Drama in D.C. Takes Toll on Stocks

Charles Schwab: On the Market

Posted: 5/17/2017 4:15 PM ET

Drama in D.C. Takes Toll on Stocks

The drama surrounding Washington has finally caught up to the U.S. equity markets, as the political turmoil pressured stocks in a spike of volatility. Treasuries were sharply higher amid the uncertainty and gold prices soared, while crude oil prices gained ground after the sixth-straight weekly drop in government oil inventories, and the U.S. dollar was modestly lower. News on the equity front was a mixed bag, highlighted by Target's quarterly results and the continued legal wrestling match between Apple and Qualcomm.

The Dow Jones Industrial Average (DJIA) tumbled 373 points (1.8%) to 20,607, the S&P 500 Index lost 43 points (1.8%) to 2,357, and the Nasdaq Composite plunged 159 points (2.5%) to 6,011. In heavy volume, 991 million shares were traded on the NYSE and 2.3 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.41 to $49.07 per barrel and wholesale gasoline was unchanged at $1.60 per gallon. Elsewhere, the Bloomberg gold spot price jumped $22.99 higher to $1,260.23 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% lower at 97.51.

Target Corp. (TGT $55) reported Q1 earnings-per-share (EPS) of $1.22, or $1.21 ex-items, versus the $0.91 FactSet estimate, as revenues declined 1.1% year-over-year (y/y) to $16.0 billion, compared to the projected $15.7 billion. Q1 same-store sales declined 1.3% y/y, compared to the forecasted 3.7% decrease. TGT issued Q2 EPS guidance that had a midpoint above expectations, while reaffirming its full-year same-store sales outlook and noting that its better-than-expected Q1 performance raises the probability that its current year profits will be above the midpoint of its prior forecast. Shares were nicely higher.

The legal battel between Dow member Apple Inc. (AAPL $150) and Qualcomm Inc. (QCOM $55) is escalating after Qualcomm announced that it is filing a breach of contract complaint against the manufacturers of Apple's iPhone and iPad for refusing to pay for use of its licensed technologies. The complaint comes as Qualcomm said the manufacturers now are refusing to pay royalties on the Apple products they produce, saying that they must follow Apple's instructions not to pay. The four manufacturers are Hon Hai Precision Industry Co. Ltd. (HNHPF $7), also known as Foxconn, Pegatron Corp., Wistron Corp., and Compal Electronics Inc. AAPL and QCOM were lower.

Urban Outfitters Inc. (URBN $20) was lower after posting Q1 EPS of $0.10, below the projected $0.16, as revenues were flat y/y at $761 million, south of the expected $770 million. Q1 same-store sales declined 3.1% y/y, versus the forecasted 2.3% decrease.

Advanced Micro Devices Inc. (AMD $11) gave back some of yesterday's rally that came courtesy of unconfirmed reports that the company has a licensing deal for its graphic chips with Dow member Intel Corp. (INTC $35). Analysts are expressing skepticism regarding the deal and are digesting the company's long-term forecasts delivered at yesterday's investor day.

Mortgage applications drop

The MBA Mortgage Application Index fell 4.1% last week, following the previous week's 2.4% gain. The drop came as a 5.7% decrease for the Refinance Index was met with a 2.7% decline for the Purchase Index. The average 30-year mortgage rate remained at 4.23%.

Treasuries finished noticeably higher, as the yield on the 2-year note declined 6 basis points (bps) to 1.24%, the yield on the 10-year note fell 11 bps to 2.22%, and the 30-year bond rate dropped 10 bps to 2.90%. For analysis of the bond markets, see our article, Mixed Signals: What Does Recent Economic Data Mean for Bonds?, on the Insights & Ideas page at www.schwab.com. Follow Schwab on Twitter: @schwabresearch. Also, Schwab's Vice President of Trading and Derivatives, Randy Frederick and Chief Fixed Income Strategist, Kathy Jones offer the video, Fed Rate-Hike Cycle: How Can Bond Investors Prepare? on the Insights & Ideas page at www.schwab.com. Follow Randy and Kathy on Twitter: @randyafrederick and @kathyjones.

For a look at the action in the stock markets, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, latest article, Is The Stock Market Just Quiet Or Is It Too Quiet? on the Markets & Economy page at www.schwab.com, where you can also find Schwab's Chief Investment Strategist Liz Ann Sonders' article, Strange Brew: Heightened Uncertainties, Yet Plunging Volatility…What Gives? Follow Jeff and Liz Ann on Twitter: @jeffreykleintop and @lizannsonders.

The domestic economic calendar will close out the week tomorrow with the release of weekly initial jobless claims, forecasted to tick higher to a level of 240,000 from the prior week's 236,000, as well as the Philly Fed Manufacturing Index, expected to move slightly lower to 18.5 for May from the 20.0 posted in April, with a number above zero indicating expansion in activity. Rounding out the day will be the Index of Leading Economic Indicators (LEI), with economists anticipating a 0.4% m/m rise in April, matching that seen in March.

