Stocks Rally as Bulls Come Charging Back

Charles Schwab: On the Market

Posted: 11/16/2017 4:15 PM EST

Stocks Rally as Bulls Come Charging Back

 

U.S. stocks rallied during Thursday's trading session, bouncing back from a two-day slide as European shares also snapped a string of losses. Favorable earnings reports from Dow members Wal-Mart and Cisco Systems, along with upbeat industrial production and homebuilder sentiment reads aided in boosting equity gains. Treasury yields rebounded and the U.S. dollar ticked slightly higher, along with gold, while crude oil prices were lower. 

The Dow Jones Industrial Average (DJIA) advanced 187 points (0.8%) to 23,458, the S&P 500 Index jumped 21 points (0.8%) at 2,586, and the Nasdaq Composite rallied 87 points (1.3%) to 6,793. In moderate volume, 776 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq. WTI crude oil declined $0.19 to $55.14 per barrel and wholesale gasoline was $0.03 lower at $1.71 per gallon. Elsewhere, the Bloomberg gold spot price ticked $0.59 higher to $1,278.66 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—advanced 0.1% to 93.93.

Dow member Wal-Mart Stores Inc. (WMT $100) reported Q3 earnings-per-share (EPS) of $0.58, or $1.00 ex-items, versus the $0.97 FactSet estimate, as revenues rose 4.2% year-over-year (y/y) to $123.2 billion, above the projected $121.1 billion. Q3 same-store sales at Walmart grew 2.7% y/y, topping the expected 1.9% gain. The company raised its Q4 EPS outlook and issued same-store sales guidance that was slightly above expectations. Shares traded sharply higher.

Dow component Cisco Systems Inc. (CSCO $36) posted fiscal Q1 earnings of $0.48 per share, or $0.61 ex-items, with revenues decreasing 2.0% y/y to $12.1 billion, roughly in line with expectations. CSCO issued Q2 guidance that exceeded forecasts. Shares rallied.

Best Buy Co. Inc. (BBY $55) announced Q3 EPS of $0.78, matching projections, as revenues rose 4.2% y/y to $9.3 billion, below the expected $9.4 billion. Q3 same-store sales increased 4.4% y/y, below the forecasted 4.9%. BBY issued Q4 earnings guidance that was below estimates, while its sales outlook was mostly in line with expectations. The company raised its full-year guidance. Shares fell.

Homebuilder sentiment and industrial production top forecasts

The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment this month unexpectedly improved to an eight-month high of 70, versus the Bloomberg forecast calling for a dip to 67 from October's unrevised 68 level. The index sits decisively above the 50 mark, the point of separation for good versus poor conditions. The NAHB said builder confidence is close to a post-recession high—a strong indicator that the housing market continues to grow steadily—but its members still face supply-side constraints, such as lot and labor shortages and ongoing building material price increases.

Tomorrow, the economic calendar will bring a look at housing construction activity in the form of housing starts and building permits, with starts projected to rise 5.6% month-over-month (m/m) to an annual rate of 1,190,000 units and permits expected to increase 2.0% to a 1,250,000 unit rate. Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, notes in his latest, Schwab Sector Views: 'Tis the Season…Almost, mortgage demand appears to be healthy, while interest rates continue to be relatively low and the high rental rates in some areas of the country provide incentive for home buying.

Industrial production (chart) rose 0.9% month-over-month (m/m) in October, above estimates of a 0.5% gain, after September's upwardly revised 0.4% increase. Manufacturing and utilities production both grew solidly, while mining output dropped. Capacity utilization rose to 77.0% from the prior month's upwardly revised 76.4% rate, and compared to forecasts of 76.3%. Capacity utilization is 2.9 percentage points below its long-run average. Industrial production has gained 2.9% over the past 12 months, and Schwab's Chief Investment Strategist Liz Ann Sonders notes that capex may be in for an even sharper recovery in her article, Takin Care of Business: Several Important Kickers for a Strong Capex Cycle. 

Weekly initial jobless claims (chart) surprisingly rose by 10,000 to 249,000 last week, versus the Bloomberg forecast of a decrease to 235,000, with the prior week’s figure being unrevised at 239,000. The four-week moving average grew by 6,500 to 237,750, while continuing claims fell 44,000 to 1,860,000, south of estimates of 1,900,000.

The Philly Fed Manufacturing Index (chart) in November declined more than expected to 22.7 from 27.9 in October, but a reading above zero indicates expansion. This compared to estimates of a decline to 24.6.

The Import Price Index (chart) rose 0.2% m/m for October, below projections of a 0.4% gain, following September's upwardly revised 0.8% rise. Compared to last year, prices were up by 2.5%, in line with forecasts and compared to September's unrevised 2.7% increase.

Treasuries finished lower, with the yield on the 2-year note gaining 3 basis points (bps) to 1.71%, the yield on the 10-year note increasing 5 bps to 2.37%, and the 30-year bond rate advancing 6 bps to 2.82%.

Treasury yields and the U.S. dollar rebounded somewhat from recent pressure that came from a flare-up in global risk aversion on the heels of the world stock market rally as of late. Festering U.S. tax reform uncertainty—today the House passed its bill to overhaul the tax code, which has some significant differences from the Senate's version—has fostered the change in conviction. This has countered a relatively positive economic landscape, while recent soft Chinese economic data and market skittishness as the yield curve has flattened have exacerbated sentiment. As such, check out our article, Does Low Market Volatility Portend a Market Tumble?, as well as Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend's latest commentary, Tax Reform: Key Differences Between the Senate and House Plans.

Tomorrow's domestic docket will also yield the November Kansas City Fed Manufacturing Index, forecasted to dip to 21 from 23 in October, though a reading above 0 indicates growth in activity.

Europe recovers on data, Asia rebounds from recent slide

European equity markets traded higher, rebounding from the recent string of losses that has come from an apparent change in global sentiment to de-risking, while disappointing Chinese economic data as of late has weighed on commodity-related stocks. Some upbeat earnings data in the region teamed up with a rebound in eurozone new car registrations to support the recovery in the markets, while the energy sector remained under pressure as crude oil prices extended a recent selloff. Eurozone consumer price inflation rose in line with forecasts. The euro declined versus the U.S. dollar and the British pound rose following a better-than-expected U.K. retail sales report, while bond yields in the region finished mixed. Gains for Italian stocks and Europe's financial sector were limited by a drop in shares of Italy's banks. As noted in the latest Schwab Market Perspective: Incredible, Amazing…Unstop-a-bull?, momentum favors the bulls for the foreseeable future, but elevated valuations and growing investor complacency pose risks that could lead to a long-awaited pullback and/or a pickup in volatility from today’s extremely low base.

Asian stocks mostly rebounded from the recent pullback, with the yen giving back some of its gains seen as of late as the global markets have stumbled amid a flare-up in risk aversion, while overnight stabilization in crude oil prices helped the energy sector recover somewhat. Japanese equities rallied, while Australian securities were also higher, with a softer-than-expected read on the nation's employment growth limiting gains. Mainland Chinese shares dipped and stocks trading in Hong Kong advanced with the recent soft economic data being met with some upbeat earnings results. Indian equities gained ground and South Korean shares advanced. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers a look at the global market rally seen this year that has been fostered by the broadest economic growth in a decade in his latest article, 5 Reasons Investors Should Give Thanks.

International economic releases for tomorrow will be light, with new vehicle sales from Australia and the current account and construction output from the Eurozone.

