Markets Notch Solid Weekly Gains

Charles Schwab: On the Market

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

Markets Notch Solid Weekly Gains

 

U.S. equities finished out the week solidly in the green on optimism surrounding reports that final-hour tweaking of the tax reform bill appears to be enough to pass it after yesterday's uncertainty. Treasury yields were mixed as industrial production missed expectations but the prior month's jump was revised higher, crude oil prices also diverged, while the U.S. dollar and gold finished higher. Upbeat results from Costco and yesterday's jump in retail sales upped the consumer outlook.

The Dow Jones Industrial Average (DJIA) increased 143 points (0.6%) to 24,652, the S&P 500 Index was 24 points (0.9%) higher at 2,676, and the Nasdaq Composite jumped 80 points (1.2%) to 6,937. In heavy volume due to quadruple witching, or the simultaneous expiration of options and futures contracts, 2.4 billion shares were traded on the NYSE and 3.2 billion shares changed hands on the Nasdaq. WTI crude oil increased $0.26 to $57.30 per barrel and wholesale gasoline lost $0.02 to $1.65 per gallon. Elsewhere, the Bloomberg gold spot price moved $2.84 higher to $1,255.80 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.5% higher at 93.93. Markets were higher for the week, as the DJIA increased 1.3%, the S&P 500 Index rose 0.8%, and the Nasdaq Composite advanced 1.4%.

Costco Wholesale Corp. (COST $193) reported fiscal Q1 earnings-per-share (EPS) of $1.45, or $1.36 ex-items, versus the $1.34 FactSet estimate, as revenues rose 13.2% year-over-year (y/y) to $31.8 billion, above the projected $31.1 billion. Q1 same-store sales grew 10.5% y/y, versus the expected 10.2% gain. Shares were nicely higher.

Oracle Corp. (ORCL $48) posted fiscal Q2 EPS of $0.52, or $0.70 ex-items, compared to the projected $0.68, with revenues rising 6.0% y/y to $9.6 billion, roughly in line with forecasts. ORCL increased its share repurchase plan by $12 billion, but the company issued Q3 guidance that was below expectations. Shares saw solid pressure.

Adobe Systems Inc. (ADBE $177) announced Q4 EPS of $1.00, or $1.26 ex-items, versus the expected $1.16, as revenues grew 25.0% y/y to $2.0 billion, mostly matching estimates. The company issued Q1 and 2018 revenue guidance that matched forecasts, while its Q1 EPS outlook was above expectations. Shares were higher.

CSX Corp. (CSX $53) announced that its Chief Executive Officer (CEO) Hunter Harrison is on medical leave due to unexpected complications from a recent illness. The board has named Chief Operating Officer James Foote as acting CEO. Shares finished decisively lower.

Shares of Sirius XM Holdings Inc. (SIRI $5) fell after announcing a decision by the Copyright Royalty Board (CRB) of the Library of Congress that will require the royalty rate it has to pay for a five-year period starting January 1, 2018 to increase. The rate will rise to 15.5% of gross revenues from its current rate of 11.0% and well above expectations.

Industrial production slightly misses, but prior month's strong gain revised higher

Industrial production (chart) rose 0.2% month-over-month (m/m) in November, slightly below the Bloomberg estimate of a 0.3% gain, but October's solid 0.9% rise was upwardly revised to a 1.2% jump. Manufacturing production ticked higher and mining output jumped, though utilities production dropped. Capacity utilization ticked higher to 77.1% from the prior month's unrevised 77.0% rate, and compared to forecasts of 77.2%. Capacity utilization is 2.8 percentage points below its long-run average.

The Empire Manufacturing Index showed output from the New York region slowed more than expected but remained solidly at a level depicting expansion (a reading above zero) for December. The index decreased to 18.0 from November's unrevised 19.4 level, with forecasts calling for a decline to 18.7.

Treasuries were mixed, as the yield on the 2-year note rose 3 basis points (bps) to 1.84% and the yield on the 10-year note was flat at 2.35%, while the 30-year bond rate dipped 3 bps to 2.68%. In her video, What Could Fixed Income Investors Expect in 2018?, Schwab's Chief Fixed Income Strategist Kathy Jones offers three reasons we think investors might want to be a bit more cautious about where they look for yield in 2018.

The Treasury yield curve continues to flatten and the U.S. dollar found support after yesterday's jump in retail sales followed Wednesday's highly-expected Fed rate hike as discussed by Schwab's Senior Fixed Income Research Analyst, Collin Martin, CFA, in his article, Fed Raises Rates, Projects More to Come in 2018, as well as Schwab's Chief Investment Strategist Liz Ann Sonders' and Vice President of Trading and Derivatives Randy Frederick's video, How Will Rate Hike Affect Investors?.

Tax reform continued to be in focus and Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend analyzes in his latest commentary, Tax Plan Set for Final Vote, the deal reached on Capitol Hill regarding a massive tax package that would cut the corporate tax rate and make sweeping changes to individual taxes. Late-yesterday's flared up uncertainty regarding if the bill has enough support is being calmed by headlines suggesting final-hour adjustments to the bill will likely be enough ahead of next week's expected vote. Also, Schwab's Director of Tax and Financial Planning, Hayden Adams, CPA, offers analysis of 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.

Europe and Asia mixed on U.S. tax reform uncertainty

European equity markets traded mixed, with the euro giving back early gains versus the U.S. dollar amid choppy trading to help provide some late-day support and help offset a flare-up in U.S. tax reform uncertainty ahead of an expected vote sometime next week. Technology issues remained hamstrung, and consumer discretionary stocks led to the downside. Bond yields in the region pared losses to help financials limit a downside move and German markets finished higher, while the nation's central bank upped its economic growth forecast. The U.K. markets rose as the British pound fell, pressured by increased Brexit uncertainty as talks move on to the next stage but revolve around trade, which is seen to be a tougher hurdle to overcome than previous negotiations that have been contentious. In economic news, the eurozone trade surplus narrowed more than expected for October.

Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers his, 2018 Global Market Outlook: Three Actions to Take for the Year Ahead, in which he says stay invested: with 2018 global stock market gains potentially being in the double-digits and go global: as international stocks may outperform U.S. stocks in 2018. Jeff also urges investors to rebalance: with rebalancing back to target allocations important as 2018 gains in stocks may result in a higher risk asset allocation ahead of a potential recession and bear market.

Stocks in Asia finished mixed as the scrutiny of the deal reached on tax reform by lawmakers in the U.S. heats up as it moves closer to a final vote. Also, the markets are digesting this week's Fed rate hike that was followed by unchanged monetary policy decisions from the European Central Bank and the Bank of England yesterday. The yen moved higher to pressure Japanese equities, and while the nation's Q4 Tankan Large Manufacturing Index improved more than expected, suggesting sentiment is improving, the Tankan outlook component came in a bit below forecasts. Stocks in mainland China and Hong Kong fell amid some continued paring of solid gains seen this year amid the market uncertainty. The Global markets have been bolstered by the broadest economic growth in a decade and is expected to continue in 2018 as discussed by Schwab's Jeffrey Kleintop, CFA, in his article, 5 Reasons Investors Should Give Thanks. Meanwhile, stocks in Australia declined, but South Korean listings rose, and markets in India advanced amid some supporting exit polls that suggested continued support for Prime Minister Modi's party, per Bloomberg. After the closing bell, India reported a sharp jump in the country's exports for November.

Stocks move higher as tax reform and data bolster fresh record highs

Stock markets moved back to record high territory this week amid optimism tax reform successfully scaled the reconciliation hurdle clearing a way to a final vote, while a jump in retail sales suggested the health of the all-important U.S. consumer was strong. Moreover, Dow member Walt Disney Co's (DIS $111) $52 billion agreement to acquire a large portion of Twenty-First Century Fox Inc. (FOXA $35) fueled a positive M&A sentiment. The telecommunications sector extending its recent run, and consumer-related stocks rallied to lead a broad-based advance, which saw technology issues regain some of its momentum that has led the year's decisive rally as the tax-reform sector rotation out of the group seemed to ease. However, the utilities sector was the lone group in the red after the Fed's highly-expected rate hike and forecast for more to come in 2018.

Outside the stock market trading was choppy as the Fed's hike was followed by unchanged monetary policy decisions from the European Central Bank, Bank of England and Swiss National Bank. The Treasury yield curve continued to flatten, with the 2-year rate rallying but the 10-year note finished little changed and the 30-year bond yield slipped. The U.S. dollar was extending last week's gain but following a mid-week slide and flared-up tax reform uncertainty the greenback lost momentum and finished little changed to slightly down. Crude oil prices rallied early on amid exacerbated supply concerns on a key pipeline crack and a gas plant explosion overseas, but lost ground and finished near the unchanged mark on the heels of mixed oil & gas inventory data.

Next week will the last before the Christmas holiday and the economic calendar will hopefully bring more gifts than coal, with a fully-loaded sleigh of releases including: the NAHB Housing Market Index, housing starts and building permits, existing home sales, the final revision of Q3 GDP, the Leading Index, personal income and spending, durable goods orders, new home sales, and the final December University of Michigan Consumer Sentiment Index.

Schwab's Chief Investment Strategist Liz Ann Sonders notes in our 2018 Market Outlook: U.S. Stocks and Economy, animal spirits are keeping business optimism alive and well: U.S. growth broadly—and capex and productivity specifically—should remain healthy in 2018. Late cycle tendencies should be on investors’ radar screen: A tight labor market augurs for higher wage growth, higher inflation and tighter monetary policy. Tax reform would be a plus, but skepticism is warranted: Failure to pass tax reform would dent business and investor confidence, but not necessarily actual growth or corporate earnings.

International reports due out next week include: China—property prices. Japan—trade balance and the Bank of Japan's monetary policy decision. Eurozone—consumer price inflation and German business confidence. U.K.—consumer confidence and final read on Q3 GDP.

Equities take a Ride on the Global Stock Slide

Charles Schwab: On the Market

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

Equities take a Ride on the Global Stock Slide

 

Domestic stocks traded lower, joining a global equity slump as global market participants remain uncertain about the prospect of a successful overhaul of U.S. tax policy. Treasury yields were lower and the U.S. dollar was mostly flat after recovering from some early pressure. In equity news, tech stocks led the decline and a cautious outlook from Target weighed on consumer discretionary listings. Crude oil prices added to a recent selloff and gold reversed to the downside. 

The Dow Jones Industrial Average (DJIA) fell 138 points (0.6%) to 23,271, the S&P 500 Index lost 14 points (0.6%) at 2,565, and the Nasdaq Composite declined 32 points (0.5%) to 6,706. In moderate volume, 844 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil declined $0.37 to $55.33 per barrel and wholesale gasoline was $0.02 lower at $1.74 per gallon. Elsewhere, the Bloomberg gold spot price ticked $1.79 lower to $1,278.46 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 93.79.

Target Corp. (TGT $54) reported Q3 earnings-per-share (EPS) of $0.87, or $0.91 ex-items, versus the $0.86 FactSet estimate, as revenues increased 1.4% year-over-year (y/y) to $16.7 billion, above the projected $16.6 billion. Q3 same-store sales rose 0.9% y/y, topping the expected 0.4% gain. TGT said it was pleased with its Q3 performance, including traffic and sales growth that demonstrate it is building on the progress it saw in the first half of the year. The retailer issued Q4 EPS guidance with a midpoint below estimates, while its same-store sales outlook had a midpoint above expectations, as it added that it expects the Q4 environment to be highly competitive but it is confident in its holiday season plans. TGT raised its full-year guidance. Shares traded sharply lower.

Shares of Acorda Therapeutics Inc. (ACOR $17) tumbled after the company announced that some patients had developed a severe blood infection called sepsis and some died during a late-stage trial of its treatment for Parkinson's disease.

Retail sales and consumer price inflation roughly match expectations

Advance retail sales (chart) for October rose 0.2% month-over-month (m/m), compared to the Bloomberg forecast of a flat reading and compared to September's upwardly revised 1.9% increase. Last month's sales ex-autos were up by 0.1% m/m, versus expectations of a 0.2% gain, and following the favorably revised 1.2% increase seen in the previous month. Sales ex-autos and gas gained 0.3% m/m, in line with estimates, and versus September's upwardly revised 0.6% gain. The retail sales control group, a figure used to help calculate GDP, increased 0.3%, matching projections, and versus the prior month's favorably revised 0.5% gain.

