Barbarians at the Gate with Toothpaste

Sinclair Noe — October 10, 2017

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DOW + 69 = 22,830 (Record)
SPX + 5 = 2550
NAS + 7 = 6587
RUT + 4 = 1508
10 Y – .02 = 2.35%
OIL + 1.34 = 50.92
GOLD + 3.90 = 1288.50

Cryptocurrency

• Number of Currencies: 874
• Total Market Cap: $153,183,891,232
• 24H Volume: $3,150,277,911

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	4,745.0	$79.08B	$1.51B	47.97%	1	-0.62%	+10.31%
	Ethereum	ETH	301.25	$28.69B	$332.08M	10.54%	0.0637418	+0.63%	+2.43%
	Ripple	XRP	0.25804	$10.12B	$329.41M	10.46%	0.00005539	-0.10%	+28.57%
	Bitcoin Cash	BCH	315.99	$5.28B	$261.54M	8.30%	0.0668111	-0.32%	-21.06%
	Litecoin	LTC	50.400	$2.69B	$81.09M	2.57%	0.0106525	-0.02%	-3.77%
	Dash	DASH	287.90	$2.20B	$28.65M	0.91%	0.0609756	-0.73%	-4.26%
	NEM	XEM	0.21437	$1.91B	$4.76M	0.15%	0.00004475	+2.96%	-4.85%
	NEO	NEO	30.150	$1.50B	$47.56M	1.51%	0.00634651	+2.97%	-10.79%
	IOTA	MIOTA	0.47300	$1.32B	$7.64M	0.24%	0.00009993	-0.63%	-14.76%
	Monero	XMR	86.08	$1.31B	$24.55M	0.78%	0.0181888	-0.49%	-6.51%

The Dow and the Nasdaq opened at record high. The Dow Industrials managed to hang on for a record high close. Only two of the 11 primary S&P 500 sectors are in negative territory for the year, and for broader indexes, even mild pullbacks of 3% have basically been nonexistent for months.

Volatility is near record lows. Other regions have also reported strong gains: European equities are up more than 20% this year, as are emerging markets. Basically, every country—as gauged by the most popular single-country exchange-traded funds—is positive on the year.

The International Monetary Fund is holding a meeting in Washington. Today a reporter asked Maurice Obstfeld, the chief economist at the International Monetary Fund: “Are financial markets being irrationally exuberant?” Obstfeld’s response? “Maybe.”

And he went on to add: “To some degree, asset prices are being supported by very, very low interest rates. They are supported by growth expectations that could be disappointed. Our assessment that longer-term growth rates, particularly in advanced economies, are subdued, feeds into that. So, our concern is simply that, if interest rates were to rise faster than expected or growth outcomes not validate these high asset prices, there could be abrupt repricing that could be disruptive.”

The IMF seems to be taking a more cautious stance – still calling for global economic growth, but issuing a warning against complacency. The IMF fears that financial markets are ignoring the risks, just as they did in the buildup to the crisis in 2007.

What’s more, central banks and finance ministries have used up much of their ammunition in the past decade. There is little or no scope to cut interest rates, QE has long since been subject to the law of diminishing returns, and governments are running much bigger budget deficits.

Remember that tax reform plan that was released just a couple of weeks ago. We were told it was the greatest thing since Ronald Reagan invented sliced bread. Today, Trump said he plans to make changes to his tax plan within the next few weeks, while dismissing concerns that his public spat with Senator Bob Corker would scuttle an overhaul. Trump didn’t specify what kind of changes, and it’s unclear whether he now intends to release another version.

Environmental Protection Agency Administrator Scott Pruitt is trying to repeal the Clean Power Plan, declaring “The war on coal is over.” What Pruitt forgot to say is that coal lost. Nobody in their right mind wants to go back to coal – it is dirty, expensive and an environmental nightmare. The Clean Power Plan hasn’t gone into effect yet, so there is no data to show if it had an impact on emissions. The repeal effort will end up in court. Next on the EPA’s agenda – bringing back whale oil.

The barbarians were at the gate, demanding more profit from the sale of toothpaste and detergent. But Procter & Gamble declared victory over activist investor Nelson Peltz, saying initial figures show it won the biggest proxy battle in history. But the narrow win puts pressure on the owner of Bounty and Tide to move faster in its turnaround and regain the support of investors. P&G will file results with the Securities and Exchange Commission when the vote is finalized.