Stocks Hold All-Time Highs

Charles Schwab: On the Market

Posted: 10/17/2017 4:15 PM EDT

Stocks Hold All-Time Highs

 

U.S. stocks finished the regular trading session fairly flat, though the Dow broke through the 23,000 mark intraday as market participants waded through a flood of corporate earnings and economic reports. Treasury yields were little changed and the U.S. dollar rose as uncertainty and speculation in regard to who will soon lead the Federal Reserve remains. In economic news, homebuilder sentiment and industrial production rebounded, while import prices rose. Gold was lower and crude oil prices inched higher.

The Dow Jones Industrial Average (DJIA) increased 40 points (0.2%) to 22,997, the S&P 500 Index added 2 points (0.1%) to 2,559, and the Nasdaq Composite was nearly unchanged at 6,624. In moderate-to-light volume, 692 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq. WTI crude oil ticked $0.01 higher to $51.88 per barrel and wholesale gasoline also increased $0.01 to $1.63 per gallon. Elsewhere, the Bloomberg gold spot price lost $9.69 to $1,286.10 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% higher at 93.51.

Morgan Stanley(MS $49) reported Q3 earnings-per-share (EPS) of $0.93, compared to the $0.81 FactSet estimate, as revenues rose 3.4% year-over-year (y/y) to $9.2 billion, above the projected $9.0 billion. The company said its results reflected the stability its wealth management, investment banking and investment management businesses bring when its sales and trading business faces a subdued environment. Shares traded higher.

Netflix Inc. (NFLX $199) posted Q3 EPS of $0.29, versus the expected $0.32, as revenues grew 30.3% y/y to $3.0 billion, roughly in line with forecasts. The company reported net subscriber additions for its domestic and international streaming units that both topped estimates, with the latter easily besting forecasts. NFLX issued Q4 guidance that exceeded expectations and said it will spend $7-8 billion on content for 2018. Shares lost ground.

Dow member Goldman Sachs Group Inc. (GS $236) announced Q3 profits of $5.02 per share, above the estimated $4.17, as revenues increased 1.9% y/y to $8.3 billion, topping the $7.5 billion expectation. The company's trading revenues fell, while its investment banking and investing and lending revenues rose solidly. Shares traded lower.

Dow component UnitedHealth Group Inc. (UNH $204) achieved Q3 EPS of $2.51, or $2.66 ex-items, versus the projected $2.56, with revenues rising 9.0% y/y to $50.3 billion, compared to the estimated $50.4 billion. UNH raised its full-year earnings outlook and shares finished nicely higher.

Dow member Johnson & Johnson(JNJ $141) reported Q3 earnings of $1.37 per share, or $1.90 ex-items, versus the expected $1.80, as revenues rose 10.3% y/y to $19.7 billion, above the forecasted $19.3 billion. The company noted the strong performance of its pharmaceutical business. JNJ raised its full-year guidance and shares traded solidly to the upside.

Homebuilder sentiment rebounds, industrial production rises

The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment this month rose to a five-month high of 68, versus the Bloomberg forecast calling for it to match September's unrevised 64 level. The index sits well above the 50 mark, the point of separation for good versus poor conditions. The NAHB said the report showed homebuilders are rebounding from the initial shock of the hurricanes, but need to be mindful of long-term repercussions from the storms, such as intensified material price increases and labor shortages.

Housing construction will come into focus tomorrow, with the economic calendar delivering the September housing starts and building permits report. Starts are projected to dip 0.4% month-over-month (m/m) to an annual rate of 1,175,000 units and permits are forecasted to decline 2.1% to a rate of 1,245,000 units. MBA's mortgage applications report tomorrow will also give us a look at home lending activity. Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, notes in his latest, Schwab Sector Views: Sustainable Energy?, mortgage demand appears to be healthy, while interest rates continue to be relatively low and the high rental rates in some areas of the country provide incentive for home buying.

Industrial production (chart) rose 0.3% month-over-month (m/m) in September, matching estimates, after August's upwardly revised 0.7% decrease, which snapped a six-month string of gains. Manufacturing and mining production both ticked higher, while utilities output rose solidly. Capacity utilization rose to 76.0% from the prior month's downwardly revised 75.8% rate, and compared to forecasts of 76.2%. Capacity utilization is 3.9 percentage points below its long-run average. The Federal Reserve noted the continued effects of the hurricanes held down growth in total production. Tomorrow, the Fed will give us a look at national business activity in the form of its Beige Book, a tool it will use to prepare for its next two-day monetary policy meeting scheduled to end November 1st.

Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, discusses the global impact of the natural disasters in his latest article, Fires, Hurricanes, and Earthquakes: What Disasters Mean For Markets, noting that stock market losses associated with past major disasters were typically short-lived.

The Import Price Index (chart) gained 0.7% m/m for September, above projections to match August's unrevised 0.6% gain. Compared to last year, prices were up 2.7%, topping forecasts of a 2.6% gain and compared to August's unrevised 2.1% increase.

Treasuries finished mixed but little changed, with the yield on the 2-year note increasing 1 basis point (bp) to 1.55%, the yield on the 10-year note flat at 2.30% and the 30-year bond rate dipping 1 bp to 2.81%. The U.S. dollar gained ground on uncertainty regarding who will be the next Fed Chief amid the backdrop of signs that inflation may be nudging higher and global economic growth remains steady. Also, the markets continued to grapple with global political uncertainty and the potential for U.S. tax reform.

As such, Schwab's Chief Investment Strategist Liz Ann Sonders offers her article, The Waiting: Wage Growth and Inflation Finally Getting in Gear?, and Schwab's Jeffrey Kleintop, CFA, delivers his commentary, Inflation May Be The Biggest Question For Investors In 2018.
Moreover, Jeff discusses, How the Shift by Central Banks May Affect the Stock Market, and Schwab's Chief Fixed Income Strategist, Kathy Jones talks in the video with Vice President of Trading and Derivatives, Randy Frederick, Should a Change in Fed Leadership Matter to Investors?. For analysis of the journey to tax reform, see Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend's article, Tax Reform Framework Released, But The Road Ahead Is Long.

Check out these articles and video on the Market Commentary page at www.schwab.com. Follow our Schwab experts on Twitter: @lizannsonders, @jeffreykleintop, @kathyjones and @randyafrederick.

Europe slips as political uncertainties linger

European equity markets gave up early gains and finished modestly lower even as the euro and British pound lost ground as the U.S. dollar showed some strength on speculation regarding who will be the leader of the Central Bank. Materials issues led to the downside and political concerns continued to stymie conviction. Financials pared gains after rising in the wake of key results from the sector in the U.S. The pound shrugged off signs that U.K. inflation continues to rise, with Brexit negotiations remaining in a deadlock even after Prime Minister Theresa May's meeting in Brussels yesterday with European Union officials. However, Spanish stocks rebounded from recent weakness that has come as Spain continues to push Catalonia for clarification on whether it declared independence or not, showing some resiliency in the face of the nation lowering its GDP growth outlook. For analysis of the uncertain political front in the region, see Schwab's Jeffrey Kleintop's, CFA, and Randy Frederick's video, Political Risk: How Should Investors Respond?, and our article, Brexit Begins: What's Next for the U.K?, on the Market Commentary page at www.schwab.com. In other economic news, German investor confidence for October came in below forecasts. Bond yields in the region were mostly lower.

Stocks in Asia finished mixed with continued global economic optimism helping support sentiment, while caution appeared elevated ahead of a flood of Chinese economic data, headlined by its Q3 GDP report, as well as the highly anticipated Communist Party gathering in China later this week. Japanese equities rose as the yen weakened to help it extend its string of gains to eleven sessions that has taken it to levels not seen in over two decades. Mainland Chinese stocks declined and shares trading in Hong Kong finished flat. Australian securities advanced with basic materials gaining ground and the minutes from the Reserve Bank of Australia's policy meeting earlier this month suggested that there was no sense of urgency to raise rates. South Korean equities advanced and Indian shares dipped. Schwab's Jeffrey Kleintop, CFA, and Randy Frederick offer a look at global investing in the video, Is An Optimistic Outlook for Global Equities Warranted?, on the Market Commentary page at www.schwab.com.

