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Tuesday, November 07, 2017

Stocks Mixed in Lackluster Session

Charles Schwab: On the Market
Posted: 11/7/2017 4:15 PM EST

Stocks Mixed in Lackluster Session
U.S. equities finished mixed amid light economic and equity news. U.S. tax reform and global trade uncertainties continued to linger, as President Trump continued his tour of Asia. Treasuries were flat and the U.S. dollar continued its ascent, getting a boost from the weakness in European currencies, while crude oil inched lower and gold also lost ground.

The Dow Jones Industrial Average (DJIA) rose 9 points to 23,548, the S&P 500 Index was nearly unchanged at 2,591, and the Nasdaq Composite fell 19 points (0.3%) to 6,768. In moderately heavy volume, 904 million shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq. WTI crude oil ticked $0.15 lower to $57.20 per barrel and wholesale gasoline lost $0.01 to $1.82 per gallon. Elsewhere, the Bloomberg gold spot price was $5.40 lower at $1,276.55 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% higher at 94.91.

Priceline Group Inc. (PCLN $1,646) reported Q3 earnings-per-share (EPS) of $34.43, or $35.22 ex-items, compared to the FactSet estimate of $34.26, as revenues rose 20.1% year-over-year (y/y) to $4.4 billion, topping the projected $4.3 billion. The travel booking company said it saw solid growth and operating results during its seasonally busy quarter. However, PCLN issued Q4 EPS guidance that missed expectations on increased brand investments. Shares were sharply lower.

Shares of TripAdvisor Inc. (TRIP $30) tumbled over 20% after the travel booking company posted Q3 revenue of $439 million, up 4.0% y/y, below the projected $451 million. The company said re-igniting near-term hotel growth has been more difficult than expected. TRIP's Q3 EPS of $0.36 ex-items was one penny above expectations.

Tapestry Inc. (TPR $42), formerly known as Coach, posted a fiscal Q1 loss of 0.06 per share, or EPS of $0.42 ex-items, versus the projected $0.36, with revenues growing 24.0% y/y to $1.3 billion, roughly in line with estimates. The results include the contribution of its recently acquired Kate Spade. Q1 same-store sales at its Coach stores declined 2.0% y/y, compared to the expected 1.9% rise. The company reaffirmed its full-year outlook as it said it is well positioned for the holiday season. Shares finished slightly higher.

Job openings roughly flat but remains near record high, consumer credit soars

The Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, came in at a level of 6.09 million jobs available to be filled in September, roughly matching August's upwardly revised figure. The Bloomberg forecast called for a decline to 6.08 million. The hiring rate dipped to 3.6% from August's 3.7% pace, and the separation rate remained at the prior month's 3.6% rate.

Consumer credit saw its largest increase since November 2016, jumping 6.6% year-over-year (y/y) to $20.8 billion during September, above the $17.5 billion forecast of economists polled by Bloomberg, while August's figure was unadjusted at $13.1 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, rose $14.4 billion, a 6.3% increase y/y, while revolving debt, which includes credit cards, rose by $6.4 billion, a 7.7% y/y rise.
Treasuries were unchanged, as the yields on the 2-year and the 10-year notes, as well as the 30-year bond, were all flat at 1.63%, 2.31% and 2.77%, respectively.

The U.S. dollar continued its rebound and Treasury yields paused from yesterday's declines, as the markets continue to grapple with a positive global economic backdrop, Fed leadership changes, and uncertainty regarding if the long road to tax reform will come to fruition.

Schwab's Chief Investment Strategist Liz Ann Sonders notes in her latest article, One Thing Leads to Another: Productivity's Rebound, that recent better productivity likely has legs heading into 2018, adding that stocks have done best following periods of weak productivity.

Schwab's Chief Fixed Income Strategist Kathy Jones and Vice President of Trading and Derivatives, Randy Frederick discuss in the video, Should a Change in Fed Leadership Matter to Investors?, while Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest commentary, House Tax Reform Bill: What Investors Need to Know.
The only item on tomorrow's economic calendar is MBA Mortgage Applications.

Europe moves lower, Asia mixed

European equities traded lower, despite some weakness in the euro versus the U.S. dollar, with political uncertainties continuing to fester and reports suggesting diverging opinions among European Central Bank members regarding guidance for its stimulus measures. German industrial production fell more than expected in September, but eurozone retail sales rose more than forecasted, with Italy easily topping estimates to likely help limit losses for its markets. The British pound saw some pressure as Brexit uncertainty remained and a read on U.K. retail sales unexpectedly fell, while bond yields in the region were lower. Schwab's Liz Ann Sonders and Randy Frederick note in the video, Tracking Sentiment: Are Investors Too Optimistic About Stocks?, that there seems to be no end in sight to the bull market in equities, but that doesn’t mean there’s nothing to worry about.

Stocks in Asia finished mixed on the heels of yesterday's modest extension of record highs in the U.S., while the markets paid attention to President Trump's tour of the region, and energy issues were higher as crude oil prices rallied yesterday amid a corruption crackdown in Saudi Arabia. Japanese equities rallied, hitting levels not seen since 1992, with better-than-expected wage data in September joining upbeat corporate earnings sentiment that has been bolstered by weakness in the yen. Amid this backdrop, Schwab's Jeffrey Kleintop, CFA, and Randy Frederick offer the video, Is An Optimistic Outlook for Global Equities Warranted?. Mainland Chinese stocks and those traded in Hong Kong advanced, boosted by the strength in the energy sector, ahead of some key economic reports this week. Markets in Australia gained solid ground, with resource-related issues moving higher, while the Reserve Bank of Australia kept its monetary policy stance unchanged as expected. Meanwhile, stocks in South Korea and India declined.

Tomorrow, the international economic calendar will offer the Leading Index and trade data from Japan, industrial production from Spain, and trade figures from France.

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