Peltz’s fund Trian Partners said it plans to challenge the proxy results. With a market capitalization of $230 billion, P&G is the largest company to have fought a proxy fight and one of a few companies larger than $50 billion. In 2015, David Taylor took over as CEO and since then the company simplified its corporate structure, streamlined its portfolio, poured more money into research and development and worked to improve operations.

But the proxy fight wasn’t about how the company is run, rather it is how the shares have performed. Since Taylor took the reins, P&G’s stock has outpaced most U.S. consumer products companies, including Clorox and Colgate-Palmolive, though it under-performed against the S&P 500.

Walmart said it expects US online sales to jump about 40% in the next fiscal year. Walmart plans to invest heavily in e-commerce and online grocery in the coming months, with plans to double its online grocery pickup locations by the end of next year.

They will redesign their website by the first quarter and it will feature Jet.com’s “smart-cart” system – which basically gives automatic discounts the more stuff you throw in the cart. Now this is where it gets interesting. Walmart is ubiquitous for its brick and mortar stores but they haven’t shown great leadership online – that’s where Amazon shines.

Amazon’s is on a parallel track where they’re trying to build up the logistical capability and the brick-and-mortar capability, frankly, that Walmart already possesses. Walmart has been automating its supply chain and moving into online sales. Armed with open-source software such as the OpenStack cloud, Walmart is fighting Amazon on its high-tech turf.

Amazon responds AWS, Amazon Web Services, their own cloud which controls everything. In other words, this is a battle of the retail giants. Each brings its own set of skills to the fight. So, where does one have an advantage?

Unless you follow the retail business like a hawk, you might not know that Amazon was beating Walmart every day on its “Everyday Low Price” guarantee. Walmart responded by calling in the major consumer suppliers — from diapers to clothes to TVs — with an offer they couldn’t refuse: Either cut their wholesale prices by at least 15 percent off, or Walmart would limit their presence in stores and create its own branded products to compete with them.

Amazon, never afraid to cut sales margins by increasing volume, has responded by selling even more CRaP, an inside Amazon acronym for “Can’t Realize a Profit” products. Amazon will cut its own profit to get a new customer. Amazon will reinvest its last dollar in new technology – they’ll even invest money they don’t have.

Also, today Walmart announced $20 billion in share buybacks. This is something I would never expect from Amazon. Share buybacks are the fallback position for management that can’t figure out the next big innovation. Either way, Walmart and Amazon are the 800-pound gorillas of retail, and this will be an ongoing battle.

Last year, the South Korean military’s computer network was breached by North Korean hackers. The hack was discovered in September last year. Now South Korea is reporting it was worse than previously estimated. The North Koreans stole classified wartime contingency plans jointly drawn by the United States and South Korea.

It remained unclear how much the hacking has undermined the joint preparedness of the South Korean and United States militaries, with South Korean officials simply saying that they have been redressing whatever damage was caused by the cyberattack.

A security breach at Deloitte, a major accounting and consulting firm, may be much more serious than the company admits. Deloitte previously said on Sep. 25 that “very few clients” had been affected by a hack into its email platform, which began in fall 2016 and was uncovered in March 2017.

Yet the Guardian reported today that the affected server housed emails exchanged with about 350 clients, many of them high profile. That group includes the U.S. departments of defense, state, energy, and homeland security, along with the National Institutes of Health, the U.S. Postal Service, and major companies like Fannie Mae and Freddie Mac. The server also contained emails to or from unnamed global banks, airlines, car manufacturers, energy companies, and pharmaceutical manufacturers.

More than a dozen wildfires burned across Northern California for the third straight day. Here’s what we know: At least 15 people have died since Sunday night, when most of the fires began. Nine deaths were in Sonoma County. More than 100 people were being treated at Napa- and Sonoma-area hospitals for fire-related injuries or health issues.

About 2,000 homes and businesses have been destroyed by the fires. Wildfires were burning more than 115,000 acres in California as of Tuesday morning; firefighters are still in rescue mode, not containment mode. Fires have left more than 91,000 customers without power in the state. Some of the largest of the 14 blazes burning over a 200-mile region were in Napa and Sonoma counties, home to dozens of wineries that attract tourists from around the world.

