Charles Schwab: On the MarketPosted: 12/11/2017 4:15 PM EST
Tech Assistance Boosts Gains
The Dow Jones Industrial Average (DJIA) increased 57 points (0.2%) to 24,386, the S&P 500 Index was 8 points (0.3%) higher at 2,660, and the Nasdaq Composite advanced 35 points (0.5%) to 6,875. In moderate volume, 782 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil increased $0.63 to $57.99 per barrel and wholesale gasoline gained $0.01 to $1.73 per gallon. Elsewhere, the Bloomberg gold spot price moved $5.80 lower to $1,242.69 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 93.94.
Mattel Inc. (MAT $15) announced bond offerings totaling $1 billion, and it intends to use the proceeds to refinance debt coming due next year and repay all outstanding borrowings related to its commercial paper program. The toy company also warned that it anticipates Q4 sales to continue to be negatively impacted by key retail partners moving toward tighter inventory management and certain underperforming brands. Shares traded higher.
At the annual Meeting of the American Society of Hematology (ASH), Juno Therapeutics Inc. (JUNO $50) and Celgene Corp. (CELG $108) announced mixed results from a trial of their treatment for a type of non-Hodgkin lymphoma. However, Celgene also announced upbeat results of a study of its myeloma treatment with partner Bluebird Bio Inc. (BLUE $202). JUNO fell, while CELG traded higher and BLUE rallied. Dow member Merck & Co. Inc. (MRK $56) gained ground after it announced at the ASH meeting that the FDA assigned priority review for its treatment for large B-cell lymphoma known as Keytruda.
Job openings dip to kick off busy week
The Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, came in at a level of 6.0 million jobs available to be filled in October, down from the upwardly revised 6.2 million level in September. This compared to the Bloomberg forecast calling for a 6.1 million level. The hiring rate rose to 3.8% from September's 3.6% pace, and the separation rate dipped to 3.5% from the prior month's 3.6% rate.
Treasuries finished lower, with the yield on the 2-year note rising 2 basis points (bps) to 1.82%, while the yields on the 10-year note and the 30-year bond gained 1 bp to 2.39% and 2.77%, respectively.
Treasury yields ticked higher and the U.S. dollar gave back some of last week's gain, with U.S. tax reform remaining a key focus for the markets, as the House and Senate try to reconcile their bills with a goal of trying to get one bill on President Donald Trump's desk for a signature by the end of the year.
Schwab's Director of Tax and Financial Planning, Hayden Adams, CPA, offers analysis of this process and what investors should be paying attention to, in his article, Tax Reform: What Investors Should Know, while also addressing questions regarding how the potential tax overhaul may affect you as an investor in his article, Tax Reform: Frequently Asked Questions. Moreover, as you conduct your year-end tax planning, check out our latest article, Tax Reform: 11 Questions to Ask Your Advisor.
However, this week fiscal policy focus will share the spotlight with monetary policy as the Federal Open Market Committee (FOMC) is highly expected to conclude its Wednesday meeting with a 25 bps increase to its target fed funds rate to 1.50%. The accompanying updated FOMC projections and Chairwoman Janet Yellen's final press conference shortly after the decision will likely garner the most attention as the markets try to gauge the pace of rate hikes in 2018. The Fed's meeting will be followed by monetary policy decisions from the European Central Bank (ECB) and Bank of England (BoE) on Thursday. Other economic releases this week include: the Consumer Price Index (CPI), retail sales, Markit's business activity reports, and industrial production and capacity utilization.
As noted in the latest Schwab Market Perspective: The Big Picture Heading into 2018, a better-than-expected 2017 appears to be morphing into a solid start to 2018, but it is unlikely to be as smooth a ride. We believe the bull market still has room to run but it could shape up to be a bumpier ride as expectations and sentiment are elevated. For detailed market analysis heading into the New Year, check out our 2018 Schwab Market Outlook: Executive Summary.
Tomorrow, the U.S. economic calendar will include the National Federation of Independent Business (NFIB) Small Business Optimism Index, forecasted to move higher to a level of 104.0 during November from the 103.8 posted the month prior, followed by the first look at inflation readings in the form of the Producer Price Index (PPI), with economists anticipating a 0.3% month-over-month (m/m) increase for November, while the core rate, which excludes food and energy, expected to have gained 0.2%.
Europe mixed amid political focus, Asia mostly higher
European equities finished mixed, with the euro higher versus the U.S. dollar and technology issues remaining under pressure, while the markets likely treaded cautiously ahead of monetary policy decisions this week from the Fed, ECB and BoE. Politics also garnered attention as the U.S. tax reform reconciliation process continues and traders look to see if U.K. Brexit talks will move to the next stage after late last week's agreement that appeared to break the negotiation impasse between the U.K. and European Union. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, and Vice President of Trading and Derivatives Randy Frederick point out in the video, European equities finished mixed, with the euro higher versus the U.S. dollar and technology issues remaining under pressure, while the markets likely treaded cautiously ahead of monetary policy decisions this week from the Fed, ECB and BoE. Politics also garnered attention as the U.S. tax reform reconciliation process continues and traders look to see if U.K. Brexit talks will move to the next stage after late last week's agreement that appeared to break the negotiation impasse between the U.K. and European Union. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, and Vice President of Trading and Derivatives Randy Frederick point out in the video, Political Risk: How Should Investors Respond?, that a long history of these developments shows us that holding a well-diversified portfolio may buffer the short-term market moves that are often the result. So, investors should avoid overreacting to the political and geopolitical drama and stick to their long-term financial plans. The British pound was lower versus the U.S. dollar and bond yields in the region moved mostly to the downside.
Stocks in Asia finished higher on the heels of the gains in the U.S. on Friday, with a relatively favorable labor report bolstering global economic optimism, while the markets kept an eye on the U.S. tax reform reconciliation process. Also, looming monetary policy decisions this week out of the U.S., eurozone and U.K. are in focus, along with a host of economic data in the region, commencing with inflation figures out of China that showed wholesale inflation rose in line with forecasts, but consumer inflation came in slightly cooler than expected. After the closing bell, China reported lending statistics for November that came in above forecasts. The global stock markets remain nicely higher for the year, bolstered by the broadest economic growth in a decade, which is expected to continue in 2018 as discussed by Schwab's Jeffrey Kleintop, CFA, discusses in his article, 5 Reasons Investors Should Give Thanks. Japanese equities advanced with the yen's recent weakness aiding the markets, while stocks trading in mainland China and Hong Kong gained solid ground. Australian and South Korean securities ticked higher, while Indian shares also advanced.
The international economic docket for tomorrow will yield PPI and the Tertiary Industry Index from Japan, export and import prices from South Korea, house prices from Australia and CPI and industrial production from India. Reports from across the pond will include CPI and PPI from the U.K., total payrolls from France and the Zew Economic Sentiment Survey from Germany.