Stocks Continue Recent Record Run

Charles Schwab: On the Market

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

Stocks Continue Recent Record Run

 

Adding to recent record highs, U.S. stocks showed resiliency amid lingering geopolitical and monetary policy uncertainty, buoyed by upbeat reads on domestic business spending and jobless claims, while the trade balance narrowed more than expected. Tomorrow, the key nonfarm payroll report for September will be in focus. Treasury yields, crude oil prices and the U.S. dollar were higher and gold experienced a minor decline. In equity news, Constellation Brands topped Q2 earnings expectations, Bloomberg reported that Amazon is testing its own delivery service and Netflix announced it will raise prices for its popular services.

The Dow Jones Industrial Average (DJIA) increased 114 points (0.5%) to 22,775, the S&P 500 Index advanced 14 points (0.6%) to 2,552, and the Nasdaq Composite rallied 51 points (0.8%) to 6,585. In moderate volume, 746 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil increased $0.81 to $50.79 per barrel and wholesale gasoline was $0.03 higher at $1.61 per gallon. Elsewhere, the Bloomberg gold spot price dipped $6.37 to $1,268.48 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.5% higher at 93.96.

Constellation Brands Inc. (STZ $209) reported fiscal Q2 earnings-per-share (EPS) of $2.48, or $2.47 ex-items, versus the $2.17 FactSet estimate, as revenues rose 3.1% year-over-year (y/y) to $2.1 billion, roughly in line with expectations. The company's beer shipments rose solidly y/y, while its wine and spirits shipments declined. STZ raised its full-year EPS outlook. Shares traded nicely higher.

United Parcel Service Inc. (UPS $118) saw pressure and FedEx Corp. (FDX $222) dipped in early action before finishing flat, on a Bloomberg report that Amazon.com Inc. (AMZN $981) is testing its own delivery service to rival these companies, according to people familiar with the matter. AMZN and FDX did not comment on the report. A spokesman from UPS told Bloomberg that Amazon is a valued customer and it supports all its customers with industry-leading e-commerce solutions and expect to expand these relationships further in the future.

Netflix Inc. (NFLX $194) rallied after announcing that it will raise prices for its most popular service by 10% as it adds more exclusive TV shows and movies.

Jobless claims decline, trade balance shrinks, factory orders rise

Weekly initial jobless claims (chart) decreased by 12,000 to 260,000 last week, below the Bloomberg forecast of a decline to 265,000, with the prior week’s figure being unrevised at 272,000. The four-week moving average fell by 9,500 to 268,250, while continuing claims rose 2,000 to 1,938,000, south of estimates of 1,950,000.

The trade balance (chart) showed that the deficit came in at $42.4 billion in August, compared to estimates of $42.7 billion. July's deficit was downwardly revised to $43.6 billion. Exports gained 0.4% month-over-month (m/m) to $195.3 billion, while imports dipped by 0.1% to $237.7 billion.

Factory orders (chart) rose 1.2% m/m in August, above expectations of a 1.0% gain, while July's figure was unrevised at a 3.3% drop. Stripping out the volatile transportation component, orders advanced 0.4% and July's 0.5% rise was unrevised. August durable goods orders—preliminarily reported last week—were positively revised to a 2.0% increase versus forecasts of an unadjusted 1.7% rise. Also, nondefense capital goods orders excluding aircraft, a gauge of business spending, were revised higher to a 1.1% gain from the initially-reported 0.9% increase, posting the second-straight monthly gain of over 1.0%.

Treasuries were lower, with the yields on the 2-year and 10-year notes, as well as the 30-year bond rising 2 basis points (bps) to 1.49%, 2.35% and 2.89%, respectively.

Treasury yields and the U.S. dollar have rebounded noticeably in the past month, with the 10-year rate off of levels not seen since November 2016 and the greenback from multi-year lows. Expectations have jumped that the Fed will announce another rate hike in December as signs of an uptick in inflation joined a positive global economic background, while the Central Bank is set begin to shrink its behemoth balance sheet this month. Also, the recently released tax reform framework appeared to foster some fiscal policy optimism but faces a long road that began with today's House approval of its budget resolution.

However, the stock markets continue to grind out record highs and amid this backdrop, 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. Also, Schwab's Chief Investment Strategist Liz Ann Sonders offers her article on the stock market resiliency in the face of a plethora of things to worry about titled, Comfortably Numb? An Update on Investor Sentiment. Read these articles and other timely commentary from our Schwab experts on the Market Commentary page at www.schwab.com. Follow Schwab and Liz Ann on Twitter: @schwabresearch and @lizannsonders.

This bring us to tomorrow's September nonfarm payroll report, expected to show jobs grew by 80,000, after August's 156,000 gain, while private sector job growth is projected at 72,000 on the heels of the prior month's 165,000 increase (economic calendar). The unemployment rate is expected to remain at 4.4%. The noticeable decline in job growth figures to below the 176,000 monthly average thus far this year is likely to be discounted by the expected impact of last month's hurricanes. However, the wage component of the release is likely to remain a key focus giving the uncertain inflation backdrop. Average hourly earnings are expected to rise 0.3% m/m, after August's 0.1% increase, and remain at a 2.5% y/y growth rate.

Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, analyzes the relationship between inflation and unemployment in his article, Inflation May Be The Biggest Question For Investors In 2018, on the Market Commentary page at www.schwab.com. Jeff notes that global labor markets may now be at a point where wages may finally rise more rapidly and if central banks move too aggressively in anticipation of a tightening global labor market reviving inflation, the impact of their actions on financial conditions could undermine the bull market in stocks. Follow Jeff on Twitter: @jeffreykleintop.

Wholesale inventories and consumer credit are other reports due out tomorrow.
Europe mostly higher, Asia little changed

European equity markets finished mostly to the upside, shrugging off a plethora of remaining uncertainties, with Spanish stocks rebounding noticeably after a bout of volatility as Catalonia's fight for independence fostered political uncertainty after its weekend secession vote was deemed illegal. Also, the euro and British pound lost ground on the U.S. dollar to help the markets, with the U.S. dollar extending a rebound on some upbeat economic data. Bond yields in the region finished mixed. In economic news, growth in German retail and construction sectors decelerated, while U.K. new car registrations fell. The minutes from the European Central Bank's (ECB) monetary policy meeting last month showed the central bank sees any reassessment of the monetary policy stance as needing to proceed in a very gradual and cautious manner, while maintaining sufficient flexibility.

U.K. Brexit and political uncertainty continued to linger, exacerbated by yesterday's mishaps at a speech by Prime Minister Theresa May. For analysis of political and Brexit uncertainties, see Schwab's Jeffrey Kleintop's, CFA, and Vice President of Trading and Derivatives, Randy Frederick's video, Political Risk: How Should Investors Respond?, and our article,Political Risk: How Should Investors Respond?, and our article, Brexit Begins: What's Next for the U.K?, on the Insights & Ideas page at www.schwab.com. Follow Randy on Twitter: @randyafrederick. Uncertainty regarding who will be the Fed Chief in the U.S. festers in the wake of the ECB and Bank of England signaling last month moves to tighten monetary policy. As such, Schwab's Jeffrey Kleintop, CFA, offers analysis in his article, How the Shift by Central Banks May Affect the Stock Market, on the Market Commentary page at www.schwab.com.

Stocks in Asia finished near the unchanged mark but tilted to the downside despite another round of record highs in the U.S., with Japanese stocks pausing at levels not seen in more than two years, while Indian shares snapped a four-session winning streak and Australian markets were hamstrung after an unexpected drop in August retail sales. However, volume remained lighter than usual, with markets in mainland China, Hong Kong and South Korea all closed for holidays. 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 Insights & Ideas page at www.schwab.com.

Tomorrow, the international economic docket will include labor cash earnings and the Leading Index from Japan, factory orders from Germany and house prices and unit labor costs from the U.K.

Markets Hardy In Face of Persistent Anxiety

Charles Schwab: On the Market

Posted: 9/6/2017 4:15 PM ET

Markets Hardy In Face of Persistent Anxiety

U.S. equities were higher, remaining durable in the face of continued uncertainty surrounding monetary policy, political and geopolitical issues, as well as the approaching Category 5 Hurricane Irma off the Florida coast following in the aftermath of Hurricane Harvey battering the Texas coast last week. Treasury yields and the U.S. dollar were higher after yesterday's drops, while crude oil prices were mixed and gold was lower.

The Dow Jones Industrial Average (DJIA) rose 54 points (0.3%) to 21,808, the S&P 500 Index gained 8 points (0.3%) to 2,466, and the Nasdaq Composite increased 18 points (0.3%) to 6,393. In moderate volume, 813 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.50 to $49.16 per barrel and wholesale gasoline lost $0.03 to $1.67 per gallon. Elsewhere, the Bloomberg gold spot price was $6.20 lower at $1,333.29 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—inched 0.1% higher to 92.29.