They sent smoke as far south as San Francisco, about 60 miles (96 kilometers) away. The causes of the fires were unknown. A large part of Santa Rosa was evacuated. Authorities imposed a sundown-to-sunrise curfew for parts of the city. Taken as a group, the fires are already among the 10 deadliest in California history, and the death toll is expected to grow.

Alongside the new Pixel 2 smartphones Google unveiled last week, the company also launched a set of Bluetooth earbuds called the Pixel Buds with one standout feature: instant translation between 40 different languages using a Pixel smartphone.

In a live demo on stage, the Pixel Buds were shown translating short phrases back and forth between English and Swedish using Google Translate running on a Pixel 2 smartphone. This isn’t the first time Google has tried to break the language barrier.

The Google Translate app on Android and Apple’s iPhone can already perform the same trick. For non-Android’s, the Bragi Dash Pro does the same thing, using the iTranslate app on an iPhone.

Financial Review

You’re Fired

Sinclair Noe — May 9, 2017

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

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DOW – 36 = 20,975
SPX – 2 = 2396
NAS + 17 = 6120
RUT + 0.22 = 1391
10 Y + .03 = 2.40%
OIL – .23 = 46.20
GOLD – 4.90 = 1222.10

President Trump has fired FBI Director James Comey. White House spokesman Sean Spicer said the president “terminated and removed” Comey from office “based on the clear recommendations of both Deputy Attorney General Rod Rosenstein and Attorney General Jeff Sessions.”

In Trump’s letter to Comey, the president said, “It is essential that we find new leadership for the FBI that restores public trust and confidence in its vital law enforcement mission.”

The FBI Director is appointed to a 10-year term and it is unusual for a director to be removed from the office before the term expires. Comey was appointed in 2013. Comey, who has led an investigation into Russia’s meddling during the 2016 election and possible links to Trump aides and associates, is only the second FBI chief to have been fired.

Earlier in the day, the FBI clarified a statement Comey made before a Senate panel that overstated the number of classified emails Hillary Clinton aide Huma Abedin forwarded to the personal computer of her husband, former Rep. Anthony Weiner.

Comey had come under fire from Democrats last year after announcing an investigation into Clinton’s emails right before the presidential election, while not disclosing until later a probe into ties between Donald Trump’s campaign team and Russian intelligence officials.

In a letter sent to Comey, Trump wrote: “While I greatly appreciate you informing me, on three separate occasions, that I am not under investigation, I nevertheless concur with judgment of the Department of Justice that you are not able to effectively lead the Bureau.”

Stocks trade at fresh highs (at least on the Nasdaq) and volatility across assets is so subdued it’s touching near-record lows (the VIX inched slightly higher at the close but is still in single digit territory and dipped as low as 9.56).

With the French election out of the way, investors have stopped paying what had been a five-month high in the cost of insuring against declines in the S&P 500 Index. The price of hedging against a 5 percent drop in the gauge over the next month is 36 percent below its five-year average.

For some, this sense of calm in the market is anxiety-inducing especially as valuations stretch to levels not seen since the aftermath of the 1990s-internet bubble. It has been a long time since we had a 5 or 10 percent correction, and the clock is ticking. Or maybe the bull market is just catching a breath, but the markets are almost never this calm.

Goldman CEO Lloyd Blankfein said today, “Every time I get accustomed to low volatility, like we were towards the end of the Greenspan era, and we think we have all the levers under the control … something erupts to remind us that the idea that anybody is in control of everything is hubris. I don’t know what brings us out of the doldrums, but I do know this is not a normal resting state.”

Fed funds futures pricing shows investors are almost universally expecting the Federal Reserve to raise overnight interest rates at its next meeting, with close to a 90 percent perceived chance of an increase next month. Yields on U.S. two-year notes, considered most sensitive to rate-hike expectations, rose to eight-week highs.

While the U.S. economy saw a marked deceleration in the first quarter, the overall outlook remains solid and the Fed is still widely expected to raise U.S. lending rates in June and likely again in September. The positive sentiment (or at least the ubiquitous complacency) and rising U.S. Treasury yields also boosted the dollar. The dollar index, which tracks the greenback’s value against six major currencies, rose to a three-week high, in line with the gains in yields.

Not everyone is cheerfully confident about economic growth. Commerce Secretary Wilbur Ross says the US economy won’t achieve the Trump administration’s 3 percent growth goal this year and not until all its tax, regulatory, trade and energy policies are fully in place.