Sales gains were widespread, led by activity at sporting goods, hobby, book and music stores, food services and drinking places, clothing stores, and auto dealers. However, sales declined at gasoline stations, building material and garden equipment stores, and at nonstore retailers, which includes on line shopping.

Today's report, highlighted by the positive upward revisions to September's figures, suggests the consumer remains relatively healthy heading into the key holiday shopping season. Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, notes in his latest, Schwab Sector Views: 'Tis the Season…Almost, much of the U.S. economy arguably comes down to how the consumer is faring. Brad adds that it would be difficult to view the status of the consumer as anything less than mostly positive with unemployment historically low, wages trending higher and still low interest rates conspiring to boost consumer confidence. He concludes that this holiday season could shape up to be a solid one but offers some headwinds facing retailers that lead us to maintain our marketperform rating for the consumer discretionary sector.

The Consumer Price Index (CPI) (chart) ticked 0.1% higher m/m in October, matching estimates, while September's 0.5% rise was unrevised. The core rate, which strips out food and energy, was up 0.2% m/m, in line with expectations and compared to September's unrevised 0.1% rise. Y/Y, prices were 2.0% higher for the headline rate, matching forecasts, while the core rate was up 1.8%, above of projections of a 1.7% increase. September's y/y figures showed unrevised 2.2% and 1.7% rises for the headline and core rates, respectively.

The Empire Manufacturing Index showed output from the New York region slowed but remained solidly at a level depicting expansion (a reading above zero) for November. The index decreased to 19.4 from October's unrevised 30.2 level—which was the highest since 2014—with forecasts calling for a decline to 25.1.

The MBA Mortgage Application Index rose 3.1% last week, following the prior week's flat reading. The increase came as a 6.3% jump in the Refinance Index was accompanied by a 0.4% gain in the Purchase Index. The average 30-year mortgage rate remained at 4.18%.

Business inventories (chart) were flat m/m in September, matching forecasts, and versus August's downwardly revised 0.8% increase.

Treasuries finished mostly higher, with the yield on the 2-year note little changed at 1.68%, while the yield on the 10-year note declined 5 basis points (bps) to 2.32% and the 30-year bond rate decreased 6 bps to 2.77%.

Treasury yields and the U.S. dollar remain under pressure as risk aversion appears to be continuing, with the global stock markets pulling back from the recent rally. Fiscal and monetary policy uncertainties are countering a relatively positive economic landscape, though caution has ramped up following soft Chinese economic data as of late. As such, check out our article, Does Low Market Volatility Portend a Market Tumble?, as well as Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend's latest commentary, Tax Reform: Key Differences Between the Senate and House Plans.

Tomorrow, the U.S. economic calendar will offer the Import Price Index for October, expected to have increased 0.4% m/m, after rising 0.7% in September and weekly initial jobless claims, forecasted to have dipped to 235,000 from the previous week's level of 239,000. Additionally, we'll receive the Fed's October industrial production and capacity utilization report, forecasted to show production advanced 0.5% m/m and utilization ticked higher to 76.3%. The housing market will also garner attention with tomorrow's release of the NAHB Housing Market Index, with economists anticipating November's reading to inch lower to 67 from the 68 posted in October, where the 50 mark represents the point of separation for good versus poor conditions.

Europe sees pressure and Asia falls as global markets turn cautious

Most European equity markets traded to the downside, with energy and commodity-related issues seeing pressure amid the continued risk aversion in the markets, exacerbated by festering U.S. tax reform skepticism, recent disappointing Chinese economic data and the pullback in crude oil prices. However, Spanish stocks bucked the trend, bolstered by solid gains in the country's banking sector, which helped the European financial sector overcome early losses. The euro and the British pound were little changed versus the U.S. dollar, while bond yields in the region finished mixed. In economic news, the September eurozone trade surplus widened more than expected, while U.K. employment unexpectedly declined. As noted in the latest Schwab Market Perspective: Incredible, Amazing…Unstop-a-bull?, momentum favors the bulls for the foreseeable future, but elevated valuations and growing investor complacency pose risks that could lead to a long-awaited pullback and/or a pickup in volatility from today’s extremely low base.

Stocks in Asia finished broadly lower as the global markets appear to be skittish following the recent rally as U.S. tax reform uncertainty lingers and Chinese economic data has been softer than expected as of late. Japanese equities fell, with the yen gaining ground, while the nation reported Q3 GDP growth of 1.4% on a quarter-over-quarter annualized basis, missing the 1.5% projection and compared to the upwardly revised 2.6% expansion posted in Q2. Shares trading in mainland China and Hong Kong dropped, while stocks in Australia and South Korea also traded lower. Indian securities moved to the downside, on the heels of late-yesterday's disappointing October trade report.

Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, notes in his latest article, 5 Reasons Investors Should Give Thanks, the record breaking streak of gains in the global stock market this year has been supported by the broadest global economic growth in a decade. Stocks appear to closely track earnings growth, even where risks are most intense. Broad economic and earnings growth is expected to continue in 2018.

The international economic docket for tomorrow will include housing loans and machine tool orders from Japan, inflation expectations and employment data from Australia, the unemployment rate from France and retail sales from the U.K.

Stocks Advance to Begin the Week

Charles Schwab: On the Market

Posted: 10/16/2017 4:15 PM EDT

Stocks Advance to Begin the Week

 

U.S. stocks began the week on a positive note as shares continued the recent record run on the heels of an unexpected jump in regional manufacturing activity that coupled with some upbeat Chinese economic data to aid global economic optimism. The advance for stocks may have been limited as market participants await a host of earnings and economic reports expected later this week. Treasury yields and the U.S. dollar ticked higher, while gold was flat and crude oil added to last week's gains. In equity news, Nordstrom traded lower after suspending its search to go private. 