Hewlett Packard Enterprise Co. (HPE $14) reported fiscal Q3 earnings-per-share (EPS) of $0.15, or $0.31 ex-items, versus the $0.26 FactSet estimate, as revenues rose 3.0% year-over-year (y/y) to $8.2 billion, topping the forecasted $7.5 billion. HPE issued Q4 EPS guidance that was slightly below expectations, while its full-year profit outlook was mostly in line with estimates. Shares were lower.

Dave & Buster's Entertainment Inc. (PLAY $51) posted Q2 profits of $0.71 per share, or $0.59 ex-items, versus the $0.55 expectation, as revenues increased 14.9% y/y to $281 million, compared to the forecasted $282 million. Q2 same-store sales grew 1.1% y/y, compared to the 2.6% gain that was anticipated. PLAY raised its full-year net income outlook slightly, but it had a midpoint the missed forecasts, while it lowered its same-store sales forecast. Shares fell.

Sarepta Therapeutics Inc. (SRPT $47) jumped after announcing upbeat results from a trial of its treatment for Duchenne Muscular Dystrophy.

United Continental Holdings Inc. (UAL $60) came under pressure after the airline lowered its Q3 outlook, citing some impact from Hurricane Harvey, geopolitical tensions in the Korean Peninsula, pricing issues and higher fuel costs.

Services sector reports miss but show growth accelerated in August

The August Institute for Supply Management (ISM) non-Manufacturing Index (chart) rose to 55.3 from July's unrevised 53.9 level, and compared to the Bloomberg forecast of a gain to 55.6. A reading above 50 denotes expansion. New orders grew 2.0 points month-over-month (m/m) to 57.1, business activity rose 1.6 points to 57.5, and employment gained 2.6 points to 56.2. Prices increased 2.2 points to 57.9. The ISM said the majority of respondents are optimistic about business conditions going forward.

The final Markit U.S. Services PMI Index was revised to 56.0 in August from the preliminary 56.9 level, where it was expected to remain, and up from July's level of 54.7. The release is independent and differs from ISM's report, as it has less historic value and Markit weights its index components differently.

The outlook for the services sector—the largest contributor to U.S. economic growth—appears positive with consumer starting to see wages move higher as one of the strongest areas of the economy continues to be the labor market as discussed in the latest Schwab Market Perspective: A Preview of Coming Attractions?. The limited risk of an economic recession keeps us in the bull market camp, notwithstanding near-term risks of fiscal and monetary uncertainties. Read more on the Markets & Economy page at www.schwab.com.

The trade balance (chart) showed that the deficit came in at $43.7 billion in July, compared to estimates of $44.7 billion. June's deficit was downwardly revised to $43.5 billion. Exports dipped 0.3% month-over-month (m/m) to $194.4 billion, while imports nudged lower by 0.2% to $238.1 billion.

The MBA Mortgage Application Index rose 3.3% last week, following the previous week's 2.3% drop. The increase came as a 5.1% rise in the Refinance Index was met with a 1.4% gain for the Purchase Index. The average 30-year mortgage rate declined 5 basis points (bps) to 4.06%.

In afternoon action, the Federal Reserve released its Beige Book, a summary of business activity across the nation used as a tool to prepare for this month's two-day monetary policy meeting ending on the 20th. The report indicated that the economy continued on a "modest to moderate" pace, with little in the way of inflation. Meanwhile, job growth slowed somewhat in some districts, and labor conditions continued to be characterized as "tight." Some items of note, however, were that some districts expressed concerns over a prolonged slowdown in the auto industry, particularly in Cleveland and Chicago, and the Atlanta and Dallas Fed banks reported wide-ranging disruptions in economic activity along the Gulf Coast as a result of Hurricane Harvey.

Treasuries finished lower, as the yield on the 2-year note ticked 1 bp higher to 1.31%, while the yields on the 10-year note and the 30-year bond rose 4 bps to 2.10% and 2.72%, respectively. Bond yields and the U.S. dollar fell yesterday, courtesy of some dovish commentary from Fed members and a return of risk aversion as North Korean tensions flared back up. The 10-year bond yield hit the lowest level since last November and the greenback fell back to levels not seen in over two years. Global monetary policy uncertainty remains a source of volatility ahead of tomorrow's decision by the European Central Bank (ECB) and as the Bank of Canada today unexpectedly raised rates.

Schwab's Chief Fixed Income Strategist Kathy Jones notes in her article, What's the Bigger Risk: Bond Market Bubble or Complacency?, we think bond yields are likely to rise from current levels as the economy continues to improve and the Federal Reserve tightens policy, but we don’t see a bubble in the market. Read more on the Fixed Income page at www.schwab.com, and for analysis of investing styles, see Schwab's Chief Investment Strategist Liz Ann Sonders' latest article, Radioactive II: Could the Tide Finally Be Turning for Active vs. Passive?, on the Markets & Economy page. Follow Kathy and Liz Ann on Twitter: @kathyjones and @lizannsonders.

For our latest analysis of the political front, see Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend's newest article, Congress Returns to Face Debt Ceiling, Government Shutdown Deadlines, on the Insights & Ideas page at www.schwab.com.

Tomorrow's economic calendar will be fairly light and include weekly initial jobless claims, forecasted to rise to a level of 241,000 from the prior week's 236,000, as well as final Q2 productivity and labor costs, with productivity expected to be upwardly revised to a 1.3% increase and labor costs to have been adjusted lower to a 0.6% rise.

Europe mixed as skittish mood lingers, Asia mixed

European equity markets finished mixed, with sentiment continuing to be a bit hamstrung by heightened North Korean tensions and U.S. political uneasiness, while monetary policy uncertainty festered ahead of tomorrow's decision from the ECB. The euro and British pound ticked higher versus the U.S. dollar, while bond yields in the region rebounded. German factory orders for July surprisingly dropped. Automakers led to the upside as the recently improved optimism toward the sector was bolstered by some upbeat analyst recommendations. However, insurance companies remained hamstrung in the aftermath of Hurricane Harvey in the U.S. and as another potential damaging Category 5 Hurricane Irma made landfall in the Caribbean. For a look at global stock investing, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, latest article, U.S. vs international: what do earnings tell us about what may be ahead?, on the Markets & Economy page at www.schwab.com, and his video with Vice President of Trading and Derivatives, Randy Frederick, Is An Optimistic Outlook for Global Equities Warranted?, on the Insights & Ideas page. Follow Jeff and Randy on Twitter: @jeffreykleintop and @randyafrederick.

Stocks in Asia finished mostly lower on the heels of yesterday's drop in the U.S., as sentiment remained skittish in the face of exacerbated tensions toward North Korea, along with global monetary policy and U.S. political uncertainties. Schwab's Jeffrey Kleintop, CFA, notes in his article, Missiles and Markets: An investor guide to geopolitical risks 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 dipped, with the yen holding onto recent gains despite a report that showed the nation's wages unexpectedly declined in July. Markets in South Korea, India, Hong Kong, and Australia all declined, with the latter posting a Q2 GDP report which showed growth was smaller than expected. Stocks in mainland China finished flat.

In addition to the European Central Bank's monetary policy decision, tomorrow's international economic calendar will offer retail sales from Australia, Japan's Leading Index, industrial production from Germany, and GDP from the Eurozone.

Stocks Flat as Oil Touches Five-Month Low

Charles Schwab: On the Market

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

Stocks Flat as Oil Touches Five-Month Low

U.S. stocks finished mostly flat with energy issues leading the decliners as crude oil prices fell to a five month low, while Facebook, Tesla and Viacom were under pressure following earnings reports. Health care stocks finished higher as the House of Representatives passed the GOP health bill aimed at repealing and replacing the Affordable Care Act. Treasury yields were higher and the U.S. dollar was lower amid some mixed economic data and ahead of tomorrow's key labor report. Gold traded lower.

The Dow Jones Industrial Average (DJIA) declined 6 points to 20,951, the S&P 500 Index added 1 point (0.1%) to 2,390, and the Nasdaq Composite ticked 3 points higher to 6,075. In heavy volume, 1.0 billion shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq. WTI crude oil dropped $2.30 to $45.52 per barrel and wholesale gasoline fell $0.05 to $1.48 per gallon. Elsewhere, the Bloomberg gold spot price lost $9.61 to $1,228.56 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.5% lower at 98.74.

Facebook Inc. (FB $151) reported Q1 earnings-per-share (EPS) of $1.04, or $1.30 ex-items, versus the $1.12 FactSet estimate, as revenues grew 49.0% year-over-year (y/y) to $8.0 billion, above the projected $7.8 billion. The social network's monthly and daily active users modestly topped expectations. However, shares were under pressure as the company warned about slowing ad revenue growth for the year.