US trading partners have been spooked by Trump’s vow to renegotiate or pull out of trade deals, such as the North American Free Trade Agreement. A possible rise in the use of tariffs to punish foreign companies deemed to be competing unfairly also has raised concerns of a wave of protectionism. Ross, however, insisted that the Trump administration was not aiming to restrict trade with its actions.

Kansas City Federal Reserve President Esther George said today the central bank should keep gradually raising short-term interest rates despite some economic indicators, like car sales, flashing “yellow”. Among the cautionary areas, auto sales are down from last year’s record pace, and first quarter GDP growth was up at only a 0.7% annual rate, George noted in a speech at the University of California, Santa Barbara.

But other indicators, like consumer sentiment, remain strong, and household balance sheets are, on average, healthy. And as labor markets continue to strengthen, “continuing the gradual removal of monetary accommodation is the appropriate course for the Fed,” George said. George said that rate hikes must be timed right and that a gradual pace seems appropriate. Going too fast risks derailing the economy, while moving too gradually can pose a risk to financial stability

Boston Federal Reserve President Eric Rosengren said today that efforts to overhaul Fannie Mae and Freddie Mac could lead to “a potential and significant shock” to the commercial real-estate sector.

The pair of mortgage-finance giants, which were bailed out by the U.S. government and placed in conservatorship in 2008 during the height of the financial crisis, have historically boasted outsize influence on the single-family mortgage market, but Rosengren expressed concern that the duo’s growing clout in the multifamily sector may pose risks, as the government considers new structures for the entities.

Job openings and hires moved sideways in March as economic momentum stalled out. The Labor Department says there were 5.74 million job openings, the same number as previously reported in February, which was cut to 5.68 million. Labor’s Job Openings and Labor Turnover Survey lags the closely watched monthly non-farm payroll data but provides more detail.

In March, the JOLTS report showed that the number of workers voluntarily leaving their jobs ticked up by 2.6%. That signals more worker confidence in the labor market.

South Korean liberal politician Moon Jae In has won the country’s presidential election. Moon’s win was fueled by a surge in liberal sympathy after the former conservative president, Park Geun Hye, was removed from office months ago. Park is now in a jail cell as she awaits trial on accusations she took about $52 million in bribes from major companies, including Samsung.

In light of the scandal with the former president, Moon was a seen as a clean candidate who would end corruption. The country’s National Election Commission said more than 33.8 million people voted in the election, a turnout of 77 percent, the highest in two decades. Moon has pushed for a more calm and conciliatory stance toward North Korea. Separately, the North Korean ambassador to the UK told Sky News the country will proceed with its sixth nuclear test.

Disney reported profits that topped expectations, but revenues that fell short of forecasts amid continued weakness at ESPN.  Disney said it earned $1.50 in adjusted earnings per share during its fiscal second quarter, and $13.3 billion in revenue. Revenues from Disney’s parks and resorts increased by 9% to $4.3 billion, helped by Shanghai Disney Resort.

Nvidia reported a 48 percent jump in quarterly revenue, helped by strong demand for its graphics chips and its diversification into fast-growing areas such as self-driving systems and artificial intelligence. Net income rose to $507 million, or 79 cents per share, from $208 million, or 35 cents per share, a year earlier. Nvidia’s revenue rose to $1.9 billion from $1.3 billion.

Yelp reported revenue of $197 million, just short of analysts’ estimates. Yelp cut it full-year 2017 estimates for revenue and earnings. Yelp was slammed – down 28%.

Passengers at an airport in Florida protested on Monday night after the cancellation of multiple flights, leading to a confrontation with airline employees and sheriff’s deputies who arrested three travelers while attempting to restore order. The airport altercation is only one skirmish in Spirit’s war, its customers’ discomfort a kind of collateral damage.

According to a federal lawsuit filed in the Southern District of Florida on Tuesday morning, the Miramar-based airline is accusing the Air Line Pilots Association, an AFL-CIO-affiliated labor union that represents more than 55,000 American and Canadian pilots, of arranging a pilot shortage and forcing Spirit to cancel flights to “purposely and unlawfully disrupting the airline’s operations” as retribution over ongoing pilot contract disputes.