The Dow Jones Industrial Average (DJIA) increased 85 points (0.4%) to 22,957, the S&P 500 Index added 4 points (0.2%) to 2,558, and the Nasdaq Composite gained 18 points (0.3%) to 6,624. In moderate-to-light volume, 695 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq. WTI crude oil increased $0.42 to $51.87 per barrel and wholesale gasoline was flat at $1.62 per gallon. Elsewhere, the Bloomberg gold spot price lost $9.00 to $1,294.82 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% higher at 93.31.

Nordstrom Inc. (JWN $40) saw heavy pressure after the retailer announced, in light of the difficulty of obtaining debt financing in the current retail environment, it suspended active exploration, for the balance of the year, of the possibility of proposing a transaction to take the company private. The company said it intends to continue its efforts to explore the possibility of making a going private proposal after the conclusion of the holiday season.

Aramark (ARMK $42), a provider of uniforms and food to schools and stadiums, announced agreements to acquire competitors Avendra for about $1.35 billion, as well as AmeriPride Services Inc. for $1.0 billion. ARMK finished little changed.

Regional manufacturing activity jumps to three-year high

The Empire Manufacturing Index showed output from the New York region jumped further into a level depicting expansion (a reading above zero) for October. The index rose to 30.2—the highest since 2014—from September's unrevised 24.4 level, with the Bloomberg forecast calling for a decline to 20.2.

Treasuries dipped, with the yield on the 2-year note rising 4 basis points (bps) to 1.53%, the yield on the 10-year note advancing 3 bps to 2.30%, and the 30-year bond rate ticking 1 bp higher to 2.82%. Bond yields and the U.S. dollar nudged higher and have been choppy as inflation remains in focus and global economic growth remains steady, while global monetary policy uncertainty lingers and the markets continue to grapple with the potential for tax reform.

For more on this backdrop, see Schwab's Chief Investment Strategist Liz Ann Sonders' article, The Waiting: Wage Growth and Inflation Finally Getting in Gear?, and Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, commentary, Inflation May Be The Biggest Question For Investors In 2018.

Moreover, Jeff discusses, How the Shift by Central Banks May Affect the Stock Market, and talks in the video with Vice President of Trading and Derivatives, Randy Frederick, Should a Change in Fed Leadership Matter to Investors?, while Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend, delivers his article, Tax Reform Framework Released, But The Road Ahead Is Long.

Check out these articles and video on the Market Commentary page at www.schwab.com. Follow our Schwab experts on Twitter: @lizannsonders, @jeffreykleintop, @kathyjones and @randyafrederick.
Tomorrow, the U.S. economic calendar will offer the Import Price Index for September, expected to have increased 0.6% month-over-month (m/m), matching the increase seen in August. Additionally, we'll receive the Fed's September industrial production and capacity utilization report, forecasted to show production increased 0.3% m/m and utilization ticked higher to 76.2%. The housing market will also garner attention with tomorrow's release of the NAHB Housing Market Index, with economists anticipating October's reading to match the 64 posted in September, where the 50 mark represents the point of separation for good versus poor conditions.

Europe mixed, Asia mostly higher 

European equity markets finished mixed amid persistent global economic optimism following some upbeat Chinese and U.S. economic data, while a report showed the eurozone trade surplus widened more than expected. Crude oil prices extended last week's gains to support the energy sector, bolstered by reports of turmoil in parts of Kirkuk, a Kurdish-controlled oil rich province, per Reuters. For more on the energy sector, check out Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, latest, Schwab Sector Views: Sustainable Energy? on the Market Commentary page at www.schwab.com. Political uncertainty remained elevated, with Catalonia calling for talks with the Spanish government, which is pressing it to clarify if it declared independence, while U.K.

Prime Minister Theresa May headed to Brussels to talk with European officials as Brexit negotiations remain in a deadlock. For analysis, see Schwab's Jeffrey Kleintop's, CFA, and Randy Frederick's video, Political Risk: How Should Investors Respond?, and our article, Brexit Begins: What's Next for the U.K?, on the Market Commentary page at www.schwab.com. The euro dipped and British pound was little changed versus the U.S. dollar, while bond yields in the region lost ground.

Stocks in Asia finished mostly higher on the heels of last week's gains in the U.S. to fresh record highs, culminating with a cooler-than-expected consumer price inflation reading that kept accelerated Fed monetary policy tightening concerns in check. Japanese stocks continued to rally, for their tenth-straight session of gains, rising to levels not seen in over two decades, despite some strength in the yen as the U.S. dollar slipped. Mainland Chinese stocks declined and shares trading in Hong Kong advanced following mixed reads on inflation in September, as well as late-Friday's reports that showed lending activity topped forecasts for last month. The markets are awaiting a flood of Chinese economic data this week, headlined by its Q3 GDP report, along with the beginning of the 19th National Congress of the Communist Party. South Korean equities moved higher, while Indian and Australian securities gained ground. Schwab's Jeffrey Kleintop, CFA, and Randy Frederick discuss in the video, Are Investors Underestimating the Stock Market Rally?, on the Market Commentary page at www.schwab.com.

The international economic docket for tomorrow will yield new motor vehicle sales from Australia, CPI, PPI and house prices from the U.K., investor confidence from Germany and CPI for the Eurozone.

Stocks Stretch Record Runs Despite Data

Charles Schwab: On the Market

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

Stocks Stretch Record Runs Despite Data

U.S. stocks added to strong weekly gains after shrugging off softer-than-expected retail sales and industrial production reports and showing some resiliency in the face of a terror attack in London and another North Korean missile test. Quadruple witching likely added to the day's volatility and volume. Treasury yields modestly extended their weekly advance and the U.S. dollar pared its weekly gain as the euro and British pound extended recent gains. Crude oil was little changed and gold was lower.

The Dow Jones Industrial Average (DJIA) increased 65 points (0.3%) to 22,268, the S&P 500 Index gained 5 points (0.2%) to 2,500, and the Nasdaq Composite increased 19 points (0.3%) to 6,448. In heavy volume, 2.1 billion shares were traded on the NYSE and 2.7 billion shares changed hands on the Nasdaq. WTI crude oil was flat at $49.89 per barrel and wholesale gasoline moved $0.03 higher to $1.66 per gallon. Elsewhere, the Bloomberg gold spot price declined $8.67 to $1,321.07 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% lower at 91.87. Markets were nicely higher for the week, as the DJIA rallied 2.2%, the S&P 500 Index jumped 1.6% and the Nasdaq Composite gained 1.4%.