Tesla Inc. (TSLA $295) posted a Q1 loss of $2.04 per share, or a loss of $1.33 per share ex-items, compared to the shortfall of $0.82 that was projected, as revenues rose 18.0% quarter-over-quarter (q/q) to $2.7 billion, above the forecasted $2.6 billion. TSLA maintained its first-half outlook for vehicle deliveries and said its Model 3 is on track for initial production in July. Shares were solidly lower.

Kraft Heinz Co. (KHC $90) announced Q1 EPS of $0.73, or $0.84 ex-items, versus the forecasted $0.86, as revenues declined 3.1% y/y to $6.4 billion, compared to the expected $6.5 billion. The company noted a slow start to the year, with lower y/y consumption in North America being offset by significant gains from cost savings. Shares traded higher.

Viacom Inc. (VIA $38) reported fiscal Q2 earnings of $0.30 per share, or $0.79 ex-items, versus the projected $0.59, as revenues rose 8.0% y/y to $3.3 billion, versus the forecasted $3.0 billion. Shares moved noticeably to the downside as the company reported a drop in ad revenue at its TV network unit, exacerbating industry uneasiness regarding "cord-cutting" cable subscribers.

Oracle Corp. (ORCL $45) advanced after announcing a strategic agreement with AT&T Inc. (T $38), which will move thousands of its large scale internal databases to Oracle's Cloud Infrastructure as a Service (IaaS) and Platform as a Service (PaaS). T lost ground. 

Trade deficit dips, productivity and jobless claims drop

The trade balance (chart) showed that the deficit came in at $43.7 billion in March, compared to the Bloomberg estimate of $44.5 billion. February's deficit was revised higher to $43.8 billion. Exports dipped 0.9% month-over-month (m/m) to $191.0 billion, while imports declined 0.7% to $234.7 billion.

Preliminary Q1 nonfarm productivity (chart) fell 0.6% on an annualized basis, versus expectations of a 0.1% dip, following the upwardly revised 1.8% increase seen in Q4. Also, unit labor costs increased 3.0%, versus the forecast calling for a 2.7% gain. Unit labor costs were revised lower to a rise of 1.3% in Q4.

Weekly initial jobless claims (chart) fell by 19,000 to 238,000 last week, below forecasts of 248,000, with the prior week’s figure unrevised at 257,000. The four-week moving average rose by 750 to 243,000, while continuing claims dropped by 23,000 to 1,964,000, south of estimates of 1,990,000.

Factory orders (chart) rose 0.2% m/m in March, below the expected 0.4% gain and February's upwardly revised 1.2% increase. March durable goods orders—preliminarily reported last week—were adjusted higher to a 0.9% increase, from a 0.7% gain, and versus expectations of no revision. Orders of nondefense capital goods excluding aircraft—a proxy for business spending—were adjusted higher to a 0.5% increase.

Tomorrow, the economic calendar will culminate with the release of the April nonfarm payroll report, projected to show employment grew by 190,000 jobs, rebounding from the prior month's disappointing 98,000 gain. Private sector payrolls are forecasted to increase by 188,000 jobs, following March's 89,000 rise. The unemployment rate is expected to tick higher to 4.6% from 4.5% and average hourly earnings are anticipated to rise 0.3% m/m and be 2.7% higher y/y. Average hourly earnings could post a fifth-straight monthly gain and the figure is likely to garner scrutiny, given its impact on the consumer, which drives the majority of economic growth, and amid the backdrop of recent soft readings on inflation.

As noted in the latest Schwab Market Perspective: Should Sharp Sentiment Shifts Mean a Change in Strategy?, we don't believe that trend growth is as low as the 0.7% real gross domestic product (GDP) print posted for this year's first quarter, but neither do we believe the economy has accelerated markedly. We continue to believe the bull market will continue due to decent economic growth and a good profits picture, but there will likely be sentiment-driven dips and surges to come. Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, notes in his latest Schwab Sector Views: Is Retail Really Dead?, the American consumer remains relatively healthy in our view, with increasing wages, low unemployment and high confidence. Read more on the Markets & Economy page at www.schwab.com and follow Schwab on Twitter: @schwabresearch.

Treasuries traded lower, with the yield on the 2-year note rising 1 basis point (bp) to 1.31%, while the yields on the 10-year note and the 30-year bond advanced 3 bps to 2.35% and 2.99%, respectively. Bond yields finished mixed yesterday after the widely expected unchanged monetary policy stance from the Federal Open Market Committee (FOMC), which noted that "the slowing in growth during the first quarter is likely to be transitory," and that "near-term risks to the economic outlook appear roughly balanced." In their unanimous decision, the Committee provided little direction of any change to its current outlook for future rate increases, which beforehand showed that members have penciled-in two additional rate hikes this year.

For analysis of the bond markets, see Schwab's Chief Fixed Income Strategist, Kathy Jones' article, Three Reasons to Own Bonds When the Fed is Raising Interest Rates on the Markets & Economy page at www.schwab.com. Follow Kathy on Twitter: @kathyjones. Schwab's Vice President of Trading and Derivatives, Randy Frederick and Senior Fixed Income Research Analyst, Collin Martin, CFA, offer the video What's Driving the Ongoing Drop in Long-Term Bond Yields? on the Insights & Ideas page at www.schwab.com, where you can also find our latest article, Mixed Signals: What Does Recent Economic Data Mean for Bonds?. Follow Randy on Twitter: @randyafrederick.

The U.S. political front continues to command attention, and 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, Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend and Randy Frederick offer the article, Trump's First 100 Days: Key Observations, on the Insights & Ideas page at www.schwab.com.

Also, consumer credit will be released tomorrow afternoon to round out the economic docket for the week. Economists are forecasting that consumer borrowing expanded by $14.0 billion in March after increasing by $15.2 billion in February.

Europe higher on data, Asia mixed following Fed decision

European equities finished higher, with financials rising following some solid earnings results. The markets digested the unchanged monetary policy stance in the U.S. yesterday. Moreover, French political concerns remained subdued following yesterday's Presidential debate, after which polls suggested mainstream candidate Emmanuel Macron is poised to defeat anti-EU Marine Le Pen in the final vote this weekend. Meanwhile, U.K. Brexit negotiations continued as the nation heads for a June vote, while a German election looms. For analysis of the political uncertainty on both sides of the pond, 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?, while Director of International Research, Michelle Gibley CFA, offers her article, Europe Votes: Could More Countries Reject the EU? on the International Investing page at www.schwab.com. Eurozone and U.K. business activity showed growth accelerated in April, and eurozone retail sales rose slightly more than expected. The euro and British pound moved higher versus the U.S. dollar and bond yields in the region traded mixed.

Stocks in Asia finished mixed on the heels of the highly-expected unchanged monetary policy decision in the U.S., while basic materials continued to slide. Geopolitical and political uncertainty lingered, while volume continued to be lighter than usual as markets in Japan remained closed for a holiday. Australian securities declined, with weakness in financials continuing following recent earnings reports in the banking sector, while the drop in basic materials also weighed on the markets. Chinese shares decreased amid lingering economic concerns in the wake of soft manufacturing and services sector reports as of late, along with festering regulatory crackdown concerns. However, stocks in India rose on strength in the financial sector following reports of new rules for the banking sector, while South Korean equities also gained ground after returning to action following yesterday's holiday break. For analysis of the global landscape, see Schwab's Jeffrey Kleintop's, CFA, article, Missiles and Markets: An investor guide to geopolitical risks on the Markets & Economy page at www.schwab.com, as well as his article, Top Five Trade Issues Investors Should Be Watching on the International Investing page at www.schwab.com.

Tomorrow the international economic calendar will be light, offering construction data from Australia and retail PMI reads from Germany, France, Italy and the Eurozone. Meanwhile, in central bank action, the Reserve Bank of Australia will release its monetary policy statement.

Caution Still Hampering Markets

Charles Schwab: On the Market

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

Caution Still Hampering Markets

The U.S. equity markets finished with only slight gains in choppy trading, with industrials doing the heavy-lifting for the Dow following comments from President Trump on infrastructure overhaul. Meanwhile, a rebound in crude oil prices gave energy issues a boost, but caution and renewed trade anxiety ahead of the US/China talks later this week kept sentiment in check, while late-day news of Fed member Jeffrey Lacker's immediate departure after disclosing improper disclosure of confidential information had little effect. Treasury yields and gold gained modest ground, while the U.S. dollar was little changed.

The Dow Jones Industrial Average (DJIA) rose 39 points (0.2%) to 20,689, the S&P 500 Index inched 1 point (0.1%) higher to 2,360, and the Nasdaq Composite added 4 points (0.1%) to 5,899. In moderate volume, 801 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.79 to $51.03 per barrel and wholesale gasoline gained $0.03 to $1.72 per gallon. Elsewhere, the Bloomberg gold spot price increased $2.65 to $1,256.15 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 100.55.