In response to the Fort Lauderdale fracas, Spirit officials quickly passed the buck, blaming the incident on ALPA’s truant pilots. Spirit and ALPA have been at it since 2015, per CNN, but multiple contract negotiations have so far failed to produce an agreement. According to the lawsuit, Spirit has canceled about 300 flights in the past week alone.

A federal court granted Spirit Airlines a temporary restraining order today, compelling the pilots’ union to return to status quo. The pilots’ union said Spirit Airlines pilots will fully comply with the court to help restore normal operations.

Stocks Close at Lows Ahead of Holiday Weekend

Charles Schwab: On the Market

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

Stocks Close at Lows Ahead of Holiday Weekend

U.S. stocks finished the last session of the holiday-shortened week lower, despite some relatively upbeat results from JPMorgan and Citigroup to unofficially kick off 1Q earnings season. Losses accelerated after news broke that the U.S. dropped the largest non-nuclear bomb on a tunnel complex in Afghanistan. Energy issues were among the largest decliners as crude oil prices were a bit volatile before finishing nearly where they started. Treasuries were mostly flat in an abbreviated session, the U.S. dollar extended losses and gold was higher. In economic news, wholesale inflation was cooler than expected, but consumer sentiment popped above expectations.

The Dow Jones Industrial Average (DJIA) declined 139 points (0.7%) to 20,453, the S&P 500 Index lost 16 points (0.7%) to 2,329, and the Nasdaq Composite declined 31 points (0.5%) to 5,805. In moderate volume, 772 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq. WTI crude oil added $0.07 to $53.18 per barrel and wholesale gasoline was $0.01 lower at $1.73 per gallon. Elsewhere, the Bloomberg gold spot price was $1.02 higher at $1,287.80 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% lower at 100.55. Markets were down for the week, as the DJIA was 1.0% lower, the S&P 500 Index declined 1.2%, and the Nasdaq Composite lost 1.3%.

Dow member JPMorgan Chase & Co. (JPM $84) reported 1Q earnings-per-share (EPS) of $1.65, versus the $1.51 FactSet estimate, as revenues rose 6.5% year-over-year (y/y) to $24.7 billion, compared to the projected $24.8 billion. Fixed income and equity sales and trading revenues topped forecasts. The company's Chairman and Chief Executive Officer (CEO) Jamie Dimon noted that JPM is off to a good start for the year, and U.S. consumers and businesses are healthy and with pro-growth initiatives and improving collaboration between government and business, the U.S. economy can continue to improve. Shares of JPM gave up early gains and finished lower.

Citigroup Inc. (C $58) posted 1Q EPS of $1.35, compared to the expected $1.23, with revenues rising 3.0% y/y to $18.1 billion, versus the projected $17.7 billion. The company said the momentum it saw across many of its businesses towards the end of the year carried into 1Q and revenue increased in both its consumer and institutional lines of business. However, the company's net interest margin declined. C closed below the flatline in choppy trading. 

Wells Fargo & Co. (WFC $51) announced 1Q profits of $1.00 per share, above the expected $0.96, as revenues dipped 0.9% y/y to $22.0 billion, below the forecasted $22.3 billion. The company said its diversified business model generated higher revenue and net income y/y, though expenses were elevated, driven by typically-higher 1Q personnel-related expenses. Shares traded solidly lower.

Financials unofficially kicked off 1Q earnings season with relatively upbeat results, and for a look at all the sectors as the season begins, see Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, latest Schwab Sector Views: Housing—Building Bubble or Growing Trouble?, at www.schwab.com/marketinsight. Follow Schwab on Twitter: @schwabresearch.

Inflation cooler than expected, jobless claims dip, consumer sentiment surprisingly improves

The Producer Price Index (PPI) (chart) showed prices at the wholesale level in March dipped 0.1% month-over-month (m/m), versus the Bloomberg expectation calling for a flat reading and compared to February's unrevised 0.3% rise. The core rate, which excludes food and energy, came in flat, versus forecasts of a 0.2% advance and February's unrevised 0.3% increase. Y/Y, the headline rate was 2.3% higher, below of projections of a 2.4% increase, and the core PPI rose 1.6% last month, south of estimates of a 1.8% gain. In February, producer prices were 2.2% higher and up 1.5% for the headline and core rates, respectively.