Oracle Corp. (ORCL $49) reported fiscal Q1 earnings-per-share (EPS) of $0.52, or $0.62 ex-items, versus the $0.60 FactSet estimate, as revenues grew 7.0% year-over-year (y/y) to $9.2 billion, above the projected $9.0 billion. The company noted that the sustained "hyper-growth" of its cloud business continued to drive increased revenue and earnings. However, the company's Q2 guidance missed expectations. Shares fell solidly.

Retail sales miss to kick off heavy day of data

Advance retail sales (chart) for August declined 0.2% month-over-month (m/m), compared to the Bloomberg forecast of a 0.1% gain and compared to July's downwardly revised 0.3% gain. Last month's sales ex-autos grew by 0.2% m/m, versus expectations of a 0.5% gain, and following the negatively revised 0.4% increase seen in the previous month. Sales ex-autos and gas were down 0.1% m/m, compared to estimates of a 0.3% rise, and versus July's unrevised 0.5% rise. The retail sales control group, a figure used to help calculate GDP, decreased 0.2%, compared to the projected 0.2% rise, and the prior month's figure was unrevised at a 0.6% rise.

Auto activity fell solidly, along with clothing and online sales, while electronics and appliances, and building materials were also lower. Sales of furniture, and at restaurants, food and beverage stores and gas stations all moved higher. Commenting on the potential impact of Hurricanes Harvey and Irma on the data, the U.S. Census Bureau said overall response was within the range of the past 12 months even though collection in the impacted areas lagged behind recent months.

The preliminary University of Michigan Consumer Sentiment Index (chart) dipped to 95.3 in September from the prior month's 96.8 level, and compared to expectations for it to decline to 95.0. The current economic conditions component improved m/m, while the expectations measure dropped. The 1-year inflation forecast ticked higher to 2.7% from August's 2.6% rate, while the 5-10 year inflation outlook rose to 2.6% from 2.5%.

Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, notes in his article, Consumer Discretionary Sector Rating: Marketperform, the status of the all-important U.S. consumer looks to us to be solid and hasn't shown signs of diminishing to any great degree at this point, but the retail sector faces challenges that warrant our rating. We view the retail sector is "right sizing," which could ultimately help the group down the road. Read more on the Markets & Economy page and follow us on Twitter: @schwabresearch.

Industrial production (chart) fell 0.9% m/m in August—after six-straight monthly gains—versus estimates calling for a 0.1% gain, and compared to July's upwardly revised 0.4% increase. Manufacturing and mining production both declined, while utilities output fell sharply. Capacity utilization declined to 76.1% from July's upwardly revised 76.9% rate, and compared to forecasts of a 76.7% rate. Capacity utilization is 3.8 percentage points below its long-run average. The Federal Reserve noted that Hurricane Harvey is estimated to have reduced the rate of change in total output by roughly ¾ percentage point.

The Empire Manufacturing Index showed output from the New York region remained solidly at a level depicting expansion (a reading above zero) for September. The index dipped to 24.4 from August's unrevised 25.2 level, with forecasts calling for a reading of 18.0.

Business inventories (chart) rose 0.2% m/m in July, matching forecasts, and versus June's unrevised 0.5% increase.

The impact of the hurricanes on incoming data will likely cloud the economic picture in coming months, but as Schwab's Chief Investment Strategist Liz Ann Sonders notes in her article, Trying to Reason with Hurricane Season: The Aftermath of "Harma", we expect to see a dip in economic activity in the short-term, followed by a boost associated with the recovery/rebuilding efforts, and the impact will unlikely dent the Fed's plans to continue monetary policy normalization. Read more on the Markets & Economy page at www.schwab.com and follow Liz Ann on Twitter: @lizannsonders.

Treasuries finished lower, with the yields on the 2-year and 10-year notes rising 2 basis points (bps) to 1.38% and 2.20%, respectively, while the 30-year bond rate was flat at 2.77%.

Bond yields are modestly extending this week's sharp rebound from a recent drop back to November lows that came despite upbeat economic data. Yesterday's acceleration in consumer price inflation appeared to bring the Fed back into focus, with expectations of a December rate hike nudging higher, per data compiled by Bloomberg. Schwab's Chief Fixed Income Strategist, Kathy Jones, and Vice President of Trading and Derivatives, Randy Frederick, provide analysis of the bond markets in the video, The Economy is Picking Up, But Bond Yields Are Falling—What's That About?, with Kathy noting that the disconnect between the fixed income markets and the economy is about inflation. Read more on the Insights & Ideas page and follow Kathy and Randy on Twitter: @kathyjones and @randyafrederick.

The U.S. dollar pared its weekly gain, amid flared-up North Korean tensions and another terrorist attack in London. Also, the British pound extended a jump that came from boosted U.K. rate hike expectations. Schwab's Chief Global Investment Strategist 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.

Europe lower as pound and euro rally

European equity markets finished lower, with the euro trading higher versus the U.S. dollar, while the British pound extended its surge to levels not seen in over a year. The pound has jumped on increased rate hike expectations in the wake of yesterday's Bank of England (BoE) monetary policy decision and bolstered hawkish commentary today from a BoE member that had been labeled as dovish. Another missile test over Japan by North Korea and another reported terrorist attack in London likely hampered sentiment, but the reaction appeared limited. Bond yields moved higher, led by the U.K., amid the heightened BoE expectations. In economic news, the eurozone trade surplus narrowed more than expected in July and the region's wage growth posted the fastest pace in two years.

For a look at global investing, see Schwab's Jeffrey Kleintop's, CFA, 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 Randy Frederick, Is An Optimistic Outlook for Global Equities Warranted?, on the Insights & Ideas page.