Urban Outfitters Inc. (URBN $22) reported that thus far during the first quarter, same-store retail segment net sales are mid-single-digit negative, wider than the FactSet estimate of a 1.2% decline. Shares were solidly lower. 

Shares of Staples Inc. (SPLS $10) jumped following a report from the Wall Street Journal that the company is exploring a possible sale and is in early talks with buyout firms. SPLS did not commented on the report.

Acuity Brands Inc. (AYI $174) reported fiscal 2Q earnings-per-share (EPS) of $1.53, or $1.77 ex-items, compared to the FactSet estimate of $1.83, as revenues rose 3.5% year-over-year (y/y) to $805 million, below the projected $828 million. The company noted that the growth rate of lighting solutions in the North American market in the first half of its fiscal year was lower than anticipated. Shares finished solidly lower.

Factory orders match forecasts, trade deficit narrows more than expected

Factory orders (chart) rose 1.0% month-over-month (m/m) in February, matching the Bloomberg expectation, while January's figure was upwardly revised to a 1.5% gain. February durable goods orders—preliminarily reported two weeks ago—were adjusted slightly higher to a 1.8% increase, from the preliminary reading of a 1.7% gain, and versus expectations of no revision. Orders of nondefense capital goods excluding aircraft—a proxy for business spending—were unrevised at a 0.1% dip.

The trade balance (chart) showed that the deficit came in at $43.6 billion in February, compared to the Bloomberg estimate of $44.6 billion. January's deficit was revised lower to $48.2 billion. Exports ticked 0.2% higher m/m to $192.8 billion, while imports fell 1.8% to $236.4 billion.

Treasuries were lower, as the yield on the 2-year note rose 2 basis points (bps) to 1.25%, the yield on the 10-year note gained 3 bps to 2.35%, and the 30-year bond rate advanced 4 bps to 2.99%.

Bond yields and the U.S. dollar have been diverging, with the former dropping to pressure financials, which have led the last two sessions of losses for the stock markets, while the latter has rebounded from a multi-month low set in late-March. The markets continue to grapple with upbeat economic data, exacerbated political uncertainty here and abroad, and the Fed's March rate hike and outlook for future increases. Amid this backdrop, see Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, latest Schwab Sector Views: Financials—Opportunity or End of the Run?, at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch. Also, check out our videos by Schwab's Vice President of Trading and Derivatives, Randy Frederick and Senior Fixed Income Research Analyst, Collin Martin, CFA, titled, Fed Hiked Interest Rates, So Why Are Bond Yields Still So Low?, and Randy's and Schwab's Chief Fixed Income Strategist, Kathy Jones' discussion, Three Fed Hikes Seen in 2017: How Should Bond Investors Respond, at www.schwab.com/insights. Follow Randy and Kathy on Twitter: @randyafrederick and @kathyjones.

This sets the stage for tomorrow's economic calendar, which will bring MBA mortgage applications and ADP's employment change report, projected to show job growth of 190,000 for March ahead of Friday's key nonfarm payroll report. However, data that will likely garner the most attention is two key reads on March services sector activity in the form of the ISM non-Manufacturing Index and Markit's Services PMI Index. ISM's report is expected to show a slight deceleration to 57.0 from February's 57.6 level and Markit's index is projected to show a revised figure of 53.1 from 52.9, and down from the prior month's 53.8 level. Readings above 50 for both indexes denote expansion. Moreover, the minutes from the Fed's March monetary policy meeting are poised to foster a reaction given the uncertainty and recent moves in the stock, bond and currency markets.

As noted in the latest Schwab Market Perspective: Working off the Froth, the modest downward pressure on stocks recently appears to be working off some overly optimistic sentiment. We view this as a healthy pause in an ongoing bull market. Investors are facing the realization that "soft" data—such as confidence readings and business surveys—doesn't necessarily translate immediately into "hard" data—like retail sales, capital expenditures, and industrial production. It's this hard data that translates into economic growth and increasing profitability. Looking at some of the parabolic moves in recent confidence surveys, it would be difficult for hard data to keep up. Historically, wide spreads between soft and hard data tend to narrow in both directions—soft data tends to retreat, but hard data tends to play some catchup. We expect that pattern in this cycle, too. Read more about this in Schwab’s Chief Investment Strategist Liz Ann Sonders' latest article, Hard Times: Time for the Hard Data to Catch Up to the Soft Data, as well as the rest of our perspective at www.schwab.com/marketinsight. Follow Liz Ann on Twitter: @lizannsonders.

Europe shows resiliency supported by energy, Asia lower in light action

European equities finished mostly higher, showing some late-session resiliency as financials paused from some recent weakness, while oil & gas led to the upside as crude oil prices rebounded. Stocks appeared to shrug off continued festering political uncertainty on both sides of the pond , with the U.S. and China set to meet later this week and skepticism lingering regarding U.S. President Trump's business-friendly agenda. Also, Brexit negotiations remained in focus and France heads toward a key Presidential election later this month. 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, Director of International Research, Michelle Gibley CFA, offers her article, Europe Votes: Could More Countries Reject the EU? at www.schwab.com/oninternational. A stronger-than-expected read on eurozone retail sales may have had a limited positive impact on the markets, along with weakness in the euro and British pound versus the U.S. dollar. Bond yields in the region finished mostly lower.

Stocks in Asia finished lower amid heightened political uncertainty in the U.S. and Europe being met with a flare-up in concerns toward North Korea and the looming meeting between the U.S. and China later this week. For commentary on global trade and China, check out Schwab's Jeffrey Kleintop's, CFA, articles, Top Five Trade Issues Investors Should Be Watching, and The Fed has China in a Tough Spot . Also, the yen showed some strength, U.S. auto sales figures came in softer than expected yesterday, and the Reserve Bank of Australia (RBA) held its monetary policy stance unchanged but appeared to be slightly more dovish, noting concerns about the labor market. Volume was lighter than usual with markets in China and India closed for holidays. Stocks in Japan fell, pressured by the yen's strength, while financials contributed to a decline for Australia's markets. South Korean equities also traded to the downside. Emerging markets have enjoyed strong returns in 2017, led by Indian stocks, which have rebounded sharply after a brief post U.S. election slide. For more on emerging markets read Schwab's Michelle Gibley's, CFA, article, Emerging Markets: Why They Deserve a Place in Your Portfolio. Read all these commentaries at www.schwab.com/oninternational.

Service sector PMI reads will dominate tomorrow's international economic calendar, while the Reserve Bank of India will meet to discuss monetary policy, with economists expecting no change to its stance.

Stocks Settle Lower amid Heightened Rate Hike Expectations

Charles Schwab: On the Market

Posted: 3/7/2017 4:15 PM ET

Stocks Settle Lower amid Heightened Rate Hike Expectations

U.S. stocks continued to pull back from last week's record highs as the global markets grapple with heightened expectations the Fed may raise rates after next week's meeting. Treasuries and gold were lower, while crude oil prices were little changed and the U.S. dollar ticked higher. In economic news, the trade balance matched forecasts, while consumer credit was well shy of expectations. In M&A action, Hewlett Packard Enterprise agreed to acquire Nimble Storage.

The Dow Jones Industrial Average (DJIA) lost 30 points (0.1%) to 20,925, the S&P 500 Index declined 7 points (0.3%) to 2,368, and the Nasdaq Composite decreased 15 points (0.3%) to 5,834. In moderate volume, 793 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil ticked $0.06 lower to $53.14 per barrel and wholesale gasoline added $0.01 to $1.68 per gallon. Elsewhere, the Bloomberg gold spot price ticked $9.49 lower to $1,215.80 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% higher at 101.78.

Hewlett Packard Enterprise Co. (HPE $23) announced an agreement to acquire flash storage solutions provider Nimble Storage Inc. (NMBL $13) for $12.50 per share in cash, or about $1.0 billion. HPE dipped and NMBL rallied sharply. For more on the tech sector, see Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, latest Schwab Sector Views: Can the Tech Rally Continue? at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch.

Dick's Sporting Goods Inc. (DKS $48) reported 4Q earnings-per-share (EPS) of $0.81, or $1.32 ex-items, versus the $1.29 FactSet estimate, as revenues increased 10.9% year-over-year (y/y) to $2.5 billion, roughly in line with expectations. 4Q same-store sales rose 5.0% y/y, above the projected 4.5% increase. DKS issued 1Q and full-year EPS and same-store sales guidance that came in below the Street's forecasts. Shares saw heavy pressure.

Thor Industries Inc. (THO $104) fell sharply after the recreational vehicle maker posted fiscal 2Q gross margin that decelerated for the second-straight quarter and missed the Street's expectations. The disappointing margin figure appeared to overshadow its better-than-expected EPS and revenue results.