Europe and Asia lower as U.S. political concerns fester

European equities finished broadly lower, with the euro and British pound gaining ground amid the continued drop in the U.S. dollar as the global markets grappled with heightened political risk concerns in the U.S. In economic news, eurozone core consumer price inflation was unrevised at a 1.2% y/y increase, as expected, and the region's construction output declined, while the U.K. employment change rose much more than expected. Bond yields in the region moved lower. The heightened political uncertainty in the U.S. comes as elections loom in the U.K., Germany and Italy, while Brexit negotiations continue. For analysis of the political uncertainty see Schwab's Jeffrey Kleintop's, CFA, and Randy Frederick's video, Political Risk: How Should Investors Respond? on the Insights & Ideas page at www.schwab.com, where you can also find our article, Brexit Begins: What's Next for the U.K?.

Stocks in Asia finished mostly lower following some mixed earnings and economic data, while exacerbated political uncertainty in the U.S. dampened sentiment. Japanese equities declined, with the yen gaining ground as the U.S. dollar continued to fall, while reports showed the nation's machine orders—a gauge of capital spending—rose at a smaller amount than expected and industrial production declined for March. Mainland Chinese stocks and those traded in Hong Kong fell, with recent optimism regarding increased infrastructure spending by the government fading, and concerns about heightened regulatory crackdowns and recent soft economic data lingering.

Markets in Australia tumbled, as strength in basic materials was more than offset by weakness in technology and financials, while a report showed consumer confidence in the nation declined. Finally, South Korean securities dipped, while listings in India bucked the trend to finish higher, bolstered by some upbeat earnings reports in the nation. For our latest analysis of the global markets and elevated geopolitical concerns, see Schwab's Director of International Research, Michelle Gibley's CFA, article, Different Drivers: Why Emerging Market Stocks Aren't All the Same on the Insights & Ideas page at www.schwab.com, as well as 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.

Tomorrow's international economic calendar will include employment data from Australia, GDP from Japan, and retail sales from the U.K.

Rise in Crude Oil Prices Fuel Market Gains

Charles Schwab: On the Market

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

Rise in Crude Oil Prices Fuel Market Gains

U.S. equities finished higher, as upbeat homebuilder sentiment and a jump in crude oil prices on optimism of extended production cuts overshadowed heightened geopolitical concerns toward North Korea, a global cyber-attack over the weekend, and more disappointing Chinese economic data. Treasury yields ticked higher, as did gold, while the U.S. dollar lost ground.

The Dow Jones Industrial Average (DJIA) rose 85 points (0.4%) to 20,982, the S&P 500 Index added 11 points (0.5%) to 2,402, and the Nasdaq Composite increased 28 points (0.5%) to 6,150. In moderate volume, 849 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil increased $1.01 to $48.85 per barrel and wholesale gasoline added $0.02 to $1.60 per gallon. Elsewhere, the Bloomberg gold spot price moved $2.34 higher to $1,230.70 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% lower at 98.92.

Thermo Fisher Scientific Inc. (TMO $173) announced an agreement to acquire Patheon NV (PTHN $35) for $35.00 per share in cash, for about $7.2 billion, including the assumption of $2.0 billion in debt. TMO was modestly higher, while shares of PTHN rallied over 30%.

Moody's Corporation (MCO $116) announced an agreement to acquire Amsterdam-based business information provider Bureau van Dijk for about $3.3 billion. MCO finished higher.

Energy stocks saw gains to propel the markets as crude oil prices rallied after Saudi Arabia and Russia said they are in favor of extending production cuts until March 2018, longer than the six month extension that had been expected by the markets. Also, internet security companies got a boost from a cyber-attack that affected dozens of countries over the weekend. For a look at energy and all other major sectors see, Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, latest Schwab Sector Views: Is Energy an Opportunity or a Trap? on the Markets & Economy page at www.schwab.com and follow Schwab on Twitter: @schwabresearch.

Homebuilder sentiment surprisingly improves, regional manufacturing report misses

The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment this month improved to 70—the second highest reading since 2005—from 68 in April, where the Bloomberg forecast called for it to remain. A 50 mark separates good and poor conditions. The NAHB said the report shows the builders' optimism in the housing market is solidifying, even as they deal with higher building material costs and shortages of lots and labor.

Tomorrow, we will get a look at housing construction activity in the form of April housing starts and building permits. Starts are forecasted to rebound from a four-month low in March, rising 3.7% month-over-month (m/m) to an annual rate of 1,260,000 units. Permits are projected to tick 0.2% higher to an annual rate of 1,270,000 units. As noted in the latest Schwab Market Perspective: Sell in May…or Settle In?, after a long downturn, we're starting to see an encouraging uptick in both home ownership and household formations. This suggests that consumer confidence is starting to translate into some economy-boosting action. Read more on the Markets & Economy page at www.schwab.com. In addition, the other item on tomorrow's docket will be the Federal Reserve's industrial production and capacity utilization report, forecasted to show production rose 0.4% m/m during April following the 0.5% increase seen in March, while utilization is expected to have ticked higher to 76.3% from the 76.1% registered the month prior.

The Empire Manufacturing Index showed output from the New York region surprisingly dropped into contraction territory (a reading below zero) for May. The index fell to -1.0 from April's unrevised 5.2 level, with forecasts calling for a 7.5 reading.

Treasuries are dipping, with the yield on the 2-year note little changed at 1.30%, while the yields on the 10-year note and the 30-year bond are ticking 1 basis point higher to 2.33% and 3.00%, respectively. For analysis of the bond markets, see our article, Mixed Signals: What Does Recent Economic Data Mean for Bonds?, on the Insights & Ideas page at www.schwab.com. Follow Schwab on Twitter: @schwabresearch. Also, Schwab's Vice President of Trading and Derivatives, Randy Frederick and Chief Fixed Income Strategist, Kathy Jones offer the video, Fed Rate-Hike Cycle: How Can Bond Investors Prepare? on the Insights & Ideas page at www.schwab.com. Follow Randy and Kathy on Twitter: @randyafrederick and @kathyjones.