Tomorrow, the international economic docket will be limited to leading indicators from Australia, jobless claims from the U.K. and construction output from the Eurozone.

Record Run Continues Despite Looming Fed Meeting

Charles Schwab: On the Market

Posted: 9/19/2017 4:15 PM ET

Record Run Continues Despite Looming Fed Meeting

U.S. equities added to record highs, continuing to show resiliency in the face of geopolitical and U.S political concerns, and ahead of tomorrow's Fed decision. U.S. housing construction activity in August topped expectations, adding to the upbeat mood, and Treasury yields modestly added to their recent rebound. Meanwhile, the U.S. dollar and crude oil prices declined, while gold was modestly higher.

The Dow Jones Industrial Average (DJIA) increased 40 points (0.2%) to 22,371, the S&P 500 Index gained 3 points (0.1%) to 2,507, and the Nasdaq Composite increased 7 points (0.1%) to 6,461. In moderate volume, 809 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil fell $0.45 to $49.90 per barrel and wholesale gasoline lost $0.01 to $1.66 per gallon. Elsewhere, the Bloomberg gold spot price increased $3.87 to $1,311.31 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% lower at 91.78.

Shares of Kohl's Corp. (KSS $45) rose as the Street cheered its announcement that it will offer free returns for Amazon.com Inc's (AMZN $970) customers at select stores starting in October. The offer comes on the heels of its announcement earlier this month that it will launch a new Amazon smart home experience in 10 select Kohl's stores.

Shares of Best Buy Co. Inc. (BBY $53) fell as the Street expressed disappointment toward the company's new long-term financial targets that it released ahead of its investor day this afternoon.

AutoZone Inc. (AZO $535) reported fiscal Q4 earnings-per-share (EPS) of $15.27, or $15.18 ex-items, above the $15.11 FactSet estimate, as revenues grew 3.3% year-over-year (y/y) to $3.5 billion, roughly in line with expectations. Q4 same-store sales rose 1.0% y/y, versus the projected 0.8% gain, while its gross margin was flat y/y, slightly missing estimates, and its operating expenses rose due partly to higher wage pressure. Shares finished lower.

Shares of T-Mobile US Inc. (TMUS $65) and Sprint Corp. (S $8) moved higher following a report from CNBC's David Faber that the two companies are in active merger talks but that they are still weeks away from finalizing a deal. According to the report, Deutsche Telekom AG (DTEGY $19)—which owns about 64% of T-Mobile—would be the majority owner, while Softbank Group Corp. (SFTBY $41)—which owns nearly 84% of Sprint—will emerge as a large minority holder. None of the entities mentioned have commented on the report.

Housing construction activity tops forecasts in August

Housing starts (chart) for August dipped 0.8% month-over-month (m/m) to an annual pace of 1,180,000 units, but above the Bloomberg forecast of a 1,174,000 unit rate, while July starts were favorably revised to an annual pace of 1,190,000. Single-unit construction rebounded after the prior month's decline, while multi-family starts continued to drop. Building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, jumped 5.7% m/m in August to an annual rate of 1,300,000, after July's upwardly revised 1,230,000 rate, and north of the expected annual pace of 1,220,000 units. Permits for multi-unit rebounded from July's drop, while single-unit authorizations declined.

The housing market will likely be hampered by the storms in the short-term, joining the headwinds of higher building materials costs and shortages of lots and labor. Also, low supply and elevated prices have hampered existing home sales, which hit an eleven month low in July and will be in focus tomorrow as the August figures are released, projected to tick 0.2% higher m/m to an annual rate of 5.45 million units (economic calendar). However, as noted in yesterday's homebuilder confidence report and Schwab's Chief Investment Strategist Liz Ann Sonders' article, Trying to Reason with Hurricane Season: The Aftermath of "Harma", a boost associated with the recovery/rebuilding efforts is likely, while Liz Ann adds that real estate has been one of most consistent beneficiaries in the subsequent months following the 10 costliest U.S. hurricanes. Read more on the Markets & Economy page at www.schwab.com and follow Liz Ann on Twitter: @lizannsonders. MBA Mortgage Applications will also be reported.

The Import Price Index (chart) increased 0.6% m/m for August, topping projections of a 0.4% rise, and compared to July's downwardly revised 0.1% dip. Compared to last year, prices were up by 2.1%, below forecasts of a 2.2% gain and compared to July's downwardly revised 1.2% increase.

Treasuries dipped, as the yield on the 2-year note was flat at 1.40%, while the yields on the 10-year note and the 30-year bond ticked 1 basis point higher to 2.24% and 2.81%, respectively. For analysis of the bond markets, see Schwab's Chief Fixed Income Strategist, Kathy Jones', and Vice President of Trading and Derivatives, Randy Frederick's, video, The Economy is Picking Up, But Bond Yields Are Falling—What's That About?, on the Insights & Ideas page at www.schwab.com. Follow Kathy and Randy on Twitter: @kathyjones and @randyafrederick.

Bond yields modestly extended a sharp recent rebound that has come as the markets shrugged off festering geopolitical tensions, while an acceleration in consumer price inflation added to the positive economic backdrop to bring the Fed back into focus, with the Federal Open Market Committee (FOMC) beginning its two-day monetary policy meeting today.

A rate hike is not expected after tomorrow's conclusion but the announcement that the Central Bank will begin to shrink its massive $4.5 trillion balance sheet is highly anticipated. For further analysis of the meeting, check out our latest article, Fed Watch: What to Expect from the September Meeting, on the Insights & Ideas page at www.schwab.com and follow us on Twitter: @schwabresearch.

Europe battles back from early weakness, Asia lower 

European equity markets mostly ticked higher, overcoming early losses with the euro and British pound paring losses versus the U.S. dollar and despite caution ahead of tomorrow's monetary policy decision by the U.S. Federal Reserve. Global monetary policy remained in focus as the Fed decision will be followed by the Bank of Japan's policy statement, while the Bank of England signaled last week that a rate hike may be delivered in the coming months and the European Central Bank suggested at its last monetary policy decision that it will begin to discuss in detail dialing back its stimulus measures this autumn. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, discusses the potential changes in global monetary policy in his latest article, How the Shift by Central Banks May Affect the Stock Market, noting that despite the coming shift by central banks towards trimming/tapering their balance sheets, we don't believe the bull market is at risk. Read more on the Markets & Economy page at www.schwab.com including Jeff's point that earnings, not easing, remain the key support for stock markets around the world. In economic news, German investor confidence easily topped expectations for September. Bond yields in the region finished mixed to little changed.

Stocks in Asia finished mostly lower following the recent global market rally, with caution appearing to set in ahead of tomorrow's monetary policy decision out of the U.S., which will be followed by the Bank of Japan's decision later this week. Markets in mainland China, Hong Kong, Australia, India and South Korea were all lower. However, Japanese equities bucked the trend, finishing solidly higher in their return to action from yesterday's holiday, playing catch up with the markets and bolstered by the recent weakness in the yen. Schwab's Jeffrey Kleintop, CFA, offers analysis of the global investing landscape in his articles, What are fund flows telling us about trends and risks in the global stock market?, and, An important benefit to global investors is back after 20 years, on the Markets & Economy page at www.schwab.com.

Reports on tomorrow's international economic calendar will include trade data from Japan, PPI from Germany and retail sales from the U.K.