Trade deficit widens as expected

The trade balance (chart) showed that the deficit came in at $48.5 billion in January, matching the Bloomberg estimate. December's deficit was unrevised at $44.3 billion. Exports rose 0.6% month-over-month (m/m) to $192.1 billion, while imports gained 2.3% to $240.6 billion.

Consumer credit, released in the final hour of trading, showed consumer borrowing advanced by $8.8 billion during January, well shy of the $17.3 billion forecast of economists polled by Bloomberg, while December's figure was adjusted slightly higher to an increase of $14.8 billion from the originally reported $14.2 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, climbed by $12.6 billion, while revolving debt, which includes credit cards, fell by $3.8 billion.

Treasuries were lower, with the yield on the 2-year note ticking 2 basis points (bps) higher to 1.33%, while the yields on the 10-year note and the 30-year bond increased 1 bp to 2.51% and 3.11%, respectively.

The markets remain focused on the timing and details of President Donald Trump's policy plans, while expectations of a Fed rate hike next week have jumped in the wake of continued solid economic data. Amid this backdrop, see our latest article, End of an Era: Why Volatility May Return to the Stock Market at www.schwab.com/insights.

As noted in the latest Schwab Market Perspective: "Phenomenal" Expectations, higher inflation and stronger economic data—and perhaps the stock market's rip higher—have led to more "hawkish" commentary from the Fed recently. March Fed hike expectations have risen considerably, now well over 80. History compiled by Strategas Research Partners shows that the best stock market performance during a rate hiking cycle comes when the Fed moves slowly in the first year, but quicker in the second year. That pattern appears to be panning out in this cycle. Read more at www.schwab.com/marketinsight.

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.

Tomorrow, the U.S. economic calendar will offer the ADP Employment Change Report, with private sector payrolls forecasted to rise by 189,000 jobs in February, as well as final 4Q nonfarm productivity and unit labor costs, with productivity anticipated to have increased 1.5% on an annualized basis and costs forecasted to have risen 1.6%. Additional releases expected tomorrow include wholesale inventories, with economists expecting a 0.1% month-over-mon (m/m) decrease in January, matching that registered in December, and the weekly MBA Mortgage Applications report.

Europe and Asia mixed on Fed, data and politics

European equities finished mixed, with the global markets grappling with elevated U.S. Fed rate hike expectations, along with some disappointing German manufacturing data. Also, political uncertainty continued to fester as the markets await U.S. President Donald Trump's reflationary policy plans, while gearing up for an upcoming key French Presidential election as discussed by Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, and Vice President of Trading and Derivatives, 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. Germany reported a 7.4% m/m drop in factory orders for January, after rising 5.2% in December and compared to the projected 2.5% decline. In other economic news, eurozone 4Q GDP was unrevised at a 0.4% quarter-over-quarter rate and a 1.7% y/y pace of growth, both matching expectations. The euro dipped and the British pound saw modest pressure versus the U.S. dollar, while bond yields in the region finished mixed. 

Stocks in Asia finished mixed as the markets grapple with the boosted expectations of a rate hike in the U.S. next week, along with exacerbated political uncertainty ahead of a key election in France and amid anticipation of U.S. President Trump's policy plans. Also, geopolitical concerns have ticked higher on news that North Korea fired ballistic missiles off its east coast over the weekend. Japanese equities declined, with the yen choppy, while Australian securities gained ground on the heels of the unchanged monetary policy decision by the Reserve Bank of Australia. Chinese stocks advanced and those trading in Hong Kong rose with banking stocks leading the way and as traders continue to focus on the ongoing government's annual legislative meeting.

South Korean equities advanced despite the North Korean news, though Indian listings declined. For more 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.

The international economic docket for tomorrow will include a plethora of releases from Japan as the island nation reports its trade data, 4Q GDP, bank lending figures and Leading Index. Releases from across the pond will include industrial production from Germany and trade data from France.

On the Market Posted: 2/7/2017 4:15 PM ET Investors Remain Unsure With a host of diverging earnings and economic data, as well as persistent political uncertainty on both sides of the pond in the mix, investors appeared skittish in today's action, with U.S. stocks finishing the day only modestly higher and near the flatline. Meanwhile, Treasuries finished modestly higher, crude oil prices fell, pressuring the energy sector, hawkish commentary from Fed voting member Harker helped the U.S. dollar rebound, and gold was lower. The Dow Jones Industrial Average (DJIA) increased 37 points (0.2%) to 20,090, the S&P 500 Index was a half-point higher at 2,293, and the Nasdaq Composite gained 11 points (0.2%) to 5,674. In moderate volume, 821 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil fell $0.84 to $52.17 per barrel and wholesale gasoline lost $0.02 to $1.49 per gallon. Elsewhere, the Bloomberg gold spot price lost $2.55 to $1,232.98 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% higher at 100.27 General Motors Co. (GM $35) reported 4Q earnings-per-share (EPS) ex-items of $1.28, above the FactSet estimate of $1.17, with automotive revenues rising 9.2% year-over-year (y/y) to $41.2 billion, versus the projected $40.3 billion. GM affirmed its 2017 EPS guidance that was well above expectations. Shares were lower despite the results, which were preliminarily reported in January and included y/y margin deterioration in its key North American segment, along with in China, appearing to cause some concern among analysts. Also, the political uneasiness in the U.S. and Europe may be fostering some uncertainty. Michael Kors Holdings Ltd. (KORS $37) posted fiscal 3Q profits of $1.64 per share, one penny above estimates, with revenues decreasing 3.2% y/y to $1.4 billion, roughly in line with expectations. 3Q same-store sales fell 6.9% y/y, versus the projected 4.1% drop. KORS issued 4Q and full-year guidance that severely missed the Street's forecasts. Shares fell sharply. Gap Inc. (GPS $23) raised its full-year EPS outlook after reporting stronger-than-expected 4Q revenues of $4.4 billion and providing a forecast for 4Q earnings that exceeded estimates. GPS traded to the downside as the report was accompanied by a smaller-than-expected rise in January same-store sales. Trade deficit shrinks more than expected The trade balance (chart) showed that the deficit came in at $44.3 billion in December, compared to the Bloomberg estimate of $45.0 billion. November's deficit was revised to $45.7 billion from the $45.2 billion posted earlier. Exports rose 2.7% month-over-month (m/m) to $190.7 billion, while imports gained 1.5% to $235.0 billion. The Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, dipped to a level of 5.50 million jobs available to be filled in December, from November's downwardly revised 5.51 million level, and below forecasts of 5.58 million. The hiring rate remained at November's 3.6% and the separation rate dipped to 3.4% from 3.5%. Consumer credit, released in the final hour of trading, showed consumer borrowing advanced by $14.2 billion during December, the smallest increase since 2013, compared to the $20.0 billion forecast of economists polled by Bloomberg, while November's figure was adjusted upward to an increase of $25.2 billion from the originally reported $24.5 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, climbed by $11.8 billion, while revolving debt, which includes credit cards, rose by $2.4 billion. Treasuries finished mostly higher, as the yield on the 2-year note was flat at 1.15%, while the yields on the 10-year note and the 30-year bond declined 3 basis points to 2.38% and 3.02%, respectively. For a look at the bond markets, see Schwab's Director of Income Planning, Rob Williams', CFP, and Senior Research Analyst, Cooper Howard's, CFA, latest article, , Short-Term Bonds: Why They Could Outperform As Interest Rates Rise, at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch. Treasury yields have moderated as of late but continue to hold onto their post-election jumps, the U.S. Dollar Index recently pulled back to more than a two-month low, and the stock markets are back near record highs after a recent pullback. U.S. political risk has ramped up with the global markets skittish toward President Donald Trump's global trade and immigration policies and the lack of details on his plans for infrastructure spending and tax cuts, while global economic data has been on the positive side and last week's Fed decision fostered a relatively dovish takeaway from the markets. For a look at these market drivers, see Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, 5 Themes to Watch as the Trump Era Begins, at www.schwab.com/insights. Also, Schwab’s Chief Investment Strategist Liz Ann Sonders offers analysis of the Fed's monetary policy decision in her latest article, Fed Leaves Rates Unchanged, while noting in Rise Up: Dow 20k Fails to Thrill Individual Investors, that individual sentiment has become less bullish, while other measures show highly elevated optimism. She adds that extremely low volatility isn't likely to persist, but the bull market is. Read more at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders. Also, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers his latest article, Simple Indicators In A Complex World, noting that while markets may exhibit increasing volatility, we believe the bull market remains intact supported by tangible and effective indicators of global growth. For more useful indicators see Jeff's article, Five Reasons to Stay Invested Despite Heightened Uncertainty. Read these articles at www.schwab.com/oninternational, and follow Jeff on Twitter: @jeffreykleintop. Europe turns mixed late in the session European equities finished mixed, with solid gains in basic materials, technology and healthcare issues being met with drops in oil & gas and financial stocks following some disappointing earnings reports. The euro came under pressure versus the U.S. dollar, but the British pound reversed sharply to the upside. The pound's wild ride came as Bank of England (BoE) member Kristin Forbes said if the U.K. economy continues on its current trajectory, accelerating inflation may push her to vote for a rate hike, per Bloomberg. The markets showed some resiliency for most of the session in the face of some disappointing economic data, as well as festering political uneasiness on both sides of the pond. For analysis of the U.S. and European political fronts, see Schwab's Jeffrey Kleintop's, CFA, article, President Trump and Global Trade: How Will Campaign Promises Play Out? and Director of International Research, Michelle Gibley's, CFA, article, Europe Votes: Could More Countries Reject the EU? at www.schwab.com/oninternational. German industrial production unexpectedly fell in December and U.K. housing prices surprisingly declined last month. Bond yields in the region finished mostly lower. For global market investing analysis, see Schwab's Jeffrey Kleintop's, CFA, articles, The CURE for a calm Market: Four risks for 2017, and 5 Reasons International Stocks May Underperform In 2017. Read these articles at www.schwab.com/oninternational. Stocks in Asia finished mostly lower following yesterday's declines in the U.S. and Europe as political uneasiness in both regions continued to foster global market uneasiness. Japanese securities declined, with the yen holding onto yesterday's rally amid increased risk aversion. Weakness in energy issues amid crude oil's decline, and lingering liquidity concerns hamstrung stocks in China and Hong Kong, while Australian equities ticked slightly higher, led by strength in industrials and basic materials issues, and as the Reserve Bank of Australia kept its monetary policy unchanged as expected. Stocks in South Korea and India traded to the downside. For our analysis of the global markets, see Schwab's Director of International Research, Michelle Gibley's, CFA, articles, Currency Hedging: 5 Things You Need to Know and Emerging Markets: Why They Deserve a Place in Your Portfolio at www.schwab.com/oninternational, and be sure to check out our release, Why Your Portfolio Needs International Stocks—Despite 2017 Risks at www.schwab.com/insights. Tomorrow's international economic calendar will be light, with reports slated for release to include Japan's trade balance and industrial production from Spain. Also on tap, the Reserve Bank of India will meet, with economists forecasting a 25 bp reduction to its benchmark interest rate.