Finally, focus on the political front remains, 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, see the video from Schwab's Randy Frederick and Vice President of Legislative and Regulatory Affairs, Michael T. Townsend titled, Washington Overview: Budget Deals, Tax Reform, and Trump's 100-Day Mark, on the Insights & Ideas page at www.schwab.com.

Europe mostly higher despite lingering uncertainties

European equities finished mostly higher, with markets shrugging off another round of softer-than-expected Chinese economic data, a global cyber-security attack, and global trade concerns. Oil & gas issues lent support amid a rally in crude oil prices on optimism about extended global oil production cuts. Political uncertainty remained, with Germany holding regional elections ahead of a national election later this year, while Brexit negotiations continue and as an election looms in Italy later this year. For analysis of the political uncertainty see Schwab's Jeffrey Kleintop's, CFA, and Randy Frederick's video, Political Risk: How Should Investors Respond? on the Insights & Ideas page at www.schwab.com, where you can also find our article, Brexit Begins: What's Next for the U.K?, 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. The euro and British pound were higher as the U.S. dollar saw some pressure, while bond yields in the region gained ground.

Stocks in Asia finished mostly higher, with oil prices rallying sharply on optimism of extended production cuts. The markets showed some relative resiliency in the face of heightened geopolitical concerns in the face of another missile test by North Korea, along with another round of softer-than-expected Chinese economic data. The markets also appeared to shrug off lingering trade concerns and news of a global cyber-security attack. China's industrial production, fixed asset investment and retail sales al missed expectations for April. The data followed late-Friday's stronger-than-expected reads on new yuan loans and aggregate financing—a gauge of total credit issued—with mainland Chinese stocks and those traded in Hong Kong both gaining ground, aided by that nation's release of infrastructure spending plan. Markets in India rose, with some cooler-than-anticipated inflation figures late-Friday boosting optimism that the Reserve Bank of India may have room to cut rates, per Bloomberg. Meanwhile, securities in Japan dipped, paring losses as the yen showed some weakness, while South Korean equities moved higher and those listed in Australia finished flat,. For analysis of the global front amid the backdrop of trade and geopolitical uncertainty, see Schwab's Jeffrey Kleintop's, CFA, articles, Missiles and Markets: An investor guide to geopolitical risks on the Markets & Economy page at www.schwab.com, as well as, Top Five Trade Issues Investors Should Be Watching on the International Investing page at www.schwab.com.

Tomorrow's international economic calendar will include the Tertiary index and retail sales from Japan, CPI from France, GDP from Italy, the Zew Economic Sentiment Survey from Germany, GDP and the trade balance from the Eurozone, and CPI, PPI, the Retail Price index and housing prices from the U.K.

Stocks Cut Prices on Disappointing Retail Earnings

Charles Schwab: On the Market

Posted: 5/11/2017 4:15 PM ET

Stocks Cut Prices on Disappointing Retail Earnings

U.S. stocks finished the regular trading session well-off the lows, but still in the red as early morning pressure mounted on the heels of some disappointing earnings figures, which weighed on the retail sector, ahead of some key consumer reports expected tomorrow. Treasuries gained ground and the U.S. dollar was flat despite a hotter-than-expected wholesale inflation report, while gold and crude oil prices were higher. In central bank action, the Bank of England kept its monetary stance unchanged as expected.

The Dow Jones Industrial Average (DJIA) declined 24 points (0.1%) to 20,920, the S&P 500 Index ticked 5 points (0.2%) lower to 2,394, and the Nasdaq Composite decreased 13 points (0.2%) to 6,116. In moderately-heavy volume, 863 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil increased $0.50 to $47.83 per barrel and wholesale gasoline added $0.02 to $1.56 per gallon. Elsewhere, the Bloomberg gold spot price moved $6.64 higher to $1,225.59 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 99.64.

Macy's Inc. (M $24) reported Q1 earnings-per-share (EPS) of $0.23, or $0.24 ex-items, compared to the $0.36 FactSet estimate, as revenues dropped 7.5% year-over-year (y/y) to $5.3 billion, below the projected $5.5 billion. Q1 same-store sales fell 5.2% y/y, versus the expected 2.7% decline. M reaffirmed its full-year guidance. Shares closed sharply lower.

Kohl's Corp. (KSS $37) posted Q1 profits of $0.39 per share, versus the forecasted $0.29, as revenues were 3.2% lower y/y at $3.8 billion, below the projected $3.9 billion. Quarterly same-store sales decreased 2.7% y/y, compared to the estimated 1.2% decline. KSS was solidly lower.

Whole Foods Market Inc. (WFM $37) announced fiscal Q2 EPS of $0.31, or $0.37 ex-items, versus estimates of $0.37, with revenues rising 1.1% y/y to $3.7 billion, roughly in line with expectations. Q2 same-store sales declined 2.8% y/y, compared to the forecasted 3.0% decrease. WFM lowered its full-year EPS and revenue outlooks, while announcing a 29% increase of its quarterly dividend to $0.18 per share, and a new $1.25 billion share repurchase program. WFM also announced changes, including additions, to its Board, as well as the appointment of a new Chief Financial Officer. WFM traded higher.