Markets Flat Amid Investor Caution

Charles Schwab; On the Market

Posted: 8/15/2017 4:15 PM ET

Markets Flat Amid Investor Caution

U.S. equities finished mixed and near the unchanged mark as investors weighed eased geopolitical concerns against upbeat economic data that may have put the possibility of a Fed rate hike back into play. Retail sales came in much stronger than expected and manufacturing activity in the New York region surged. Meanwhile, Treasury yields rose on the reports, gold was lower, while crude oil prices and the U.S. dollar were little changed.

The Dow Jones Industrial Average (DJIA) gained 6 points to 21,999, the S&P 500 Index lost 1 point to 2,465, and the Nasdaq Composite ticked 7 points (0.1%) lower to 6,333. In light-to-moderate volume, 700 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq. WTI crude oil inched $0.04 lower to $47.55 per barrel and wholesale gasoline was unchanged at $1.58 per gallon. Elsewhere, the Bloomberg gold spot price lost $10.05 to $1,272.10 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 93.82.

Dow member Home Depot Inc. (HD $150) reported Q2 earnings-per-share (EPS) of $2.25, versus the FactSet estimate of $2.21, as revenues rose 6.2% year-over-year (y/y) to $28.1 billion, compared to the forecasted $27.8 billion. Q2 same-store sales grew 6.3% y/y, above the projected 4.9% gain. HD raised its full-year guidance. Shares finished lower despite the results.

Coach Inc. (COH $41) posted fiscal Q4 EPS of $0.53, or $0.50 ex-items, versus the forecasted $0.49, as revenues decreased 1.7% y/y to $1.1 billion, below the estimated $1.2 billion. Q4 same-store sales grew 4.0% y/y, above the estimated 3.6% increase. The company's gross margin declined y/y. COH issued current year earnings guidance with a midpoint below expectations, while its revenue outlook topped projections. Shares dropped decisively.

Dick's Sporting Goods Inc. (DKS $27) announced Q2 profits of $1.03 per share, or $0.96 ex-items, compared to the forecasted $1.00, as revenues rose 9.6% y/y to $2.2 billion, roughly in line with forecasts. Q2 same-store sales ticked 0.1% higher y/y, below the 1.4% gain that was expected. DKS issued Q3 guidance that came in below forecasts, while it lowered its full-year outlook. The company noted a "very competitive and dynamic marketplace," adding that "by design, we will be more promotional and increase our marketing efforts for the remainder of the year, as we will aggressively protect our market share." DKS fell sharply.

Retail sales top forecasts, while regional manufacturing and homebuilder sentiment jump

Advance retail sales (chart) for July rose 0.6% month-over-month (m/m), compared to the Bloomberg forecast of a 0.3% gain and compared to June's upwardly revised 0.3% increase. Last month's sales ex-autos grew by 0.5% m/m, versus expectations of a 0.3% gain, and following the favorably revised 0.1% increase seen in the previous month. Sales ex-autos and gas were up 0.5% m/m, compared to estimates of a 0.4% rise, and versus June's upwardly revised 0.3% rise. The retail sales control group, a figure used to help calculate GDP, increased 0.6%, compared to the projected 0.4% rise, and the prior month's figure was revised higher to a 0.1% rise. Ten of the thirteen categories were higher, with autos, building materials and nonstore retailers—including on line activity—leading the way, while gas, clothing and electronics and appliances sales were lower.

The report suggests strong consumer confidence and wages flashing early signs of trending higher could be starting to bolster consumer spending, the lifeblood of U.S. economic growth. However, Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, points out in his Schwab Sector Views: Time to "Energize" Your Portfolio?, spending on traditional retail items has been cautious and competition among retailers—cited today by Dick's Sporting Goods—may limit profitability, leading to our maintained marketperform rating on consumer discretionary stocks. Read more on the Markets & Economy page at www.schwab.com and follow us on Twitter: @schwabresearch.

The Import Price Index (chart) ticked 0.1% higher m/m for July, matching projections, and compared to June's unrevised 0.2% decrease. Compared to last year, prices were up by 1.5%, in line with forecasts to match June's unrevised increase.

The Empire Manufacturing Index showed output from the New York region jumped further to a level depicting expansion (a reading above zero) for August. The index surged to 25.2 from July's unrevised 9.8 level, with forecasts calling for a reading of 10.0.

The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment this month rose to 68 from July's unrevised level of 64, where it was forecasted to remain. This index sits at the highest since May and well above the 50 mark, the point of separation for good versus poor conditions. The NAHB said its members are encouraged by rising demand in the new-home market, due to ongoing job and economic growth, attractive mortgage rates and growing consumer confidence. However, the report noted that builders continue to face supply-side challenges, such as lot and labor shortages and rising building material costs.

Tomorrow, we will get a look at housing construction activity, in the form of July housing starts and building permits (economic calendar). Starts are expected to tick 0.4% higher m/m to an annual rate of 1,220,000 units and permits are projected to decline 2.0% to an annual rate of 1,250,000 units. MBA Mortgage Applications will also be released.

Business inventories (chart) grew 0.5% m/m in June, north of forecasts calling for a 0.4% gain, and versus May's unrevised 0.3% increase.

Treasuries were lower, as the yield on the 2-year note rose 2 basis points (bps) to 1.35%, the yield on the 10-year note gained 4 bps to 2.26%, and the 30-year bond rate added 3 bps to 2.84%.

Treasury yields rose and the U.S. dollar was nearly unchanged on the data as expectations of one more Fed rate hike this year rebound modestly from last week's decline in the wake of subdued inflation data. This may bring more scrutiny on tomorrow's release of the Central Bank's July policy meeting minutes. For a look at the meeting, see Schwab's Chief Investment Strategist Liz Ann Sonders' article, Fed Keeps it on the QT, on the Markets & Economy page at www.schwab.com and follow Liz Ann on Twitter: @lizannsonders.

Bond yields and the greenback are also recovering as the recently flared-up geopolitical concerns on heightened tensions between North Korea and the U.S. appear to be easing. Schwab's Liz Ann Sonders notes in her latest article, Ogre Battle: United States Takes on North Korea … Implications for Stocks the S&P 500 was hit with a sharp near-1.5% reversal last Thursday, followed by a relief rally. We don't believe significant military escalation is the likely outcome of the battle of wills between President Trump and North Korea’s Kim Jong Un. But it is a year ending in "7" and there are other forces at work which could keep stocks in a choppy pattern for the next couple of months. Read more on the Markets & Economy page at www.schwab.com and follow Liz Ann on Twitter: @lizannsonders.

Europe and Asia mostly higher as geopolitical concerns remain in retreat

European equities finished mostly to the upside, as risk appetites continued to recover after being stymied by last week's rise in tensions between North Korea and the U.S. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA points out in his article, What are fund flows telling us about trends and risks in the global stock market?, that the money coming into ETFs is flowing into a broad range of stock markets featuring a preference for international stocks and revealing a surprising disconnect with the performance and geopolitical risk of the underlying markets. Read more on the Markets & Economy page at www.schwab.com and follow Jeff on Twitter: @jeffreykleintop. The euro and British pound lost ground on the U.S. dollar, while bond yields in the region moved to the upside. Stocks came off the best levels of the day as the markets assessed the implications of the plethora of upbeat U.S. data on Fed monetary policy, while economic news in the region was lackluster. German Q2 GDP growth slowed quarter-over-quarter, while U.K. consumer price inflation came in cooler than forecasted. Volume was lighter than usual as markets in Italy were closed for a holiday.