On the Market

Posted: 2/7/2017 4:15 PM ET

On the Market

Posted: 2/7/2017 4:15 PM ET

Investors Remain Unsure

With a host of diverging earnings and economic data, as well as persistent political uncertainty on both sides of the pond in the mix, investors appeared skittish in today's action, with U.S. stocks finishing the day only modestly higher and near the flatline. Meanwhile, Treasuries finished modestly higher, crude oil prices fell, pressuring the energy sector, hawkish commentary from Fed voting member Harker helped the U.S. dollar rebound, and gold was lower.

The Dow Jones Industrial Average (DJIA) increased 37 points (0.2%) to 20,090, the S&P 500 Index was a half-point higher at 2,293, and the Nasdaq Composite gained 11 points (0.2%) to 5,674. In moderate volume, 821 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil fell $0.84 to $52.17 per barrel and wholesale gasoline lost $0.02 to $1.49 per gallon. Elsewhere, the Bloomberg gold spot price lost $2.55 to $1,232.98 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% higher at 100.27

General Motors Co. (GM $35) reported 4Q earnings-per-share (EPS) ex-items of $1.28, above the FactSet estimate of $1.17, with automotive revenues rising 9.2% year-over-year (y/y) to $41.2 billion, versus the projected $40.3 billion. GM affirmed its 2017 EPS guidance that was well above expectations. Shares were lower despite the results, which were preliminarily reported in January and included y/y margin deterioration in its key North American segment, along with in China, appearing to cause some concern among analysts. Also, the political uneasiness in the U.S. and Europe may be fostering some uncertainty.

Michael Kors Holdings Ltd. (KORS $37) posted fiscal 3Q profits of $1.64 per share, one penny above estimates, with revenues decreasing 3.2% y/y to $1.4 billion, roughly in line with expectations. 3Q same-store sales fell 6.9% y/y, versus the projected 4.1% drop. KORS issued 4Q and full-year guidance that severely missed the Street's forecasts. Shares fell sharply.

Gap Inc. (GPS $23) raised its full-year EPS outlook after reporting stronger-than-expected 4Q revenues of $4.4 billion and providing a forecast for 4Q earnings that exceeded estimates. GPS traded to the downside as the report was accompanied by a smaller-than-expected rise in January same-store sales. 

Trade deficit shrinks more than expected

The trade balance (chart) showed that the deficit came in at $44.3 billion in December, compared to the Bloomberg estimate of $45.0 billion. November's deficit was revised to $45.7 billion from the $45.2 billion posted earlier. Exports rose 2.7% month-over-month (m/m) to $190.7 billion, while imports gained 1.5% to $235.0 billion.

The Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, dipped to a level of 5.50 million jobs available to be filled in December, from November's downwardly revised 5.51 million level, and below forecasts of 5.58 million. The hiring rate remained at November's 3.6% and the separation rate dipped to 3.4% from 3.5%.

Consumer credit, released in the final hour of trading, showed consumer borrowing advanced by $14.2 billion during December, the smallest increase since 2013, compared to the $20.0 billion forecast of economists polled by Bloomberg, while November's figure was adjusted upward to an increase of $25.2 billion from the originally reported $24.5 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, climbed by $11.8 billion, while revolving debt, which includes credit cards, rose by $2.4 billion.

Treasuries finished mostly higher, as the yield on the 2-year note was flat at 1.15%, while the yields on the 10-year note and the 30-year bond declined 3 basis points to 2.38% and 3.02%, respectively. For a look at the bond markets, see Schwab's Director of Income Planning, Rob Williams', CFP, and Senior Research Analyst, Cooper Howard's, CFA, latest article, , Short-Term Bonds: Why They Could Outperform As Interest Rates Rise, at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch.

Treasury yields have moderated as of late but continue to hold onto their post-election jumps, the U.S. Dollar Index recently pulled back to more than a two-month low, and the stock markets are back near record highs after a recent pullback. U.S. political risk has ramped up with the global markets skittish toward President Donald Trump's global trade and immigration policies and the lack of details on his plans for infrastructure spending and tax cuts, while global economic data has been on the positive side and last week's Fed decision fostered a relatively dovish takeaway from the markets.

For a look at these market drivers, see Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, 5 Themes to Watch as the Trump Era Begins, at www.schwab.com/insights. Also, Schwab’s Chief Investment Strategist Liz Ann Sonders offers analysis of the Fed's monetary policy decision in her latest article, Fed Leaves Rates Unchanged, while noting in Rise Up: Dow 20k Fails to Thrill Individual Investors, that individual sentiment has become less bullish, while other measures show highly elevated optimism. She adds that extremely low volatility isn't likely to persist, but the bull market is. Read more at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders.

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

Europe turns mixed late in the session

European equities finished mixed, with solid gains in basic materials, technology and healthcare issues being met with drops in oil & gas and financial stocks following some disappointing earnings reports. The euro came under pressure versus the U.S. dollar, but the British pound reversed sharply to the upside. The pound's wild ride came as Bank of England (BoE) member Kristin Forbes said if the U.K. economy continues on its current trajectory, accelerating inflation may push her to vote for a rate hike, per Bloomberg. The markets showed some resiliency for most of the session in the face of some disappointing economic data, as well as festering political uneasiness on both sides of the pond. For analysis of the U.S. and European political fronts, see Schwab's Jeffrey Kleintop's, CFA, article, President Trump and Global Trade: How Will Campaign Promises Play Out? and Director of International Research, Michelle Gibley's, CFA, article, Europe Votes: Could More Countries Reject the EU? at www.schwab.com/oninternational. German industrial production unexpectedly fell in December and U.K. housing prices surprisingly declined last month. Bond yields in the region finished mostly lower.

For global market investing analysis, see Schwab's Jeffrey Kleintop's, CFA, articles, The CURE for a calm Market: Four risks for 2017, and 5 Reasons International Stocks May Underperform In 2017. Read these articles at www.schwab.com/oninternational.

Stocks in Asia finished mostly lower following yesterday's declines in the U.S. and Europe as political uneasiness in both regions continued to foster global market uneasiness. Japanese securities declined, with the yen holding onto yesterday's rally amid increased risk aversion. Weakness in energy issues amid crude oil's decline, and lingering liquidity concerns hamstrung stocks in China and Hong Kong, while Australian equities ticked slightly higher, led by strength in industrials and basic materials issues, and as the Reserve Bank of Australia kept its monetary policy unchanged as expected. Stocks in South Korea and India traded to the downside. For our analysis of the global markets, see Schwab's Director of International Research, Michelle Gibley's, CFA, articles, Currency Hedging: 5 Things You Need to Know and Emerging Markets: Why They Deserve a Place in Your Portfolio at www.schwab.com/oninternational, and be sure to check out our release, Why Your Portfolio Needs International Stocks—Despite 2017 Risks at www.schwab.com/insights.