Weekly initial jobless claims (chart) dipped by 1,000 to 234,000 last week, below forecasts of 245,000, with the prior week’s figure being revised higher by 1,000 to 235,000. The four-week moving average fell by 3,000 to 247,250, while continuing claims declined by 7,000 to 2,028,000, north of estimates of 2,024,000.

The preliminary University of Michigan Consumer Sentiment Index (chart) improved this month to 98.0, from the prior month's 96.9 level and compared to expectations of a dip to 96.5. The current economic conditions component rose solidly m/m, while the outlook portion ticked higher. The 1-year inflation and 5-10 year inflation outlooks remained at 2.5% and 2.4%, respectively.

Treasuries were little changed, with the yields on the 2-year and 10-year notes flat at 1.21% and 2.24%, respectively, while the yield on the 30-year bond ticked 1 basis point higher (bp) to 2.89%.

Bond yields have fallen as of late and the U.S. dollar dropped sharply yesterday after President Trump commented that he thought the currency was getting "too strong."

For a look at the moves in the bond markets, see Schwab's Senior Fixed Income Research Analyst, Collin Martin's, CFA, latest article titled, What Investors Should Know About the High-Yield Bond Rally at www.schwab.com/marketinsight, along with Collin's and Vice President of Trading and Derivatives, Randy Frederick's video Fed Hiked Interest Rates, So Why Are Bond Yields Still So Low?. Randy and Schwab's Chief Fixed Income Strategist, Kathy Jones also discuss, Three Fed Hikes Seen in 2017: How Should Bond Investors Respond?. See these and other videos at www.schwab.com/insights. Follow Randy and Kathy on Twitter: @randyafrederick and @kathyjones.

Please note: All U.S. markets will be closed tomorrow in observance of the Good Friday holiday.

U.S. stocks dipped on the week with geopolitical concerns continuing to fester toward North Korea and Syria, while lingering uncertainty regarding President Trump's pro-business policies appeared to foster a modest unwinding of the reflationary trade that fueled some of the post-election rally. As such, the fall in Treasury yields pressured financials, while materials, industrials, technology and health care issues were all lower for the holiday-shortened week. Energy stocks edged lower despite the modest extension of the recent surge in crude oil prices. The markets also appeared to be treading lightly as earnings season shoved off against elevated growth expectations.

Schwab’s Chief Investment Strategist Liz Ann Sonders notes in her latest article, One of These Things … Market's Moves Not All About Trump, much of the pick-up in economic growth, as well as the earnings turn, pre-dated the election and shouldn't be fully credited to President Trump. Liz Ann believes the recent mild pullback/consolidation in stocks was driven less by Trump malaise and more by some sentiment froth which needed working off. We are likely to see another leg up for stocks courtesy of continued genuine improvement in the U.S. and global economy; not just on hope for or a bet on Trump and his pro-growth policies. Read more at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders.

European stocks see pressure on data and geopolitics, Asia mixed

European equities finished lower, with the markets digesting comments from U.S. President Trump regarding the strong U.S. dollar, China, and interest rates. Financials saw pressure as the markets sifted through mixed results from major U.S. companies and as Spanish bank Banco Popular SA (BPESY $3) continued to fall amid concerns about its need to raise more capital. Oil & gas issues retreated from a recent rally as crude oil prices retreated modestly from a recent surge. Geopolitical concerns remained toward North Korea and following last week's missile strikes by the U.S. in Syria, while Brexit negotiations continued and a key French Presidential election moved closer. 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? at www.schwab.com/insights. Also, check out our article, Brexit Begins: What's Next for the U.K., at www.schwab.com/insights, while Director of International Research, Michelle Gibley CFA, offers her article, Europe Votes: Could More Countries Reject the EU? at www.schwab.com/oninternational. Action was likely muted by market closures tomorrow and Monday for the Easter celebration. German and French consumer price inflation rose in line with forecasts. The euro dropped and the British pound dipped versus the U.S. dollar, while bond yields in the region were mixed.

Stocks in Asia finished mixed, with the markets continuing to grapple with heightened geopolitical concerns, as well as digesting some Chinese trade data and comments from U.S. President Trump. Japanese equities fell as the yen rallied and the U.S. dollar fell on the heels of Trump's comments that he thought the greenback was too strong. Mainland Chinese stocks ticked higher and shares traded in Hong Kong declined following trade data that showed exports and imports both easily topped forecasts, with the former jumping the most in two years, per Bloomberg. Also, the markets reacted to Trump's apparent reversal, noting that he will not brand China a currency manipulator. For a look at the global trade landscape, see Schwab's Jeffrey Kleintop's, CFA, article, Top Five Trade Issues Investors Should Be Watching at www.schwab.com/oninternational.