Symantec Corp. (SYMC $31) reported a fiscal Q4 loss of $0.23 per share, or earnings of $0.28 ex-items, compared to the projected $0.28, as revenues rose 35.0% y/y to $1.2 billion, roughly in line with expectations. The company's Q1 and full-year revenue guidance came in below forecasts, while its EPS outlooks for the periods were mixed. SYMC finished lower.

Verizon Communications Inc. (VZ $46) announced that it signed an agreement to acquire Straight Path Communications Inc. (STRP $178) for $184.00 per share, or a total consideration of approximately $3.1 billion in an all-stock transaction. The agreement terminates STRP's previously announced deal to be acquired by AT&T Inc. (T $38). Shares of STRP were sharply lower, though they have nearly doubled AT&T's initial takeover proposal of $95.63 per share, while VZ and T were little changed.

Producer price inflation tops forecasts, jobless claims surprisingly decline

The Producer Price Index (PPI) (chart) showed prices at the wholesale level in April rose 0.5% month-over-month (m/m), versus Bloomberg's expectation of a 0.2% gain and compared to March's unrevised 0.1% dip. The core rate, which excludes food and energy, was up 0.4%, versus forecasts of a 0.2% advance and March's unrevised flat reading. Y/Y, the headline rate was 2.5% higher, above projections of a 2.2% increase, and the core PPI increased 1.9% last month, above of estimates of a 1.6% gain. In March, producer prices were 2.3% higher and up 1.6% for the headline and core rates, respectively.

Weekly initial jobless claims (chart) declined by 2,000 to 236,000 last week, below forecasts of 245,000, with the prior week’s figure unrevised at 238,000. The four-week moving average rose by 500 to 243,500, while continuing claims fell by 61,000 to 1,918,000, south of estimates of 1,980,000.

Today's disappointing earnings reports and hotter-than-expected inflation reading set the stage for tomorrow's economic calendar, which will bring key reads on consumer spending, sentiment and purchasing power. April retail sales are projected to rise 0.6% m/m, after March's 0.2% decline, and excluding autos, sales are forecasted to grow 0.5% after the prior month's flat reading. Stripping out autos and gas, sales are expected to increase 0.4% on the heels of the 0.1% gain in March.

As noted in our recent article, Is the Retail Sector Really Dying?, the retailing sector will likely face more turmoil as a trimmed down and modernized industry reinvents itself. We don't think investors should totally shun the sector as the gloom hanging over the group may be obscuring some potential bright spots. Read more on the Insights & Ideas page at www.schwab.com and follow Schwab on Twitter: @schwabresearch. For a look at the potential of the sector, see Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, latest look at our Consumer Discretionary Sector Rating: Marketperform, on the Markets & Economy page at www.schwab.com.

Also, this month's preliminary University of Michigan's Consumer Sentiment Index is anticipated to remain at April's 97.0 level and the Consumer Price Index (CPI) and core CPI are both estimated to be up 0.2% m/m in April, after falling 0.3% and 0.1% in March, respectively. The headline figure is expected to dip to a gain of 2.3% y/y from 2.4% and the core rate is projected to remain at a 2.0% increase. Business inventories for March will round out the day and are expected to have ticked 0.1% higher after rising 0.3% in February.

Treasuries finished higher, with the yields on the 2-year and 10-year notes declining 2 basis points (bps) to 1.34% and 2.39%, respectively, while the 30-year bond rate dipped 1 bp to 3.03%.

For analysis of the bond markets, see our article, Mixed Signals: What Does Recent Economic Data Mean for Bonds?, as well as Schwab's Vice President of Trading and Derivatives, Randy Frederick's and Chief Fixed Income Strategist, Kathy Jones' video, Fed Rate-Hike Cycle: How Can Bond Investors Prepare? on the Insights & Ideas page at www.schwab.com. Follow Randy and Kathy on Twitter:  @randyafrederick and @kathyjones.

Schwab's Chief Investment Strategist Liz Ann Sonders offers a look at the low volatility market action as of late in her article, Strange Brew: Heightened Uncertainties, Yet Plunging Volatility…What Gives? on the Markets & Economy page at www.schwab.com. Follow Liz Ann on Twitter: @lizannsonders.

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

Europe lower on data, Asia mostly higher

European equities finished lower, with the markets digesting a plethora of mixed earnings reports on both sides of the pond, while global political uncertainty continues to fester and the Bank of England (BoE) expectedly kept its monetary policy stance unchanged. The British pound saw some pressure versus the U.S. dollar following the BoE's decision, with Bloomberg pointing out that the pound had gained ground leading up to the decision amid speculation that there could be more than one dissenting vote. In other U.K. economic news, industrial and manufacturing production both unexpectedly declined m/m in March and the nation's trade deficit widened more than expected. The euro was little changed against the greenback and bond yields in the region were mostly higher. For analysis of the political uncertainty amid Brexit negotiations, and ahead of elections in the U.K., Germany and Italy later this year, see Schwab's Jeffrey Kleintop's, CFA, and Randy Frederick's video, Political Risk: How Should Investors Respond? on the Insights & Ideas page at www.schwab.com, where you can also find our article, Brexit Begins: What's Next for the U.K?. 