Tomorrow's international economic calendar will be light, with reports slated for release to include Japan's trade balance and industrial production from Spain. Also on tap, the Reserve Bank of India will meet, with economists forecasting a 25 bp reduction to its benchmark interest rate.
With a host of diverging earnings and economic data, as well as persistent political uncertainty on both sides of the pond in the mix, investors appeared skittish in today's action, with U.S. stocks finishing the day only modestly higher and near the flatline. Meanwhile, Treasuries finished modestly higher, crude oil prices fell, pressuring the energy sector, hawkish commentary from Fed voting member Harker helped the U.S. dollar rebound, and gold was lower.

The Dow Jones Industrial Average (DJIA) increased 37 points (0.2%) to 20,090, the S&P 500 Index was a half-point higher at 2,293, and the Nasdaq Composite gained 11 points (0.2%) to 5,674. In moderate volume, 821 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil fell $0.84 to $52.17 per barrel and wholesale gasoline lost $0.02 to $1.49 per gallon. Elsewhere, the Bloomberg gold spot price lost $2.55 to $1,232.98 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% higher at 100.27

General Motors Co. (GM $35) reported 4Q earnings-per-share (EPS) ex-items of $1.28, above the FactSet estimate of $1.17, with automotive revenues rising 9.2% year-over-year (y/y) to $41.2 billion, versus the projected $40.3 billion. GM affirmed its 2017 EPS guidance that was well above expectations. Shares were lower despite the results, which were preliminarily reported in January and included y/y margin deterioration in its key North American segment, along with in China, appearing to cause some concern among analysts. Also, the political uneasiness in the U.S. and Europe may be fostering some uncertainty.

Michael Kors Holdings Ltd. (KORS $37) posted fiscal 3Q profits of $1.64 per share, one penny above estimates, with revenues decreasing 3.2% y/y to $1.4 billion, roughly in line with expectations. 3Q same-store sales fell 6.9% y/y, versus the projected 4.1% drop. KORS issued 4Q and full-year guidance that severely missed the Street's forecasts. Shares fell sharply.

Gap Inc. (GPS $23) raised its full-year EPS outlook after reporting stronger-than-expected 4Q revenues of $4.4 billion and providing a forecast for 4Q earnings that exceeded estimates. GPS traded to the downside as the report was accompanied by a smaller-than-expected rise in January same-store sales. 

Trade deficit shrinks more than expected

The trade balance (chart) showed that the deficit came in at $44.3 billion in December, compared to the Bloomberg estimate of $45.0 billion. November's deficit was revised to $45.7 billion from the $45.2 billion posted earlier. Exports rose 2.7% month-over-month (m/m) to $190.7 billion, while imports gained 1.5% to $235.0 billion.

The Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, dipped to a level of 5.50 million jobs available to be filled in December, from November's downwardly revised 5.51 million level, and below forecasts of 5.58 million. The hiring rate remained at November's 3.6% and the separation rate dipped to 3.4% from 3.5%.

Consumer credit, released in the final hour of trading, showed consumer borrowing advanced by $14.2 billion during December, the smallest increase since 2013, compared to the $20.0 billion forecast of economists polled by Bloomberg, while November's figure was adjusted upward to an increase of $25.2 billion from the originally reported $24.5 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, climbed by $11.8 billion, while revolving debt, which includes credit cards, rose by $2.4 billion.

Treasuries finished mostly higher, as the yield on the 2-year note was flat at 1.15%, while the yields on the 10-year note and the 30-year bond declined 3 basis points to 2.38% and 3.02%, respectively. For a look at the bond markets, see Schwab's Director of Income Planning, Rob Williams', CFP, and Senior Research Analyst, Cooper Howard's, CFA, latest article, , Short-Term Bonds: Why They Could Outperform As Interest Rates Rise, at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch.

Treasury yields have moderated as of late but continue to hold onto their post-election jumps, the U.S. Dollar Index recently pulled back to more than a two-month low, and the stock markets are back near record highs after a recent pullback. U.S. political risk has ramped up with the global markets skittish toward President Donald Trump's global trade and immigration policies and the lack of details on his plans for infrastructure spending and tax cuts, while global economic data has been on the positive side and last week's Fed decision fostered a relatively dovish takeaway from the markets.

For a look at these market drivers, see Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, 5 Themes to Watch as the Trump Era Begins, at www.schwab.com/insights. Also, Schwab’s Chief Investment Strategist Liz Ann Sonders offers analysis of the Fed's monetary policy decision in her latest article, Fed Leaves Rates Unchanged, while noting in Rise Up: Dow 20k Fails to Thrill Individual Investors, that individual sentiment has become less bullish, while other measures show highly elevated optimism. She adds that extremely low volatility isn't likely to persist, but the bull market is. Read more at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders.

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

Europe turns mixed late in the session

European equities finished mixed, with solid gains in basic materials, technology and healthcare issues being met with drops in oil & gas and financial stocks following some disappointing earnings reports. The euro came under pressure versus the U.S. dollar, but the British pound reversed sharply to the upside. The pound's wild ride came as Bank of England (BoE) member Kristin Forbes said if the U.K. economy continues on its current trajectory, accelerating inflation may push her to vote for a rate hike, per Bloomberg. The markets showed some resiliency for most of the session in the face of some disappointing economic data, as well as festering political uneasiness on both sides of the pond. For analysis of the U.S. and European political fronts, see Schwab's Jeffrey Kleintop's, CFA, article, President Trump and Global Trade: How Will Campaign Promises Play Out? and Director of International Research, Michelle Gibley's, CFA, article, Europe Votes: Could More Countries Reject the EU? at www.schwab.com/oninternational. German industrial production unexpectedly fell in December and U.K. housing prices surprisingly declined last month. Bond yields in the region finished mostly lower.

For global market investing analysis, see Schwab's Jeffrey Kleintop's, CFA, articles, The CURE for a calm Market: Four risks for 2017, and 5 Reasons International Stocks May Underperform In 2017. Read these articles at www.schwab.com/oninternational.

Stocks in Asia finished mostly lower following yesterday's declines in the U.S. and Europe as political uneasiness in both regions continued to foster global market uneasiness. Japanese securities declined, with the yen holding onto yesterday's rally amid increased risk aversion. Weakness in energy issues amid crude oil's decline, and lingering liquidity concerns hamstrung stocks in China and Hong Kong, while Australian equities ticked slightly higher, led by strength in industrials and basic materials issues, and as the Reserve Bank of Australia kept its monetary policy unchanged as expected. Stocks in South Korea and India traded to the downside. For our analysis of the global markets, see Schwab's Director of International Research, Michelle Gibley's, CFA, articles, Currency Hedging: 5 Things You Need to Know and Emerging Markets: Why They Deserve a Place in Your Portfolio at www.schwab.com/oninternational, and be sure to check out our release, Why Your Portfolio Needs International Stocks—Despite 2017 Risks at www.schwab.com/insights.

Tomorrow's international economic calendar will be light, with reports slated for release to include Japan's trade balance and industrial production from Spain. Also on tap, the Reserve Bank of India will meet, with economists forecasting a 25 bp reduction to its benchmark interest rate.

Mild Morning Gains Fade by Friday Afternoon

Charles Schwab: On the Market

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

Mild Morning Gains Fade by Friday Afternoon

U.S. stocks finished lower, though a steady October nonfarm payroll report that was highlighted by stronger-than-expected wage growth stirred a modest early advance. The morning gains for stocks faded as December Fed rate hike expectations remain elevated and political uncertainty continues to linger ahead of next week's Presidential election. Treasuries advanced, crude oil prices and the U.S. dollar were lower and gold was mildly higher.

The Dow Jones Industrial Average (DJIA) declined 42 points (0.2%) to 17,888, the S&P 500 Index decreased 3 points (0.2%) to 2,085 and the Nasdaq Composite lost 12 points (0.2%) to 5,046. In moderately-heavy volume, 899 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq. WTI crude oil declined by $0.59 to $44.07 per barrel, wholesale gasoline lost $0.04 to $1.38 per gallon and the Bloomberg gold spot price moved $2.31 higher to $1,305.12 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% lower at 96.95. Markets were lower for the week, as the DJIA lost 1.5%, the S&P 500 Index decreased 1.9% and the Nasdaq Composite was 2.8% lower.

Starbucks Corp. (SBUX $53) reported fiscal 4Q earnings-per-share (EPS) of $0.56, one penny above the FactSet estimate, as revenues grew 16.0% year-over-year (y/y) to $5.7 billion, roughly in line with forecasts. 4Q same-store sales rose 4.0% y/y, below the expected 4.9% increase. SBUX issued full-year EPS guidance that came in below estimates. Separately, the coffee chain raised its quarterly dividend by 25.0% to $0.25 per share. Shares finished solidly higher.