Stocks in Asia finished mostly to the upside as global risk aversion continued to ease after last week's flare-up in geopolitical concerns as tensions between North Korea and the U.S. escalated pressured the global markets. Schwab's Jeffrey Kleintop, CFA, notes in his article, Missiles and Markets: An investor guide to geopolitical risks investors are best served when grim headlines are in the news by remembering that geopolitical risks are a regular part of investing and that a long history of geopolitical developments shows us that holding a well-diversified portfolio may buffer the short-term market moves that are most often the result. Investors should avoid overreacting to geopolitical developments and stick to their long-term financial plans. Read more on the International Investing page at www.schwab.com. Japanese equities jumped, as the yen gave back a recent rally, while Australian listings also gained ground. Stocks in mainland China advanced modestly following some stronger-than-expected July lending statistics, while those traded in Hong Kong declined amid a late-day slide led by oil companies and property-related issues. Volume was lighter than usual as markets in South Korea and India were closed for holidays.

Items on tomorrow's international docket include wage data from Australia, GDP from Italy and the Eurozone, and employment figures from the U.K.

Markets Mixed Amid Political Uncertainty

Charles Schwab: On the Market

Posted: 7/18/2017 4:15 PM ET

Markets Mixed Amid Political Uncertainty

The U.S. equity markets were mixed, as continued pressure on Treasury yields and a disappointing report from Goldman Sachs pressured financials, but a blowout quarter from Netflix gave consumer discretionary stocks a boost. Meanwhile, political uncertainty was elevated as the Senate's healthcare bill failed again and a read on home-builder sentiment disappointed. Crude oil, gold and the U.S. dollar were higher.

The Dow Jones Industrial Average (DJIA) fell 55 points (0.3%) to 21,575, the S&P 500 Index gained 2 points (0.1%) to 2,461, and the Nasdaq Composite increased 30 points (0.5%) to 6,344. In light to moderate volume, 694 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.38 to $46.40 per barrel and wholesale gasoline was $0.02 higher at $1.58 per gallon. Elsewhere, the Bloomberg gold spot price gained $7.80 to $1,241.91 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% higher at 94.67.

Dow member Goldman Sachs Group Inc. (GS $223) reported Q2 earnings-per-share (EPS) of $3.95, compared to the FactSet estimate of $3.38, as revenues dipped 1.0% year-over-year (y/y) to $7.9 billion, versus the projected $7.6 billion. GS topped estimates for most of its business units, but its fixed income currency and commodity unit's activity noticeably missed expectations. The company said a mixed operating environment persisted into Q2 as conditions continued to support underwriting and M&A, while also constraining certain market-making activity. Shares were lower.

Bank of America Corp. (BAC $24) posted Q2 profits of $0.46, above the projected $0.43, as revenues increased 7.0% y/y to $22.8 billion, versus the expected $21.9 billion. Trading revenues were slightly ahead of forecasts, while its net interest income and margin came in a bit shy of estimates. BAC lost ground.

Dow component Johnson & Johnson (JNJ $134) announced Q2 EPS of $1.40, or $1.83 ex-items, compared to projections of $1.79, with revenues rising 1.9% y/y to $18.8 billion, just below the $19.0 billion estimates. JNJ raised its full-year guidance, and shares were higher.

Dow member UnitedHealth Group Inc. (UNH $185) reported Q2 earnings of $2.32 per share, or $2.46 ex-items, versus the projected $2.38, as revenues grew 8.0% y/y to $50.1 billion, compared to the expected $50.0 billion. UNH raised its full-year EPS outlook, and shares were higher.

Netflix Inc. (NFLX $184) posted Q2 EPS of $0.15, one penny shy of estimates, as revenues increased 32.3% y/y to $2.8 billion, roughly in line with expectations. The company's net subscriber additions easily topped expectations. NFLX issued Q3 guidance that was well above estimates. Shares of NFLX rallied.

With Q2 earnings season ramping up and the stock markets at record highs, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers his latest article, Where's the Next Bubble?, and Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, provides analysis of the major market sectors in his latest Schwab Sector Views: Christmas in July! (Status of the Consumer) on the Markets & Economy page at www.schwab.com. Be sure to follow us and Jeff on Twitter: @schwabresearch and @jeffreykleintop.

Homebuilder sentiment falls

The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment this month dropped to 64 from June's downwardly revised level of 66, and below the Bloomberg forecast calling for a 67 reading. This was the lowest since November but remains well above the 50 mark, the point of separation for good versus poor conditions. The NAHB said its members are telling it they are growing increasingly concerned over rising material prices, particularly lumber.

Tomorrow, housing construction activity will be in focus, with the release of June housing starts and building permits (economic calendar). Starts are projected to snap a three-month streak of losses, rising 6.2% month-over-month (m/m) to an annual rate of 1,160,000 units, while permits are expected to increase 2.8% to an annual rate of 1,201,000 units, after posting back-to-back monthly declines. Weekly MBA Mortgage Applications will also be reported.

Schwab's Brad Sorensen, CFA, paints a pretty positive picture for the American consumer in his latest Schwab Sector Views, but adds that there are some concerning things that keep us from being overwhelmingly bullish on the consumer. Brad notes that while confidence remains high according to surveys, actions have been slower to come around as housing formations have only just started to tick higher, retail sales growth has been relatively tepid, and auto purchases have shown signs of rolling over. Read more on the Markets & Economy page at www.schwab.com.

The Import Price Index (chart) decreased 0.2% month-over-month (m/m) for June, matching the Bloomberg projection, and compared to May's upwardly revised 0.1% decrease. Compared to last year, prices were up by 1.5%, above forecasts calling for a 1.3% rise and following May's upwardly revised 2.3% increase.

Treasuries were higher, as the yield on the 2-year note dipped 1 basis point (bp) to 1.35%, while the yields on the 10-year note and the 30-year bond dropped 5 bps to 2.27% and 2.86%, respectively.

Bond yields and the U.S. dollar have slipped as of late following brief rebounds, pressured by continued subdued inflation data, exacerbated by Fed Chair Janet Yellen's dovish semi-annual monetary policy testimony last week. Schwab's Chief Fixed Income Strategist Kathy Jones notes in her Bond Market Mid-Year Outlook: Redefining the Borders of 'Lower for Longer' in the second half of 2017, we expect 10-year Treasury yields to remain in a 2% to 2.5% range, consistent with the eight-year "lower for longer" theme in the bond market. Read more on the Fixed Income page at www.schwab.com, where Kathy also discusses, Dollar Decline: Time to Shift to International Bonds? Maybe Not, on the Markets & Economy page. Follow Kathy on Twitter: @kathyjones.

The political front remains in focus as the highly scrutinized revised Senate healthcare bill appears to be getting scrapped again, and focus appears to be shifting to repealing Obamacare instead of replacing it. This adds credence to Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend's Washington Midyear Update: 4 Key Issues for Investors to Watch, where he points out dysfunction, drama and ethical issues in the White House have combined with Republican infighting on Capitol Hill to bog down the policy agenda. There's growing concern among congressional Republicans that the much-anticipated policy changes will need to be significantly scaled back—or that they may not happen at all. Read more on the Insights & Ideas page at www.schwab.com.

Europe sees pressure on political uncertainty and data, Asia mixed

European equities finished broadly lower, with another setback for the U.S. healthcare bill and the continued U.K. Brexit negotiations adding to political uncertainty. For analysis of the political front see Schwab's Jeffrey Kleintop's, CFA, and Vice President of Trading and Derivatives, Randy Frederick's video, Political Risk: How Should Investors Respond? on the Insights & Ideas page at www.schwab.com, where you can also find our article, Brexit Begins: What's Next for the U.K?. Follow Randy on Twitter: @randyafrederick. Technology issues led to the downside as the markets digested ramped up earnings season on both sides of the pond. In economic news, German investor confidence declined for a second-straight month, while U.K. inflation data came in mostly below forecasts. The British pound saw some pressure versus the U.S. dollar on the data. The euro rose versus the greenback, ahead of this week's monetary policy decision by the European Central Bank, while bond yields extended a recent slide to weigh on financials, along with a negative reaction to earnings reports from the sector out of the U.S. Basic materials came under pressure.