South Korean stocks advanced, while the Bank of Korea left its benchmark interest rate unchanged. Noticeable weakness in basic materials issues weighed on Australian securities and Indian equities dropped following yesterday's unexpected decline in industrial production. Indian stocks have wavered somewhat recently after a run to record highs, leading emerging markets' strong 1Q rally. Schwab's Michelle Gibley, CFA, offers her commentary, Emerging Markets: Why They Deserve a Place in Your Portfolio, while Schwab's Kathy Jones addresses the question, Emerging Market Bonds: Can the Hot Start In 2017 Continue?. Read all these commentaries at www.schwab.com/oninternational and www.schwab.com/marketinsight.

Housing and manufacturing data set to headline next week's calendar

Next week's economic calendar will bring a glance at the housing market with some key reads in the form of housing starts, building permits and existing home sales. Schwab's Brad Sorensen, CFA, notes in his recent Schwab Sector Views that one of the major features talked about by the National Association of Realtors (NAR) in its latest report was the lack of inventory, with existing homes available for sale dipping below a four-month supply, a level that has rarely been reached over the past 20 years. Meanwhile, another report that will likely garner some attention will be March retail sales. Brad also notes in his piece Consumer Discretionary Sector Rating: Marketperform, the outlook for American consumer spending appears to be improving, with consumer confidence strong and wages generally showing signs of trending higher. Read both articles, as well as Brad's views on other sectors at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch.

Manufacturing data will also make an appearance, with next Friday's release of the preliminary Markit Manufacturing PMI Index, which will be preceded in the week by a couple of regional manufacturing reports.

International releases of note are expected to include: China—retail sales, industrial production and 1Q GDP. Australia—new vehicle sales and business confidence. Japan—industrial production and capacity utilization, trade data and the Tertiary Industry Index. U.K.—retail sales. Eurozone—CPI, construction output and consumer confidence. Germany—CPI, PPI and preliminary Markit Manufacturing PMI Index.

Stocks Close Near Lows

Charles Schwab: On the Market

Posted: 12/28/2016 4:15 PM ET

Stocks Close Near Lows

U.S. stocks traded lower, as data, volume and conviction continue to be light in the final trading sessions of 2016. Treasuries, gold, the U.S. dollar and crude oil prices were all higher. Limited domestic economic data revealed an unexpected decline in pending home sales. In equity news, the Korea Fair Trade Commission announced it found that certain business practices of Qualcomm are in violation of the country's competition law.

The Dow Jones Industrial Average (DJIA) decreased 111 points (0.6%) to 19,834, the S&P 500 Index lost 19 points (0.8%) to 2,250 and the Nasdaq Composite declined 49 points (0.9%) to 5,439. In moderately-light volume, 611 million shares were traded on the NYSE and 1.3 billion shares changed hands on the Nasdaq. WTI crude oil ticked $0.16 higher to $54.06 per barrel and wholesale gasoline was $0.02 higher at $1.68 per gallon. Elsewhere, the Bloomberg gold spot price added $3.44 to $1,142.22 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly 0.3% higher at 103.28.

Qualcomm Inc. (QCOM $66) announced late-yesterday an $865 million fine from South Korean regulators for violating competition laws regarding its patent licensing practices. The company said it intends to fight the ruling as it strongly believes that the Korea Fair Trade Commission findings are inconsistent with the facts, disregard the economic realities of the marketplace and misapply fundamental tenets of competition law. Shares traded lower.

Kate Spade & Co. (KATE $18) jumped amid a report from Dow Jones Newswires that the company is considering a sale of the company. KATE did not comment on the report.

Pending home sales surprisingly decline

Pending home sales fell 2.5% month-over-month (m/m) in November, versus the Bloomberg projection of a 0.5% gain, and following the unrevised 0.1% increase registered in October. Compared to last year, sales were 1.4% higher. Pending home sales reflect contract signings and are used as a gauge of the pipeline of existing home sales, which unexpectedly rose in November and remained at the highest level since February 2007.