Activision Blizzard Inc. (ATVI $42) posted 3Q EPS ex-items of $0.52, north of the expected $0.42, with revenues rising 58.4% y/y to $1.6 billion, matching expectations. ATVI issued 4Q guidance that missed forecasts, while raising its full-year outlook. Shares were solidly lower.

Kraft Heinz Co. (KHC $84) announced 3Q earnings ex-items of $0.83 per share, versus the expected $0.74, as revenues rose 2.4% y/y to $6.3 billion, due to the merger of Kraft and Heinz, roughly in line with forecasts. KHC traded lower.

CBS Corp. (CBS $57) reported 3Q EPS of $1.05, north of the projected $0.98, with revenues increasing 4.0% y/y to $3.4 billion, above the estimated $3.3 billion. Shares moved nicely higher.

Shares of Whole Foods Market Inc. (WFM $29) reversed solidly to the upside following a Bloomberg report, citing people familiar with the matter, that the company's largest shareholder has met with potential activist investors to discuss making sweeping changes to the upscale grocer, including replacing management and exploring a sale of the company. Per the report, a Whole Foods spokeswoman responded that it values the strong and open relationships it has with its shareholders, and as discussed on yesterday's earnings call, "we are focused on pursuing the right strategies to position the company to produce strong results and returns for our shareholders over the long term."

October job growth steady and wage gains top estimates

Nonfarm payrolls (chart) rose by 161,000 jobs month-over-month (m/m) in October, versus the Bloomberg forecast of a 173,000 increase. September's gain was upwardly revised to 191,000 jobs. The total upward revision to job gains in August and September was 44,000. Private sector payrolls increased by 142,000, versus the forecasted 170,000 rise, after increasing by an upwardly revised 188,000 in September. The Labor Department noted that employment continued to trend up in healthcare, professional and business services, and financial activities, while adding that Hurricane Matthew affected parts of the East Coast during the month.

The unemployment rate dipped to 4.9% from 5.0%, in line with estimates, while average hourly earnings grew by 0.4% m/m, topping projections of a 0.3% increase, and September's upwardly adjusted 0.3% gain. Wages are up 2.8% y/y/, the largest gain since June 2009. The labor force participation rate dipped to 62.8% from 62.9%, but was up from the 62.5% rate a year ago. Finally, average weekly hours remained at September's unrevised 34.4 hours level, matching forecasts.

The report preserved elevated December Fed rate hike expectations, while the stronger-than-expected wage growth figures are likely fostering optimism that the consumer, which makes up the lion's share of U.S. economic output, could be poised to support the impact of a rate increase from an abnormally low level. As noted in the recent Schwab Market Perspective: Looking Past the Election, economic data continues to support a sluggish growth narrative, although there are glimmers of hope that we could see at least a modest acceleration in 2017. The U.S. consumer appears to be gaining some confidence and wage growth has already shown signs of picking up as the economy approaches full employment. We believe, after several false starts, the Fed will actually follow through on a rate hike this time around. Perhaps equally as important will be the message the Fed sends regarding what it may be looking to do into 2017. Read more at www.schwab.com/marketinsight.

The trade balance (chart) showed that the deficit came in at $36.4 billion in September, compared to the $38.0 billion estimate. August's deficit was revised to $40.5 billion from the $40.7 billion posted earlier. Exports rose 0.6% m/m to $189.2 billion, while imports fell 1.3% to $225.6 billion.

Treasuries were higher, with the yield on the 2-year note declining 2 basis points (bps) to 0.78%, while the yields on the 10-year note and the 30-year bond fell 4 bps to 1.77% and 2.56%, respectively. Bond yields remain choppy in the wake of a recent rally that has come courtesy of some upbeat economic data that has bolstered the case for a December rate hike, which was also preserved with Wednesday's unchanged monetary policy decision from the Federal Open Market Committee (FOMC). Schwab's Chief Fixed Income Strategist, Kathy Jones offers analysis of the FOMC's decision in her article, The Fed Plays It Safe, December Hike Likely, at www.schwab.com/insights, while also offering her article, Are Bond Yields About to Rise?, at www.schwab.com/onbonds. Follow Kathy on Twitter: @kathyjones.

Europe and Asia lower as U.S. political uncertainty festers

European equities finished broadly lower, with the markets digesting the stable U.S. October labor report, while political uncertainty in the nation remained elevated with polls indicating a tight race ahead of next week's election. Financials saw pressure amid some lackluster earnings reports out of the sector. The British pound extended yesterday's rally versus the U.S. dollar that came amid eased "hard" Brexit concerns after a court ruled that the U.K. government would have to request parliamentary approval to trigger Article 50 and start official negotiations with the European Union (EU) regarding its vote to leave the EU, known as a Brexit. For more analysis of the Brexit fallout, Schwab's Director of International Research, Michelle Gibley, CFA, offers her latest article, Keep Calm and Carry On: The Brexit Shock That Wasn't. In economic news, the final Markit Eurozone Composite PMI Index—a gauge of business activity in both the services and manufacturing sectors—was revised lower to 53.3 in October, from the 53.7 preliminary report, where it was expected to remain, and up versus the 52.6 level recorded in September. The euro ticked higher versus the greenback, while bond yields in the region were mixed. Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, offers timely analysis of the global economic picture in his article, World Tour: An Around The World Look At the Economic Landscape. Read these articles at www.schwab.com/oninternational and be sure to follow Jeff on Twitter: @jeffreykleintop.

Stocks in Asia finished lower, with the looming U.S. Presidential election continuing to stymie global conviction and foster caution, while the extended selloff in crude oil prices remained a drag on the energy sector. Japanese equities fell, returning to action after yesterday's holiday break, with the yen continuing to strengthen on risk aversion bolstered by the heightened U.S. political risk. Australian securities dropped, with heavyweight financial, basic materials and oil & gas sectors all seeing pressure. Stocks trading in mainland China and Hong Kong dipped, reversing early gains amid the political uneasiness and some disappointing earnings reports weighing on sentiment. Indian equities traded lower with drugmakers falling on persistent uneasiness regarding to impact of the election on the U.S. healthcare sector, which overshadowed strength in consumer-related companies on continued optimism over the nation's recent tax reform measures. South Korean stocks ticked to the downside.

Amid the continued global market volatility, Schwab's Jeffrey Kleintop, CFA, offers Three Reasons Why Now is Not the Time to Retreat from Global Diversification and why Your portfolio may be less diversified than you think at www.schwab.com/oninternational.

Stocks fall as U.S. election nears

The equity markets fell solidly on the week, with an apparent tightening of the U.S. Presidential race bolstering political uncertainty and stymieing global conviction, with the healthcare sector continuing to get crushed. Crude oil prices extended a tumble to pressure the energy sector. Upbeat economic reads on personal spending and manufacturing activity, culminating with Friday's October labor report, along with the Federal Open Market Committee's (FOMC) monetary policy statement, preserved December rate hike forecasts. The real estate sector led a broad-based decline. The U.S. dollar slipped and Treasury yields modestly gave back some of a recent rally. Earnings season turned the corner to home stretch, and results were mixed, with Facebook Inc. (FB $121) disappointing with its warning of a meaningful revenue growth deceleration, while Electronic Arts Inc. (EA $81) topped profit projections and issued upbeat full-year earnings guidance. Thus far, of the 422 companies in the S&P 500 that have reported results, about 56.0% have exceeded sales expectations and approximately 76.0% have bested earnings estimates.

Next week, the NFIB Small Business Optimism Index, JOLTS Job Openings and the preliminary University of Michigan's Consumer Sentiment Index will headline a light U.S. economic docket, while earnings season downshifts. However, the political front will garner the most attention and volatility is set to remain as the results from Tuesday's Presidential election, including how the House and Senate races play out, are digested and scrutinized by the markets.

As noted in the Schwab Market Perspective, given the polling numbers and betting markets, the stock market appears to be expecting a Clinton win and continued gridlock, with at least the House remaining in Republican hands. If the results are quite different than expectations, market volatility could surge, but we suggest investors hold tight. Much as we saw following the Brexit vote, reacting in a kneejerk fashion can be detrimental to longer term performance. Read more at www.schwab.com/marketinsight. For more analysis on the election, Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, Election Night: How to Watch the Returns, as part of our election 2016 commentary at www.schwab.com/insights/category/election-2016, where you can also find timely analysis of The Stock Market and Election Cycles.

International report due out next week that deserve a mention include: Australia—consumer confidence. China—trade balance, CPI and PPI, and lending statistics. Japan—machine orders. Eurozone—retail sales. U.K.—industrial and manufacturing production, and trade balance.