Stocks in Asia finished mixed to mostly lower, following flared-up U.S. political uncertainty, while the yen gained ground to pressure Japanese equities after returning to action following yesterday's holiday break. The markets are also eyeing this week's monetary policy decision by the Bank of Japan. Australian securities fell sharply amid a broad-based decline among sectors, while those traded in South Korea finished flat, holding at a record high. Stocks in India dropped, retreating from a record high. With these markets at or near all-time highs, Schwab's Jeffrey Kleintop, CFA, offers his article, The Long Period of Underperformance for Emerging Market Stocks May Finally Be Over on the International Investing page at www.schwab.com. However, stocks in mainland China and Hong Kong advanced, with property-related issues leading a late-day charge as an upbeat property price report joined a recent string of stronger-than-expected data, headlined by yesterday's Q2 GDP report. In the wake of the data, Schwab's Jeffrey Kleintop, CFA, offers his 2017 Mid-year Global Market Outlook: Broader Growth, Narrower Risks on the International Investing page at www.schwab.com.

Tomorrow's international economic calendar will be very light, with the lone report of note being PPI from South Korea.

Stocks Straddle Unchanged Mark

Charles Schwab: On the Market

Posted: 5/10/2017 4:15 PM ET

Stocks Straddle Unchanged Mark

U.S. stocks were mostly unchanged, though the Dow was decisively lower in earlier action amid some disappointing earnings results from Walt Disney Co. A jump in crude oil prices fueled by a larger-than-expected drop in oil inventories powered gains for energy listings, while investors also digested yesterday's firing of FBI Director James Comey. In economic news, import prices topped forecasts, weekly mortgage applications rose, Treasuries and gold were lower and the U.S. dollar was nearly unchanged.

The Dow Jones Industrial Average (DJIA) fell 33 points (0.2%) to 20,943, the S&P 500 Index ticked 3 points (0.1%) higher to 2,400, and the Nasdaq Composite rose 9 points (0.1%) to 6,129. In moderately-heavy volume, 821 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq. WTI crude oil jumped $1.45 to $47.33 per barrel and wholesale gasoline added $0.05 to $1.54 per gallon. Elsewhere, the Bloomberg gold spot price moved $1.64 lower to $1,219.59 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 99.61.

Dow member Walt Disney Co. (DIS $110) reported fiscal Q2 earnings-per-share (EPS) of $1.50, versus the $1.41 FactSet estimate, as revenues rose 3.0% year-over-year (y/y) to $13.3 billion, below the projected $13.4 billion. Earnings at its parks and resorts and studio entertainment segments rose solidly y/y, but its media networks unit's income decreased, as its cable networks profits declined and revenue missed forecasts, bogged down by higher programing costs and subscriber losses at ESPN. Shares were solidly lower.

Electronic Arts Inc. (EA $108) posted fiscal Q4 EPS of $1.81, compared to the projected $1.63, on adjusted revenues of $1.1 billion, roughly in line with estimates. EA issued full-year earnings guidance that topped expectations and announced a new $1.2 billion stock repurchase program. Shares rallied.

NVIDIA Corp. (NVDA $121) announced Q1 profits of $0.79 per share, or $0.85 ex-items, versus the expected $0.81, as revenues rose 48.0% y/y to $1.9 billion, but down 11.0% sequentially, roughly in line with forecasts. The graphic chipmaker issued Q2 revenue guidance that topped estimates. Shares finished nicely higher.

Priceline Group Inc. (PCLN $1,824) saw pressure after issuing Q2 earnings guidance that came in below forecasts, which accompanied a mixed Q1 profit report that showed bottomline results topped estimates but revenues were a tad shy of expectations.

Import prices rise more than expected, mortgage applications increase

The Import Price Index (chart) rose 0.5% month-over-month (m/m) for April, above the Bloomberg projection of a 0.1% gain, and compared to March's upwardly revised 0.1% increase. Compared to last year, prices were up by 4.1%, north of forecasts calling for a 3.6% rise, and following March's upwardly revised 4.3% increase.

The MBA Mortgage Application Index rose 2.4% last week, following the previous week's 0.1% dip. The increase came as a 3.3% gain for the Refinance Index was met with a 1.7% rise for the Purchase Index. The average 30-year mortgage rate remained at 4.23%.

Treasuries ticked lower, with the yields on the 2-year and 10-year notes increasing 1 basis point to 1.35% and 2.41%, respectively, while the 30-year bond rate was unchanged at 3.03%.

For analysis of the interest rate environment, see our article, Mixed Signals: What Does Recent Economic Data Mean for Bonds?, on the Insights & Ideas page at www.schwab.com, where you can also find our commentary, Cash: What to Consider in the New Rate Environment. Follow Schwab on Twitter: @schwabresearch.

Also, Schwab's Vice President of Trading and Derivatives, Randy Frederick and Chief Fixed Income Strategist, Kathy Jones offer the video, Fed Rate-Hike Cycle: How Can Bond Investors Prepare? on the Insights & Ideas page at www.schwab.com. Follow Randy and Kathy on Twitter: @randyafrederick and @kathyjones.

Schwab's Chief Investment Strategist Liz Ann Sonders offers a look at the recent subdued market action in her article, Strange Brew: Heightened Uncertainties, Yet Plunging Volatility…What Gives? on the Markets & Economy page at www.schwab.com and follow Liz Ann on Twitter: @lizannsonders. Liz Ann notes that volatility has been plumbing historical depths, but it may not be reflecting investor complacency, while the Fed's plans for its balance sheet, more than rate hikes, could bring on spikes in volatility.

Finally, with the political front remaining in focus on the heels of yesterday's ousting of FBI Director James Comey, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, discusses What the Coming Tax Cuts Mean for the Stock Market on the Markets & Economy page at www.schwab.com. Follow Jeff on Twitter: @jeffreykleintop. Moreover, see the video from Schwab's Randy Frederick and Vice President of Legislative and Regulatory Affairs, Michael T. Townsend titled, Washington Overview: Budget Deals, Tax Reform, and Trump's 100-Day Mark, on the Insights & Ideas page at www.schwab.com.

Tomorrow, the U.S. economic calendar will include the Producer Price Index (PPI) for April, expected to have increased 0.2% m/m after declining 0.1% in March, while excluding food and energy, the core rate is anticipated to have also increased by 0.2%. The docket will also deliver weekly initial jobless claims, forecasted to have increased to a level of 245,000 after registering 238,000 the week prior.

Europe and Asia mixed

European equities finished mixed, with oil & gas issues rebounding from recent weakness as crude oil prices recover, boosted by a much larger-than-expected drop in crude oil inventories reported in the U.S. Global political uncertainty, exacerbated by the firing of FBI Director Comey yesterday in the U.S., continued to fester, as the U.K. negotiates a Brexit ahead of a June election, while votes loom for Germany and Italy later this year. For analysis of the political uncertainty see Schwab's Jeffrey Kleintop's, CFA, and Randy Frederick's video, Political Risk: How Should Investors Respond? on the Insights & Ideas page at www.schwab.com, where you can also find our article, Brexit Begins: What's Next for the U.K?. French industrial and manufacturing production easily topped expectations for March, while the Bank of England is expected to deliver its monetary policy decision tomorrow. European Central Bank President Mario Draghi sounded a familiar upbeat economic tone in a speech today as he did last week when the central bank left its policy stance unchanged, while also noting that it is not the right time to discuss tapering its stimulus measures. The euro and British pound were little changed versus the U.S. dollar, while bond yields in the region came under pressure.