Stocks in Asia finished mixed after overcoming a brief bout of risk aversion as North Korea conducted another missile test over Japan. The yen reversed to the downside after an early boost on the North Korean missile launch news, helping Japanese equities gain ground, while South Korean stocks also advanced to display some resiliency. Shares trading in India and Hong Kong ticked higher. Mainland Chinese stocks declined on the heels of yesterday's disappointing retail sales and industrial production reports, which continued to weigh on materials issues, leading to a move to the downside for Australian securities. However, after the closing bell, China reported stronger-than-expected lending statistics for August. Amid the backdrop of the resiliency in the global markets, check out Schwab's Jeffrey Kleintop's, CFA, article, What are fund flows telling us about trends and risks in the global stock market?, as well as his commentary, An important benefit to global investors is back after 20 years, on the Markets & Economy page at www.schwab.com.

Stocks back on the weekly winning track

U.S. stocks got back to their weekly winning ways, rallying to fresh record highs amid reversals in the currency and bond markets, which contributed to last week's snapped winning streak. Early estimates suggesting Hurricane Irma's economic cost impact could be less than feared underpinned sentiment. Texas refining activity recovered from Hurricane Harvey's blow to boost crude oil prices to the best weekly performance since late July, per Bloomberg. The energy sector led the equity market's weekly jump. Tech stocks posted a respectable gain, bolstered by a rally leading up to Dow member Apple Inc's(AAPL $160) new iPhone unveiling. Consumer price inflation showed signs of accelerating against the favorable economic backdrop—small business optimism unexpectedly improved and the JOLTS' job openings surprisingly posted a record high—to appear to bring the Fed back in focus. The U.S. dollar rebounded from levels not seen in well over two years—though it pared gains on the pound's surge—and Treasury yields jumped off of multi-month lows to boost the financial sector.

This sets the stage for next week's economic calendar that will bring the Federal Open Market Committee's (FOMC) monetary policy decision, which is not expected to deliver a rate hike but could bring the commencement of the slow winding down of the Fed's behemoth $4.5 trillion balance sheet. Housing data will also be in focus, with the releases of the NAHB Housing Market Index, housing starts and building permits and existing home sales. Markit's September preliminary business activity reports and the Leading Index will round out the docket.

As noted in the latest Schwab Market Perspective: A Cat and Mouse Fall, U.S. stocks remain near all-time highs, but we expect some continued churn as fall is shaping up to bring a series of political, geopolitical and monetary policy conflicts which could contribute to greater volatility. Ample global liquidity, healthy economic growth combined with a solid earnings outlook should ultimately allow the bull market to continue. Global economic growth is looking good and is helping to fuel investor optimism over further gains in international stock markets. Read more on the Markets & Economy page at www.schwab.com.

International reports due out next week that deserve a mention include: China—property prices. Japan—trade balance and the Bank of Japan monetary policy decision. Eurozone—Consumer Price Index and Markit's September business activity reports, as well as German investor confidence. U.K.—retail sales.

Markets Flat Amid Investor Caution

Charles Schwab; On the Market

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

Markets Flat Amid Investor Caution

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Europe and Asia mostly higher as geopolitical concerns remain in retreat

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

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

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

Stocks Nearly Flat, Flood of Earnings on Tap

Charles Schwab: On the Market

Posted: 7/17/2017 4:15 PM ET

Stocks Nearly Flat, Flood of Earnings on Tap

U.S. equities finished the first trading session of the week nearly where they started, as investors appeared to be in wait-and-see mode ahead of an acceleration in Q2 earnings season. Treasury yields dipped, along with crude oil prices, while the U.S. dollar was flat and gold ticked higher. News on the economic front was limited, with manufacturing in the New York region remaining in expansion territory, while data out of China was upbeat.

The Dow Jones Industrial Average (DJIA) ticked 6 points lower to 21,632, the S&P 500 Index was nearly unchanged at 2,459, and the Nasdaq Composite increased 2 points to 6,314. In light to moderate volume, 674 million shares were traded on the NYSE and 1.5 billion shares changed hands on the Nasdaq. WTI crude oil lost $0.52 to $46.02 per barrel and wholesale gasoline was unchanged at $1.56 per gallon. Elsewhere, the Bloomberg gold spot price gained $5.14 to $1,233.84 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 95.11.

BlackRock Inc. (BLK $425) reported Q2 earnings-per-share (EPS) of $5.22, or $5.24 ex-items, versus the $5.40 FactSet estimate, as revenues rose 6.0% year-over-year (y/y) to $3.0 billion, roughly in line with expectations. The investment management company said while significant cash remains on the sidelines, investors have begun to put more of their assets to work. Shares traded lower.

J.B. Hunt Transport Services Inc. (JBHT $94) posted Q2 EPS of $0.88, below the Street's $0.91 estimate, with revenues increasing 7.0% year-over-year (y/y) to $1.7 billion. The company said benefits of volume growth and increases in revenue producing truck counts were substantially offset by lower customer rates and higher costs, including rail and over the road transportation costs and higher driver wages and recruiting costs. Shares overcame early pressure and were higher.

Shares of FedEx Corp. (FDX $215) came under pressure after the company disclosed in a regulatory filing that the impact of the June cyberattack at its TNT unit is still being evaluated but is likely material, citing loss of revenue due to decreased volumes and remediation/contingency costs.

The stock markets are at record highs and Q2 earnings season is set to ramp up, projected to show a growth rate of 6.8%, with nine sectors reporting expansion, led by a sharp rebound in the energy sector, per data compiled by FactSet. For analysis, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, latest article,  Where's the Next Bubble?, and Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, latest Schwab Sector Views: Christmas in July! (Status of the Consumer) on the Markets & Economy page at www.schwab.com. Be sure to follow us and Jeff on Twitter: @schwabresearch and @jeffreykleintop.

Regional manufacturing activity remains in expansion territory, kicking off economic docket

The Empire Manufacturing Index showed output from the New York region slipped but remain in expansion territory (a reading above zero) for July. The index declined to 9.8 from June's unrevised 19.8 level, with the Bloomberg forecast calling for a reading of 15.0.

Today's report kicks off the economic week, which will likely share the spotlight with earnings season but bring updates on areas of the economy that have been bright spots. Housing will dominate the docket, beginning with tomorrow's release of the July NAHB Housing Market Index, with economist expecting the read of homebuilders' view of the housing market to remain at June's level of 67, with housing starts and building permits coming later in the week. Moreover, we are getting the first look at manufacturing activity for July, as the Empire Manufacturing Index will be followed by the Philly Fed Manufacturing Index. The week will culminate with the Index of Leading Economic Indicators, which is projected to continue to indicate further economic expansion. Tomorrow's docket will also include the Import Price Index.