Stocks in Asia finished mostly to the upside, with the recent weakness in the yen helping lift Japanese equities, while Japan's trade surplus also narrowed by a smaller amount than had been expected in March. Stocks trading in mainland China and Hong Kong rebounded slightly from recent selling pressure that has come from lingering regulatory crackdown concerns and a patch of softer-than-expected economic data, bolstered by optimism amid reports that Chinese authorities stepped in to support the markets, per Bloomberg. South Korean securities advanced with the markets digesting this week's Presidential election, which delivered a victory for Democratic Party of Korea Moon. Indian listings finished flat and Australian equities ticked higher. For our latest analysis of the global markets, see Schwab's Director of International Research, Michelle Gibley's CFA, article, Different Drivers: Why Emerging Market Stocks Aren't All the Same on the Insights & Ideas page at www.schwab.com, as well as 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.

The international economic docket for tomorrow will include wholesale prices, CPI and industrial production from India, credit card balances from Australia, GDP and CPI from Germany, non-farm payrolls from France and industrial production from the Eurozone.

Stocks Straddle Unchanged Mark

Charles Schwab: On the Market

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

Stocks Straddle Unchanged Mark

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

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

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

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

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

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

Import prices rise more than expected, mortgage applications increase

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

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

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

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

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

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

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

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

Europe and Asia mixed

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

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

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

Market Mixed Amid Continued Low Volatility

Charles Schwab: On the Market

Posted: 5/9/2017 4:15 PM ET

Market Mixed Amid Continued Low Volatility

U.S. equities finished mixed in another session amid low volatility, with little in the way of seismic news to shape sentiment. Second-tier earnings news dominated a quiet equity front, while economic news showed small business optimism topped forecasts and wholesale inventories were revised higher. Meanwhile, Treasuries, gold, crude oil prices and the U.S. dollar were all modestly lower.

The Dow Jones Industrial Average (DJIA) fell 37 points (0.2%) to 20,976, the S&P 500 Index ticked 2 point (0.1%) lower to 2,397, while the Nasdaq Composite rose 18 points (0.3%) to 6,121. In moderate volume, 862 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq. WTI crude oil declined $0.55 to $45.88 per barrel and wholesale gasoline lost $0.03 to $1.49 per gallon. Elsewhere, the Bloomberg gold spot price moved $5.89 lower to $1,220.34 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% lower at 99.58.

Marriott International Inc. (U.S. equities finished mixed in another session amid low volatility, with little in the way of seismic news to shape sentiment. Second-tier earnings news dominated a quiet equity front, while economic news showed small business optimism topped forecasts and wholesale inventories were revised higher. Meanwhile, Treasuries, gold, crude oil prices and the U.S. dollar were all modestly lower.

Valeant Pharmaceuticals International Inc. (VRX $12) rallied nearly 25% after raising its full-year operating earnings outlook after posting mixed Q1 earnings and revenue figures.

Hertz Global Holdings Inc. (HTZ $13) announced a Q1 loss of $2.69 per share, or a loss of $1.61 ex-items, versus the shortfall of $1.16 per that had been projected, as revenues declined 3.4% y/y to $1.9 billion, in line with forecasts. Shares were sharply lower.

Small business optimism declines by smaller amount than expected

The National Federation of Independent Business (NFIB) Small Business Optimism Index for April dipped to 104.5 from March's 104.7 level, above the Bloomberg estimate of a decline to 104.0.

The Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, rose to a level of 5.74 million jobs available to be filled in March, from February's downwardly revised 5.68 million level, and slightly above forecasts of 5.73 million. The hiring rate remained at February's 3.6% pace, while the separation rate ticked higher to 3.5% from 3.4%.

Wholesale inventories (chart) were revised higher to a 0.2% month-over-month (m/m) gain for March, versus expectations of an unrevised preliminary 0.1% dip, and following February's upwardly revised 0.3% rise. Sales were flat m/m, after February's upwardly revised 0.7% gain. The inventory-to-sales ratio—the amount of time it would take to deplete inventories at the current sales pace—remained at February's 1.28 months level.

Treasuries were lower, as the yields on the 2-year and 10-year notes, along with the 30-year bond, all rose by 1 basis point to 1.34%, 2.40%, and 3.03%, respectively.

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

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

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

Tomorrow's economic calendar will lighten up a bit, with the only reports on the schedule being the Import Price Index, which is forecasted to increase 0.1% higher last month, as well as MBA Mortgage Applications.

Europe mostly higher, Asia mixed

European equities moved mostly higher, with basic materials rebounding amid some signs of stabilization in key metals prices, while relatively upbeat German economic and earnings data likely helped sentiment. The nation's industrial production declined by a smaller amount than expected and exports rose at a faster pace than projected for March, posting a third-straight monthly gain. Financials came under pressure and were the lone major sector kept out of the green, with weakness in Spanish banks hamstringing sentiment. In the wake of last weekend's highly-expected outcome of the French Presidential election, political uncertainty appeared to cool, though U.K. Brexit negotiations continue ahead of a June election, while Germany and Italy face votes later this year. For analysis of the political front, see Schwab's Jeffrey Kleintop's, CFA, and Randy Frederick's video, Political Risk: How Should Investors Respond? on the Insights & Ideas page at www.schwab.com, where you can also find our article, Brexit Begins: What's Next for the U.K?. The euro lost ground and the British pound was flat versus the U.S. dollar, while bond yields in the region were mostly higher.