Stocks in Asia finished mixed as Chinese stocks diverged amid lingering economic concerns on the heels of softer-than-expected data and festering uneasiness regarding regulatory crackdowns, while global political uncertainty continued to constrain conviction. Shares trading in mainland China fell and those in Hong Kong rose in the wake of mixed reads on the nation's consumer and producer price inflation, with the former topping forecasts and the latter missing estimates for April. Japanese equities gained ground with the recent weakness in the yen helping the index add to gains as of late. Australian securities advanced amid the recovery in basic materials issues and as the financial sector rebounded despite recent mixed banking sector earnings results. Indian stocks rallied, bolstered by optimism following a forecast calling for a strong monsoon rainfall season. South Korean equities fell, returning to action following yesterday's break as the nation voted in Democratic Party of Korea Moon as its new President. For analysis of the global front amid the backdrop of trade and geopolitical uncertainty, see Schwab's Jeffrey Kleintop's, CFA, articles, Missiles and Markets: An investor guide to geopolitical risks on the Markets & Economy page at www.schwab.com, as well as, Top Five Trade Issues Investors Should Be Watching on the International Investing page at www.schwab.com.

In addition to the aforementioned decision from the Bank of England, the international economic docket for tomorrow will yield the current account, trade balance, bank lending and office vacancies from Japan, the unemployment rate from South Korea, the Wholesale Price Index from Germany and industrial production, manufacturing production, construction output and the trade balance from the U.K.

Stocks Finish Lower as Earnings Season Looms

Charles Schwab: On the Market

Posted: 4/12/2017 4:15 PM ET

Stocks Finish Lower as Earnings Season Looms

U.S. stocks closed lower as the holiday-shortened week continued to supply pressure amid persistent geopolitical concerns. Financials were among the worst performers on the heels of a slide in Treasury yields and ahead of tomorrow's unofficial kick off to 1Q earnings season. Crude oil prices trimmed some recent gains despite a bullish oil inventory report. Gold ticked higher and the U.S. dollar dropped sharply after President Trump commented that he thought the currency was getting "too strong." In equity news, Delta Air Lines topped the Street's profit forecasts, while BlackBerry received a boost after the conclusion of an arbitration proceeding with Qualcomm.

The Dow Jones Industrial Average (DJIA) declined 59 points (0.3%) to 20,592, the S&P 500 Index lost 9 points (0.4%) to 2,345, and the Nasdaq Composite declined 31 points (0.5%) to 5,836. In moderate volume, 761 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq. WTI crude oil shed $0.29 to $53.11 per barrel and wholesale gasoline was $0.02 lower at $1.74 per gallon. Elsewhere, the Bloomberg gold spot price was $6.90 higher at $1,281.76 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.5% lower at 100.16.

Delta Air Lines Inc. (DAL $45) reported 1Q earnings-per-share (EPS) of $0.82, or $0.77 ex-items, compared to the $0.75 FactSet estimate, as revenues declined 1.1% year-over-year (y/y) to $9.2 billion, roughly in line with forecasts. The company noted that it expects the entirety of its 2017 margin pressure to have occurred in 1Q from higher fuel prices. DAL added that it is on track to expand margins for the balance of the year, due to an improving revenue profile and further improvement as its cost growth moderates in the second half. Shares finished higher.

BlackBerry Ltd. (BBRY $9) jumped after receiving a binding interim arbitration award requiring Qualcomm Inc. (QCOM $53) to refund a sum of $814.9 million, plus interest and attorney's fees to the company, related to royalties for certain past sales of subscriber units. QCOM said it does not agree with the decision, which is binding and not appealable. The arbitration decision was limited to prepayment provisions unique to BlackBerry's license agreement with Qualcomm and has no impact on agreements with any other licensee. QCOM traded lower.

Tractor Supply Co. (TSCO $65) preannounced that it anticipates 1Q EPS to be below the Street's expectations, and its same-store sales to unexpectedly decline. The company cited decreases in comparable transaction count and average ticket, along with lower sales of seasonal merchandise and the impact of deflation. Shares fell.

Neurocrine Biosciences Inc. (NBIX $52) surged after announcing that it got approval from the U.S. Food and Drug Administration (FDA) of its treatment for movement disorder.

Import prices dip, mortgage applications rise

The Import Price Index (chart) declined 0.2% month-over-month (m/m) for March, matching the Bloomberg projection and compared to February's upwardly revised 0.4% gain. Compared to last year, prices were higher by 4.2%, above forecasts calling for a 4.0% rise, and following February's upwardly revised 4.8% increase.

The MBA Mortgage Application Index rose 1.5% last week, following the previous week's 1.6% decline. The increase came as a flat reading for the Refinance Index was met with a 2.9% gain for the Purchase Index. The average 30-year mortgage rate declined 6 basis points (bps) to 4.28%.

Treasuries were higher, with the yields on the 2-year note and the 30-year bond dipping 2 bps to 1.21% and 2.91%, respectively, while the yield on the 10-year note was 3 bps lower at 2.27%.

Bond yields have fallen as of late, amid the backdrop of heightened geopolitical uncertainty and concerns about "hard data" lagging "soft data," while the markets grapple with Fed rate hikes and the potential for sooner-than-expected normalization of its balance sheet.

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.

Finally, with the markets choppy after a strong rally since late-2016, 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 concludes that growth has accelerated globally; while nominal growth in the United States is under-appreciated and the recent consolidation in stocks is likely about sentiment having gotten a tad too frothy. Read more at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders.

The U.S. economic calendar for tomorrow will commence with the Producer Price Index (PPI), with economists expecting no change month-over-month (m/m) for March, while excluding food and energy, the core rate is anticipated to have moved 0.2% higher, and weekly initial jobless claims, forecasted to have increased by 9,000 to a level of 245,000. The docket will round out the day with the release of the preliminary University of Michigan Consumer Confidence Index, anticipated to have ticked lower to 96.5 in April, after rising to 96.9 for March's final read.

Europe and Asia mixed on earnings and geopolitics

European equities finished mixed, with auto stocks getting modest support from upbeat results from Mercedes-Benz maker Daimler AG (DDAIY $74), while tensions toward North Korea and last week's U.S. missile strike in Syria kept geopolitical concerns elevated and 1Q U.S. earnings season looms. Political uncertainty in the region remained as Brexit negotiations continue and a key French Presidential election draws near. For analysis of the European political front, see Schwab's Chief Global Investment Strategist 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. Follow Jeff on Twitter: @jeffreykleintop. 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. In economic news, U.K. employment change rose by a smaller-than-expected amount, the euro and the British pound ticked higher versus the U.S. dollar and bond yields in the region finished mixed.

Stocks in Asia finished mixed with risk aversion boosting the yen as geopolitical tensions ramp up toward North Korea and in the wake of last week's missile strikes by the U.S. in Syria. For a look at the global landscape, see Schwab's Jeffrey Kleintop's, CFA, article, Top Five Trade Issues Investors Should Be Watching at www.schwab.com/oninternational. The yen's rally weighed on Japanese stocks, with additional pressure likely extended by a softer-than-expected read on the nation's machine orders, a gauge of capital spending, for February. Indian equities continued to pullback from a recent record run amid the geopolitical uneasiness and ahead of reports after the closing bell that showed industrial production surprisingly fell and consumer price inflation was slightly cooler than expected. Mainland Chinese shares declined after data showing consumer price inflation rose at a smaller pace than anticipated and producer price inflation decelerated by a smaller rate than projected. Stocks trading in Hong Kong staged a late-day rally to finish higher, South Korean listings rose and Australian securities ticked higher.

The international economic docket will include consumer inflation expectations and employment data from Australia, house price data from the U.K. and CPI from Germany, France and Italy.