Schwab's Chief Investment Strategist Liz Ann Sonders notes in her commentary, 2017 Mid-year US Equity Outlook: Rattle and Hum, stocks have had a remarkable—and recently drama-free—run over the past eight-plus years. We are likely in a more mature phase, which could be marked by bouts of volatility and/or pullbacks—possible driven by Fed policy. But liquidity remains ample, financial conditions loose and earnings growth healthy; which have underpinned this bull for much of its history. Those are the key things on which to keep an eye as we head into the year's second half. Read more on the Markets & Economy page at www.schwab.com and follow Liz Ann on Twitter: @lizannsonders.

Treasuries finished higher, as the yields on the 2-year and 10-year notes, as well as the 30-year bond, all declined 2 basis points (bps) to 1.35%, 2.31% and 2.90%, respectively.

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

The political front remains in focus as the markets look to the highly scrutinized revised Senate healthcare bill, which faces a vote as the Republicans hold a slim majority. The vote has been delayed again due to Senator McCain's eye surgery. Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend discusses in his latest article, Washington Midyear Update: 4 Key Issues for Investors to Watch, dysfunction, drama and ethical issues in the White House have combined with Republican infighting on Capitol Hill to bog down the policy agenda. There's growing concern among congressional Republicans that the much-anticipated policy changes will need to be significantly scaled back—or that they may not happen at all. Read more on the Insights & Ideas page at www.schwab.com.

Europe and Asia mixed following China data and ahead of ECB decision

European equities finished mixed, with oil & gas and basic materials stocks gaining ground following a plethora of upbeat Chinese economic data, headlined by better-than-expected Q2 GDP growth. Financials dipped amid a decline in most global bond yields and technology stocks saw some pressure, while conviction may have been held in check by this week's upcoming monetary policy decision from the European Central Bank and as earnings season is set to ramp up. Also, the markets eyed the second round of U.K. Brexit negotiations. For analysis of the political front see Schwab's Jeffrey Kleintop's, CFA, and Vice President of Trading and Derivatives, Randy Frederick's video, Political Risk: How Should Investors Respond? on the Insights & Ideas page at www.schwab.com, where you can also find our article, Brexit Begins: What's Next for the U.K?. Follow Randy on Twitter: @randyafrederick. In economic news, eurozone consumer price inflation came in flat month-over-month in June, matching expectations. The euro was little changed and the British pound was lower versus the U.S. dollar.

Stocks in Asia finished mixed, despite some favorable Chinese economic data, though volume was lighter than usual as Japanese markets were closed for a holiday. Mainland Chinese shares fell sharply, despite the Asian nation posting y/y Q2 GDP growth of 6.9%, versus the projected 6.8% expansion, matching Q1's pace, while it also reported stronger-than-expected retail sales, fixed asset investment and industrial production for June. Sentiment appeared to be hampered by a flare-up in regulatory crackdown concerns in the wake of the country's National Financial Work Conference over the weekend. Stocks in Hong Kong, however, advanced. In the wake of the data, Schwab's Jeffrey Kleintop, CFA, offers his 2017 Mid-year Global Market Outlook: Broader Growth, Narrower Risks on the International Investing page at www.schwab.com. Telecommunication, healthcare and financial stocks pressured Australian equities, while markets in India and South Korea advanced, extending a run of record highs for the countries' indexes. For more on emerging markets, see Schwab's Jeffrey Kleintop's, CFA, article, The Long Period of Underperformance for Emerging Market Stocks May Finally Be Over on the International Investing page at www.schwab.com.

Tomorrow's international economic calendar will offer the minutes from the Reserve Bank of Australia's latest monetary policy meeting, CPI, PPI and the Retail Price Index from the U.K., as well as the Zew Economic Sentiment Survey from Germany.

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.

Trump, Brexit Uncertainty Sap Stocks, Dollar

Charles Schwab: On the Market

Posted: 1/17/2017 4:15 PM ET

Trump, Brexit Uncertainty Sap Stocks, Dollar

U.S. equities finished the first trading session of a shortened week lower, as comments from President-elect Donald Trump ahead of his inauguration this week sparked some political uncertainty, pressuring the U.S. dollar. Moreover, the British pound rallied as U.K. Prime Minister May offered details of her country's Brexit plans. A continued pullback in Treasury yields pressured financials, despite stronger-than-expected quarterly results from Morgan Stanley. Meanwhile, gold jumped and crude oil prices ticked higher.

The Dow Jones Industrial Average (DJIA) decreased 59 points (0.3%) to 19,827, the S&P 500 Index was 7 points (0.3%) lower at 2,268 and the Nasdaq Composite declined 35 points (0.6%) to 5,539. In moderate volume, 882 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil inched $0.11 higher to $52.48 per barrel and wholesale gasoline lost $0.01 to $1.60 per gallon. Elsewhere, the Bloomberg gold spot price rose $13.03 to $1,215.76 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—tumbled 0.8% to 100.36.

Morgan Stanley (MS $42) reported 4Q earnings-per-share (EPS) of $0.81, above the $0.65 FactSet estimate, as revenues rose 16.9% year-over-year (y/y) to $9.0 billion, topping the projected $8.5 billion. The company said it had solid results in its sales & trading and advisory unit, and record revenues in wealth management, while managing expenses prudently. MS added that it is optimistic about opportunities in 2017 and beyond. Shares finished solidly lower.

Dow member UnitedHealth Group Inc. (UNH $161) posted 4Q EPS ex-items of $2.11, versus the expected $2.07, as revenues rose 8.9% y/y to $47.5 billion, north of the projected $47.4 billion. UNH reaffirmed its 2017 guidance, though the outlook was mostly below expectations. Shares came under pressure. .

Tiffany & Co. (TIF $80) announced that its same-store sales for the holiday period declined 2.0% y/y, while noting that it expects 2016 EPS to decline by no more than a mid-single digit percentage. Shares were lower.