Stocks in Asia finished mixed following some data and amid some political uncertainties in the region, with South Korean markets closed as the nation votes for a new President after the recent impeachment of former President Park for bribery charges. South Korean markets had rallied leading up to the election. Japanese equities declined, paring yesterday's rally despite some continued weakness in the yen versus the U.S. dollar on heightened expectations of a Fed rate hike next month. Japan reported an unexpected decline in wages for March, which was the first decrease in 10 months. Australia's markets dropped, led by banks following some disappointing earnings, and on reports suggesting the release later today of the country's government budget may impose a tax on lenders. Securities trading in India finished flat.

However, mainland Chinese stocks snapped a string of losses that came amid some softer-than-expected economic data, exacerbated by yesterday's trade report, and festering uneasiness about government regulatory crackdowns, while those traded in Hong Kong rallied, as major power companies jumped on reports the country is planning to create three power giants through mergers of eight coal-fired nuclear generators, per Bloomberg. For analysis of China and the global markets, see Schwab's Jeffrey Kleintop's, CFA, articles, The Fed has China in a Tough Spot and Top Five Trade Issues Investors Should Be Watching on the International Investing page at www.schwab.com.

A number of economic reports out of China will dominate the international calendar tomorrow, with the Asian nation set to release CPI, PPI and lending figures, while South Korea will report its unemployment rate, and Japan will post trade data and its Leading Index. Reports from across the pond include industrial production from France and Italy.

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.

Stocks Still Searching for a Catalyst

Charles Schwab: On the Market

Posted: 5/3/2017 4:15 PM ET

Stocks Still Searching for a Catalyst

U.S. equities were again mixed in today's session, showing little reaction to the expected Fed decision to keep monetary policy steady, while results on the earnings front varied. Treasury yields were mixed and the U.S. dollar gained modest ground following stronger-than-expected reads on the all-important services sector, while crude oil prices inched higher in the wake of a smaller-than-expected decline in the government's crude oil inventory report, and gold was lower.

The Dow Jones Industrial Average (DJIA) rose 8 points to 20,958, the S&P 500 Index declined 3 points (0.1%) to 2,388, and the Nasdaq Composite lost 23 points (0.4%) to 6,073. In moderately-heavy volume, 918 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq. WTI crude oil inched $0.16 higher to $47.82 per barrel and wholesale gasoline added $0.02 to $1.53 per gallon. Elsewhere, the Bloomberg gold spot price tumbled $16.85 to $1,239.91 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% higher at 99.30.

Dow member Apple Inc. (APPL $147) reported fiscal Q2 earnings-per-share (EPS) of $2.10, compared to the $2.02 FactSet estimate, as revenues rose 4.5% year-over-year (y/y) to $52.9 billion, versus the projected $53.0 billion. iPhone shipments came in below forecasts, while those for iPad and Mac came in roughly in line with estimates. AAPL issued Q3 revenue and gross margin guidance that had midpoints below expectations. Separately, the company announced a $50 billion boost to its capital return program, which includes a $35 billion bump in share repurchases, while announcing a 10.5% increase in its quarterly dividend to $0.63 per share. Shares finished modestly lower.

Yum Brands Inc. (YUM $68) posted Q1 EPS of $0.77, or $0.65 ex-items, above the projected $0.59, with revenues declining 2.0% y/y to $1.4 billion, roughly in line with forecasts. The company noted that same-store sales growth of 8% y/y at its Taco Bell franchise and profit growth at KFC partially offset weakness at Pizza Hut. Shares were nicely higher.

Time Warner Inc. (TWX $99) announced Q1 earnings of $1.80 per share, or $1.66 ex-items, compared to the estimated $1.45, as revenues grew 6.0% y/y to $7.7 billion, roughly in line with expectations. TWX was lower.

Delphi Automotive PLC. (DLPH $87) reported Q1 earnings of $1.24 per share, or $1.59 per share ex-items, topping the projected $1.46, as revenues rose 6.0% y/y to $4.3 billion, above the expected $4.1 billion. The company reaffirmed its full-year guidance. Separately, DLPH announced plans to spin-off its powertrain systems segment. Shares rallied.

Fed stands pat, services sector activity tops forecasts

As widely expected, the Federal Open Market Committee (FOMC) made no change to its monetary policy stance following its two-day meeting, noting in its accompanying policy statement 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. No updated economic projections or post-meeting press conference by Chairwoman Janet Yellen were provided after the decision. Look for more insight into the Fed's decision later today from Senior Fixed Income Research Analyst, Collin Martin, CFA, on the Markets & Economy page at www.schwab.com.

The April Institute for Supply Management (ISM) non-Manufacturing Index (chart) improved more than expected to 57.5 from March's unrevised 55.2 level, and compared to the Bloomberg forecast of a gain to 55.8. A reading above 50 denotes expansion. New orders and business activity both rose month-over-month (m/m) to levels north of 60, while employment dipped but continued to signal growth. Prices rose 4.1 points to 57.6. The ISM said comments from respondents were mostly positive about business conditions and the overall economy.

The final Markit U.S. Services PMI Index was revised to 53.1 in April from the preliminary 52.5 level, where it was expected to remain, and compared to the 52.8 figure posted in March. The release is independent and differs from ISM's report, as it has less historic value and Markit weights its index components differently.