Stocks Able to Avoid 4-day Losing Streak

Charles Schwab: On the Market

Posted: 3/9/2017 4:15 PM ET

Stocks Able to Avoid 4-day Losing Streak

After a brief dip into negative territory, the U.S. equity markets were able to notch slim gains and avoid a fourth-straight session of losses, as investors await tomorrow's jobs report, and as political uncertainty on both sides of the pond persisted. Meanwhile, Treasury yields inched higher, following a rise in jobless claims, but crude oil, gold and the U.S. dollar lost ground.

The Dow Jones Industrial Average (DJIA) ticked 2 points higher to 20,858, the S&P 500 Index gained 2 points (0.1%) to 2,365, and the Nasdaq Composite added a shade over a point to 5,839. In moderate volume, 881 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil fell $1.00 lower to $49.28 per barrel and wholesale gasoline lost $0.03 to $1.62 per gallon. Elsewhere, the Bloomberg gold spot price declined $6.67 to $1,201.64 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% lower at 101.89.

Staples Inc. (SPLS $8) reported a 4Q loss of $0.94 per share, or earnings-per-share (EPS) of $0.25 ex-items, versus the FactSet estimate calling for a profit of $0.26, as revenues declined 2.9% year-over-year (y/y) to $4.6 billion, below the projected $5.0 billion. 4Q same-store sales decreased 0.9% y/y, compared to the estimated 2.6% drop. SPLS issued 1Q EPS guidance that bracketed analysts' expectations. Shares were lower.

American International Group Inc. (AIG $63) announced that its President and Chief Executive Officer (CEO) Peter Hancock has notified the Board of his intention to resign. He will remain as CEO until a successor has been named, which the Board will conduct a comprehensive search for. AIG gave up an early advance and finished lower.

Shares of Tailored Brands Inc. (TLRD $16) tumbled over 30% after posting a 4Q net loss of $0.62 per share, or $0.19 ex-items, missing the projected shortfall of $0.12 per share, as revenues decreased 3.9% y/y to $793 million, south of the forecasted $811 million. 4Q same-store sales at Men's Wearhouse and K&G declined, while sales at Jos. A. Bank dropped sharply. The company said the challenging retail environment resulted in soft traffic, which drove lower-than-forecasted 4Q net sales and gross margins. TLRD issued current year EPS guidance that missed estimates.

Jobless claims jump ahead of February labor report

Weekly initial jobless claims (chart) jumped by 20,000 to 243,000 last week, above the Bloomberg forecast of 238,000, with the prior week’s figure being unrevised at 223,000. The four-week moving average rose by 2,250 to 236,500, while continuing claims declined by 6,000 to 2,058,000, south of estimates of 2,062,000.

The larger-than-expected rise in jobless claims doesn’t appear to be causing too much concern, given that they hit a 44-year low in the prior week, per Bloomberg, and as data has shown the labor market remains solid. This sets the stage for tomorrow's key February nonfarm payroll report, expected to show an increase of 200,000 jobs and a rise of 210,000 jobs to private sector payrolls (economic calendar). The unemployment rate is forecasted to dip to 4.7% from 4.8%, and average hourly earnings are projected to rise 0.3% month-over-month (m/m). The report likely will have little impact on Fed rate hike expectations for next week that have surged to almost a certainty, but the data, notably the wage growth figure, could cause some volatility as the markets grapple with what it means for the frequency of rate hikes for the rest of the year.

As noted in the latest Schwab Market Perspective: "Phenomenal" Expectations, the bar is now set higher for policy action to support the rhetoric, setting up the possibility for a market pullback and/or a pickup in volatility. The economic picture continues to look good, but inflation is heating up, which has put a March rate hike by the Federal Reserve firmly on the table. An earnings growth recovery has helped fuel a global rally, but there are risks that expectations and valuations have gotten a bit extended. Read more at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch.

The Import Price Index (chart) increased 0.2% m/m for February, compared to projections of a 0.1% increase and January's upwardly revised 0.6% gain. Compared to last year, prices were higher by 4.6%, above forecasts calling for a 4.4% jump, and following January's upwardly revised 3.8% increase.

Treasuries were lower, as the yield on the 2-year note ticked 1 basis point (bp) higher to 1.36%, while the yields on the 10-year note and the 30-year bond increased 3 bps to 2.59% and 3.18%, respectively.

Stocks avoided posting a fourth-straight session of losses that has pulled them back from record highs, while Treasury yields regained some upward momentum, amid festering global political uncertainty and boosted expectations of a Fed rate hike next week. Amid this backdrop, see our article, End of an Era: Why Volatility May Return to the Stock Market and video from Schwab’s Chief Investment Strategist Liz Ann Sonders and Vice President of Trading and Derivatives, Randy Frederick titled, Stock Rally Continues, but Is It Time for Markets to Take a Breather?, at www.schwab.com/insights. Follow Liz Ann and Randy on Twitter: @lizannsonders and @randyafrederick.

For analysis of the Fed and President Trump's highly-anticipated reflationary policies, see Schwab's Chief Fixed Income Strategist, Kathy Jones' article, What would a shake-up at the Fed mean for bond investors? at www.schwab.com/onbonds, and Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, Presidential Reset: What Does Trump's Speech Mean for His Agenda?, at www.schwab.com/insights. Follow Kathy on Twitter: @kathyjones.

Europe turns higher after ECB's Draghi offers upbeat tone, Asia mixed on China data

European equities overcame early losses and finished mostly higher, despite oil & gas issues falling as crude oil prices extended yesterday's drop that ensued after some bearish oil inventory reports. The markets digested the expected unchanged monetary policy decision from the European Central Bank (ECB). Stocks got a boost from ECB President Mario Draghi's relatively upbeat tone about the economy, noting that the cyclical recovery may be gaining momentum, though he reiterated the need to continue its stimulus measures as underlying inflation pressures remain subdued. Political uncertainty continued to linger, as the key French Presidential election continues to nudge closer as discussed by Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, and Randy Frederick in the video, Why Should the French Presidential Election Be Important to Investors? at www.schwab.com/insights. Also, be sure to check out Jeff's articles, Five Reasons to Stay Invested Despite Heightened Uncertainty and The future of Europe: EU 2.0 and its impact on the markets at www.schwab.com/oninternational. Follow Jeff and Randy on Twitter: @jeffreykleintop and @randyafrederick. In other economic news, Spanish house transactions jumped in January, French business sentiment unexpectedly rose last month, and Irish 4Q GDP growth easily topped forecasts. The euro gained ground and the British pound dipped versus the U.S. dollar, while bond yields in the region turned to the upside to boost the financial sector.

Stocks in Asia finished mixed as traders digested some mixed February Chinese inflation data and crude oil's drop yesterday, while appearing to tread cautiously ahead of today's monetary policy decision from the European Central Bank and tomorrow's key U.S. labor report. Moreover, political uncertainty lingered and the markets continued to brace for the impact of a potential rate hike in the U.S. next week, which expectations of have jumped. Mainland Chinese stocks and those listed in Hong Kong dropped, following reports that showed the nation's consumer price index rose by a much smaller rate than expected, but producer price inflation accelerated more than anticipated. After the closing bell, China reported that its new yuan loans topped forecasts, while its aggregate financing—a gauge of total credit issued—was below estimates and its money supply figures were mixed for last month. Australian equities declined, bogged down by weakness in oil & gas and basic materials issues, while South Korea's markets also lost ground.

However, stocks in Japan bucked the trend, finishing higher, aided by some weakness in the yen, while Indian securities ticked higher, led by strength in auto stocks though gains were held in check as the markets awaited exit polls from five state elections, per Bloomberg. For insight on global investing, 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.