Treasuries were higher, with the yield on the 2-year note ticking 2 basis points (bps) lower to 1.26%, the yield on the 10-year note falling 5 bps to 2.51% and the 30-year bond rate declining 4 bps to 3.10%.

Yesterday bond yields added to a recent surge that has come from upbeat economic data, which has accompanied high expectations for fiscal stimulus, tax reform and regulatory rollbacks following the surprise November Presidential election. Also, the rally in rates was bolstered in early December as the Fed's highly expected 25 bp increase to its target for the fed funds rate was delivered along with a forecast for three rate hikes in 2017, up from two in its September projection. Schwab's Chief Fixed Income Strategist, Kathy Jones discusses the bond markets in a video with Schwab's Vice President of Trading and Derivatives, Randy Frederick titled, How Should Bond Investors Prepare in Light of Fed Outlook for 2017? at www.schwab.com/insights, where you can also find her latest, Changing Conditions: A Bond Market FAQ. Follow Kathy and Randy on Twitter: @kathyjones and @randyafrederick.

Signs of rising inflation have also pressured bond prices and Schwab's Fixed Income Director, Collin Martin, CFA, discusses in his article, Inflation Is Rising: Time to Consider Treasury-Inflation Protected Securities? at www.schwab.com/onbonds.

Tomorrow, the U.S. economic calendar will remain light, with the release of weekly initial jobless claims, expected to have declined to 265,000 from last week's 275,000 level.

Europe and Asia mixed as volume remained thin

European equities finished mixed, with telecommunications stocks leading to the downside, while volume and conviction remained subdued in the holiday-shortened week. Financials continued to be hamstrung by festering concerns toward the European banking sector. Banca Monte dei Paschi di Siena SpA (BMDPD $7) remained in focus as the European Central Bank said yesterday the struggling Italian lender needs substantially more capital than the company had planned in its recently failed capital increase. The ECB's estimate comes as the government approved a bank bailout decree that will allow it to increase its public borrowing by 20 billion euros to help fund bank bailouts. However, basic materials issues rallied and the energy sector gained ground as crude oil prices modestly added to yesterday's gains, helping U.K. stocks move higher in their return from an extended holiday break. In economic news, Italian consumer and manufacturing confidence both unexpectedly improved in December. The euro and British pound lost ground on the U.S. dollar, while bond yields in the region were mostly lower.

Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers his latest article, 5 Reasons International Stocks May Underperform In 2017, at www.schwab.com/oninternational, as well as his video with Senior Derivatives Analyst Nathan Peterson titled, Brexit, Germany, China: How the Global Economy Could Fare in the New Year at www.schwab.com/insights. Follow Jeff on Twitter: @jeffreykleintop.

Stocks in Asia finished mixed following the modest gains in the U.S. and Europe yesterday, though volume remained subdued amid the holiday-shortened week. Japanese equities finished flat despite some weakness in the yen, while November economic data was mixed as the nation's industrial production rose by a smaller amount than anticipated and retail sales unexpectedly rose. Mainland Chinese issues declined as China's markets continue to grapple with festering currency/liquidity concerns in the wake of the U.S. dollar's recent jump, uncertainty following government crackdowns—notably on the real estate and insurance sectors—and lingering uneasiness regarding trade relations with the U.S. For analysis of the impact on the global markets of the U.S. election, see Schwab's Jeffrey Kleintop's, CFA, latest article, President Trump and Global Trade: How Will Campaign Promises Play Out?. However, stocks trading in Hong Kong rebounded from a recent bout of selling pressure in its return to action from the long holiday break.

Australian securities were standout winners amid a rally in basic materials listings, while South Korean equities fell on festering political uncertainty in the fallout from the recent impeachment of the nation's president. Indian stocks finished flat after yesterday's sharp rebound from a recent selloff that has taken its index to a five-week low, courtesy of festering earnings and economic concerns, along with government reform uncertainty and monetary policy divergence. Schwab's Director of International Research, Michelle Gibley, CFA, offers timely analysis of emerging markets in her latest article, Emerging Markets: Why They Deserve a Place in Your Portfolio, Read both articles at www.schwab.com/oninternational, and be sure to check out our latest article, Why Your Portfolio Needs International Stocks—Despite 2017 Risks at www.schwab.com/insights.

Tomorrow, the international economic docket will be void of any major releases.