The ADP Employment Change Report showed private sector payrolls rose by 177,000 jobs in April, slightly above forecasts of a 175,000 gain, while March's increase of 263,000 jobs was revised to a gain of 255,000. Today’s ADP data, which does not include government hiring and firing, comes ahead of Friday's broader April nonfarm payroll report, expected to show an increase of 190,000 jobs to the headline rate and to private sector payrolls. The unemployment rate is forecasted to tick higher to 4.6% from 4.5%, and average hourly earnings are projected to rise 0.3% month-over-month (m/m).

The MBA Mortgage Application Index dipped 0.1% last week, following the previous week's 2.7% increase. The slip came as a 4.7% drop for the Refinance Index was met with a 4.2% increase for the Purchase Index. The average 30-year mortgage rate rose 3 basis points (bps) to 4.23%.

Treasuries finished mixed, as the yield on the 2-year note rose 3 bps to 1.29%, the yield on the 10-year note moved 4 bps higher to 2.32%, while the 30-year bond rate declined 1 bp to 2.96%. For more on 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, as well as our latest article, Mixed Signals: What Does Recent Economic Data Mean for Bonds?, on the Insights & Ideas page at www.schwab.com. Follow Kathy on Twitter: @kathyjones.

Finally, 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.

Europe mixed, Asia lower ahead of U.S. monetary policy decision

European equities finished mixed, with basic materials and industrials leading to the downside amid weakness in metals prices and the recent soft economic data out of the U.S. and China, while the markets appeared cautious ahead of today's monetary policy decision from the U.S. Federal Reserve. Meanwhile, U.K. Brexit negotiations continued to foster political uncertainty as the nation heads for a June vote, while a German election looms and France's second round of its Presidential election is set for this weekend. 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. Preliminary eurozone Q1 GDP growth came in at a 0.5% quarter-over-quarter pace, matching expectations and Q4's expansion. The euro and British pound dipped versus the U.S. dollar, while bond yields were mostly lower.

Stocks in Asia finished lower, with the markets grappling with festering political and geopolitical uncertainty, along with mixed results from Apple in the U.S., while awaiting today's monetary policy decision by the U.S. Federal Reserve. However, volume was lighter than usual with markets in Japan, Hong Kong and South Korea closed for holidays. Mainland Chinese equities declined in the wake of recent soft readings on the nation's manufacturing and services sector activity, while securities in India also dipped. Markets in Australia fell sharply, with financials leading to the downside amid some continued disappointing earnings reports from the banking sector. 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's international economic calendar will offer the Services PMI Indexes from abroad, as well as trade data from Australia, employment data from Spain, and retail sales from the Eurozone.

Stocks Modestly Higher in Lackluster Session

Charles Schwab: On the Market

Posted: 5/2/2017 4:15 PM ET

Stocks Modestly Higher in Lackluster Session

U.S. equities finished with only slight gains, as mostly positive results on the earnings front were tempered by another bout of disappointing monthly auto sales. As well, caution remained omnipresent ahead of tomorrow's conclusion of the Fed's two-day monetary policy meeting, while political uncertainty remained elevated. Treasury yields and crude oil prices fell, while gold and the U.S. dollar were little changed.

The Dow Jones Industrial Average (DJIA) rose 36 points (0.2%) to 20,950, the S&P 500 Index rose 3 points (0.1%) to 2,391, and the Nasdaq Composite added 4 points (0.1%) to 6,095. In moderately-heavy volume, 908 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq. WTI crude oil declined $1.18 to $47.66 per barrel and wholesale gasoline was $0.02 lower at $1.51 per gallon. Elsewhere, the Bloomberg gold spot price inched $0.39 higher to $1,256.97 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 98.98.

Dow member Pfizer Inc. (PFE $34) reported Q1 earnings-per-share (EPS) of $0.51, or $0.69 ex-items, versus the $0.67 FactSet estimate, as revenues decreased 2.0% year-over-year (y/y) to $12.8 billion, below the projected $13.1 billion. PFE reaffirmed its full-year outlook. Shares were lower as analysts expressed concerns about revenues as some of its key drug franchises missed expectations.

Dow component Merck & Co. Inc. (MRK $63) posted Q1 EPS of $0.56, or $0.88 ex-items, compared to the forecasted $0.83, as revenues rose 1.3% y/y to $9.4 billion, compared to the expected $9.3 billion. MRK raised its full-year guidance. Shares ticked higher as the Street digested mixed sales performances from its key drug franchises.

Aetna Inc. (AET $139) announced a Q1 loss of $1.11 per share, or earnings of $2.71 per share excluding costs associated with the termination of its merger agreement with Humana, versus the forecasted profit of $2.37 per share. Revenues declined 1.0% y/y to $15.5 billion, topping the projected $15.4 billion. AET raised its full-year EPS guidance, with a midpoint above estimates. Shares were nicely higher.

For analysis of our outlook for the health care sector, see Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, article, Health Care Sector Rating: Outperform, on the Markets & Economy page at www.schwab.com. Follow Schwab on Twitter: @schwabresearch.

Mastercard Inc. (MA $118) reported Q1 EPS of $1.00, or $1.01 ex-items, compared to the estimated $0.95, as revenues increased 12.0% y/y to $2.7 billion, roughly in line with forecasts. The company noted that strong revenue and earnings growth was driven by solid transaction volume levels this quarter, led by a noticeable gain in purchases out of its Asia Pacific, Middle East and Africa unit and a jump in Latin America. MA was higher.

