost 19,400 Non-farm jobs in May. Three of the eleven sectors posted gains, one remained unchanged, and seven sectors posted losses. The gains were recorded in Manufacturing, Construction, and Trade, Transportation, and Utilities.  The losses were recorded in Financial Activities, Information, Education and Health Services, Leisure and Hospitality, Professional and Business Services (-5,400 jobs); and Government (the big loser -13,100 jobs). Natural Resources and Mining remained unchanged.

Disneyland debuts in Shanghai. The theme park, which cost $5.5 billion and took five years to build, opened its doors today. Disney hopes it can tap into China’s growing middle class, as 330 million people live within a three-hour drive or train ride from the park.

California’s insurance commissioner called on the U.S. government to block Anthem’s $48 billion takeover of rival health insurer Cigna, saying the deal would limit competition in the state’s health-insurance market. While Commissioner Dave Jones doesn’t have legal authority to block the merger, his opposition, plus a 22-page letter he sent to the U.S. Justice Department, adds an influential voice to the debate. The takeover would give the combined Anthem-Cigna a greater than 50 percent market share in 28 counties in California, and a market share exceeding 40 percent in 38 counties.

Volkswagen  unveiled a major restructuring today, the broadest overhaul of the company in decades. VW announced plans to deliver 30 electric plug-in models by 2025. The product overhaul and pledge to cut $9 billion in spending come as VW is already facing a bill of more than $18 billion to cover the costs of its emissions scandal.

The company rigged some 11 million diesel cars worldwide with software to cheat emissions standards. The admission triggered a litany of government investigations, a U.S. sales slump, and a management shakeup. This also follows a mandate from the German government that as of 2030, all new cars registered in Germany must be emissions free. The plan is to add one million hybrid and all-electric cars by 2020 and 6 million by 2030.

After three successes, a leftover SpaceX rocket booster crashed Wednesday while trying to land on an ocean barge. In fact, the rocket’s failed landing was, according to a Twitter post by Elon Musk, “Maybe [the] hardest impact to date.” The attempt came minutes after the Falcon 9 rocket successfully launched two satellites into orbit from Cape Canaveral, Florida.

Facebook founder Mark Zuckerberg’s philanthropy venture has made its first major investment, leading a funding round in a startup that trains and recruits software developers in Africa. Google Ventures was also part of the $24 million funding round. The startup, which has nearly 200 engineers currently employed by its Nigeria and Kenya offices, will use the funds to expand to a third African country by the end of 2016.

Philadelphia is set to become the first major American city with a soda tax despite a multimillion-dollar campaign by the beverage industry to block it. The City Council is expected to give final approval today to a 1.5 cent-per-ounce tax on diet and regular soda, iced tea, energy drinks, juice drinks with less than 50% juice, and other sugary beverages.

Microsoft is getting into the marijuana business, announcing a partnership to begin offering software that tracks marijuana plants from “seed to sale,” as the pot industry puts it. The software is meant to help states that have legalized the medical or recreational use of marijuana keep tabs on sales and commerce, ensuring that they remain in the daylight of legality. But until now, even that boring part of the pot world was too controversial for mainstream companies. It is apparent now, though, that the legalization train is not slowing down: This fall, at least five states, including the biggest of them all — California — will vote on whether to legalize marijuana for recreational use.

Get ready, here it comes. An excessive heat watch has been posted for California and Arizona, warning of temperatures that could hit 119-degrees this weekend. The forecast calls for record highs and record high-lows. High lows can sound a bit funny to say but what they translate to is misery: Temperatures stay so warm overnight that there is little relief from the heat even after the sun has set. The only consolation is that we are not expected to break the all-time record high of 122-degrees from June 26, 1990. Small consolation.