J.C. Penney Co. Inc. (JCP $7) announced an agreement with Dow member Nike Inc. (NKE $54) to put Nike shops in over 600 JCP stores. Shares of both companies were higher.

Reynolds American Inc. (RAI $58) gained solid ground after British American Tobacco PLC. (BTI $113) announced a deal where it will acquire the remaining 57.8% of RAI that it does not already own for $59.64 per share in cash and stock, in a deal valued at about $49.4 billion.

Growth in regional manufacturing activity slows more than expected

The Empire Manufacturing Index showed output from the New York region slipped but remained in expansion territory (a reading above zero) for January. The index declined to 6.5 from December's downwardly revised 7.6 level, with the Bloomberg forecast calling for an 8.5 reading.

Today's data kicks off another shortened week for the U.S. markets, with a heating up 4Q earnings season continuing to vector some attention away from the economic calendar, which will begin to heat up tomorrow with the release of the Consumer Price Index (CPI), forecasted to have increased 0.3% month-over-month (m/m) during December, following the 0.2% m/m rise in November, while the core rate, which excludes food and energy, is expected to have risen 0.2% m/m, matching the prior month's reading, as well as the Federal Reserve's industrial production and capacity utilization report, with economists expecting a 0.6% m/m increase in production, rebounding from the 0.4% m/m decline, and for capacity utilization to have ticked higher to 75.4% from November's 75.0% level. Rounding out the day will be the January NAHB Housing Market Index, forecasted to show a reading of 69, a shade lower than the 70 registered in December, but well above the 50 level that marks the demarcation point of homebuilders characterizing the housing market as good versus poor.

As noted in the Schwab Market Perspective: A Perfect Mix?, the conditions for a continuation of the long-running equity bull market appear to be intact. The recent digestion of gains since the election is a healthy process as it forestalls a potentially dangerous "melt-up" scenario, at least for now. Economic data and corporate earnings growth are conspiring with a boost in consumer and business confidence to ignite "animal spirits." Add in a Federal Reserve that is slowly normalizing monetary policy, but still remains accommodative, and we see a good mix for further equity gains. Manufacturing has rebounded around the globe, and could continue on a positive trajectory in the first half of 2017. Read more at www.schwab.com/marketinsight.

Treasuries were higher, with the yield on the 2-year note declining 5 basis points (bps) to 1.14%, the yield on the 10-year note dropping 7 bps to 2.33%, and the 30-year bond falling 6 bps to 2.93%.

Treasury yields and the U.S. dollar are pulling back amid posturing on comments from President-elect Donald Trump ahead of his inauguration this week and as the British pound is rallying following Brexit comments from U.K. Prime Minister May. Schwab's Chief Fixed Income Strategist, Kathy Jones discusses the bond markets and the recent rally in the greenback in her articles, Changing Conditions: A Bond Market FAQ and Will the U.S. Dollar Bull Market Continue in 2017?, at www.schwab.com/marketinsight. Follow Kathy on Twitter: @kathyjones.

Against the backdrop of the late-2016 rally in the stock markets, Schwab’s Chief Investment Strategist Liz Ann Sonders and Vice President of Trading and Derivatives, Randy Frederick offer their latest video, Record Territory: Could the Bull Market Continue in 2017? Watch the video at www.schwab.com/insights, where you can also find Senior Vice President of the Schwab Center for Financial Research, Mark Riepe's, CFA, latest podcast, 7 Principles for Investing Success, as well as our 2017 Schwab Market Outlook.

Europe mostly lower, Asia mixed as traders digest comments out of U.S. and U.K.

European equities finished mostly lower, with the currency markets in focus following comments from U.S. President-elect Donald Trump and U.K. Prime Minister (PM) May. Trump noted that the U.S. dollar was already "too strong," while U.K. PM May eased "hard" Brexit concerns, despite saying that the country will seek to exit the European Union's (EU) single market. May noted that the U.K. parliament will get a vote on the final Brexit deal and adding that she was confident a deal can be reached with the EU and will seek a "smooth and orderly Brexit." The British pound rallied sharply and the U.S. dollar fell noticeably. For commentary on the Brexit vote fallout, see Schwab's Director of International Research, Michelle Gibley's, CFA, article, Keep Calm and Carry On: The Brexit Shock That Wasn't. German investor confidence improved in January but by a smaller amount than expected. The euro gained ground on the greenback and bond yields in the region finished mostly to the downside.

Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, notes in his latest article, The CURE for a calm Market: Four risks for 2017, that after a calm post-election climb, developments in China, United Kingdom, Russia, and Europe may bring a return of stock market volatility. However, Jeff points out that better and broader global economic growth should help offset these risks and result in stock market gains for 2017. Read these articles at www.schwab.com/oninternational, where you can also find Jeff's commentary, 5 Reasons International Stocks May Underperform In 2017. Follow Jeff on Twitter: @jeffreykleintop.

Stocks in Asia finished mixed, ahead of a speech by U.K. Prime Minister May on Brexit plans, while the U.S. dollar is falling in the wake of comments from U.S. President-elect Donald Trump, which warned that the greenback is too strong while suggesting he is open to changes in global trade policy, notably with China. For more on Trump's trade policies, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, article, President Trump and Global Trade: How Will Campaign Promises Play Out? at www.schwab.com/oninternational. Japanese equities fell sharply, with the yen gaining ground amid the U.S. dollar's drop, while broad-based weakness led Australia's markets lower. However, mainland Chinese stocks and those in Hong Kong advanced, with the markets in China snapping a string of weakness, bolstered by the government's efforts to boost liquidity ahead of the Lunar New Year holiday, which will begin at the end of this month. Also, a host of China data is slated for this week, headlined by the release of its 4Q GDP report. For more on China, see Schwab's Director of International Research, Michelle Gibley's, CFA, article, 5 Big Risks Posed by China (And Why They Shouldn't Crash Global Markets in 2017) at www.schwab.com/oninternational.

South Korean stocks gained ground, though stocks in India declined, despite some strength in emerging market currencies in the wake of the pressure on the greenback. Schwab's Michelle Gibley, CFA, offers timely analysis of emerging markets in her latest article, 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 offer CPI from Germany and the Eurozone, as well as employment data from the U.K.