Coach Inc. (COH $43) posted fiscal Q3 profits of $0.43 per share, or $0.46 ex-items, versus the projected $0.44, as revenues decreased 4.0% y/y to $995 million, compared to the forecasted $1.0 billion. Shares rallied as Q3 North American same-store sales rose 3.0% y/y, above the expected 1.6% gain. COH maintained its 2017 outlook.

The major automakers reported April sales today, with General Motors Co's (GM $33) sales declining 5.8% y/y, compared to FactSet's projected 1.2% decrease. Fiat Chrysler Automobiles NV's (FCAU $11) Chrysler sales were 7.1% lower, compared to the expected 6.1% fall. Ford Motor Co (F $11) reported a 7.2% drop in sales, versus the expected decline of 5.5%. Shares of the three automakers were lower. However, Toyota Motor Corp (TM $109) gained modest ground after announcing a 4.4% decrease in sales, compared to the 4.6% drop that was expected.

Fed begins policy meeting

Treasuries reversed to the upside in the wake of the monthly auto sales data and on the heels of a recent rebound in bond yields, courtesy of eased European political risk concerns and as earnings season has been mostly on the positive side despite elevated expectations. The yield on the 2-year note dipped 1 basis point (bp) to 1.27%, while the yields on the 10-year note and the 30-year bond lost 3 basis points to 2.29% and 2.98%, respectively.

Focus has turned to the Fed as the Federal Open Market Committee (FOMC) began its two-day monetary policy meeting today, with its statement due out tomorrow afternoon. Expectations are calling for the FOMC to leave the target for the fed funds rate unchanged but the wording of the statement will likely garner heavy scrutiny for clues to the timing of future rate increases. The meeting will conclude with no updated economic projections and will not be followed by a press conference by Fed Chairwoman Janet Yellen.

Ahead of the decision, the economic calendar will bring some key data points, with weekly MBA mortgage applications accompanying ADP's employment change release ahead of Friday's April nonfarm payroll report. However, the headlining morning data will likely be April reads on the pivotal U.S. services sector activity in the form of the ISM non-Manufacturing Index and Markit's Services PMI Index. ISM's report is projected to show growth accelerated slightly to 55.8 from 55.2 in March and Markit's Index is forecasted to show expansion decelerated slightly to 52.5 from the prior month's 52.8 level. Readings above 50 for both indexes depict expansion.

As noted in the latest Schwab Market Perspective: Should Sharp Sentiment Shifts Mean a Change in Strategy?, economic growth continues to muddle through and a recession doesn't appear imminent despite recent mixed data and inflation has been soft, so there is very little impetus for the Fed to move against a market which is expecting no action. Read more on the Markets & Economy page at www.schwab.com, where you can also find Schwab's Chief Fixed Income Strategist, Kathy Jones' article, Three Reasons to Own Bonds When the Fed is Raising Interest Rates. Follow Kathy on Twitter: @kathyjones. Also, Schwab's Vice President of Trading and Derivatives, Randy Frederick and Senior Fixed Income Research Analyst, Collin Martin, CFA, offer a look at the bond markets in the video What's Driving the Ongoing Drop in Long-Term Bond Yields? on the Insights & Ideas page at www.schwab.com. Follow Randy on Twitter: @randyafrederick.

Finally, 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.

Europe higher, Asia mixed after holiday break

European equities finished higher, returning to action from yesterday's holiday, bolstered by some earnings, while eurozone and U.K. manufacturing reports continued to show expansion, with the former hitting a six-year high and the latter growing at the fastest pace in three years. The euro ticked higher and the British pound remained higher versus the U.S. dollar, while bond yields gained ground. The markets awaited tomorrow's monetary policy decision from the Fed, while the second round of the key French Presidential election is slated for this weekend. Also, Brexit negotiations continue ahead of a June U.K. vote, and an election in Germany later this year looms. For analysis of the political uncertainty on both sides of the pond, see Schwab's Jeffrey Kleintop's, CFA, and Randy Frederick's video, Political Risk: How Should Investors Respond? on the Insights & Ideas page at www.schwab.com , where you can also find our article, Brexit Begins: What's Next for the U.K?, 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.

Stocks in Asia finished mixed as several markets returned to action from yesterday's holidays, digesting recent softer-than-expected manufacturing reports out of China, while political uncertainty remains and the focus is shifting to tomorrow's monetary policy decision in the U.S. Japanese equities advanced, with the yen extending its recent slide to help stocks ahead of tomorrow's national holiday. Mainland Chinese shares fell on the heels of the manufacturing reports, but those traded in Hong Kong gained modest ground, aided by some relatively upbeat earnings reports from the banking sector. Stocks in Australia dipped with earnings from the banking sector in focus, along with the unchanged monetary policy stance from the Reserve Bank of Australia, while listings in South Korea rose and India's markets finished flat. Geopolitical concerns continue to join the political uncertainty and see Schwab's Jeffrey Kleintop, CFA, offers his, Missiles and Markets: An investor guide to geopolitical risks on the Markets & Economy page at www.schwab.com, while also delivering a look at the global landscape in his article, Top Five Trade Issues Investors Should Be Watching on the International Investing page at www.schwab.com.

For tomorrow, the international economic calendar will offer employment data from Germany, as well as GDP and PPI from the Eurozone.