Stocks Gain Ground Following Friday's June Jobs Report

Charles Schwab: On the Market

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

Stocks Gain Ground Following Friday's June Jobs Report

U.S. stocks finished nicely higher following the mostly upbeat June nonfarm payroll report that showed job growth for the month was well above projections. Treasury yields extended a recent run and the U.S. dollar was higher, while crude oil prices gave back the previous session's gains and gold was lower. In light equity news, Qualcomm announced that it has filed a patent infringement complaint against Dow member Apple.

The Dow Jones Industrial Average (DJIA) gained 94 points (0.4%) to 21,414, the S&P 500 Index increased 15 points (0.6%) to 2,425, and the Nasdaq Composite jumped 64 points (1.0%) higher to 6,153. In moderately-light volume, 735 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil decreased $1.29 to $44.23 per barrel and wholesale gasoline lost $0.03 to $1.50 per gallon. Elsewhere, the Bloomberg gold spot price dipped $1.96 to $1,225.08 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% higher at 96.00. Markets gained modest ground for the week, as the DJIA increased 0.3%, S&P 500 Index ticked 0.1% higher and the Nasdaq Composite rose 0.2%.

Warren Buffett's Berkshire Hathaway Inc. (BRK/B $171) announced that its energy subsidiary executed an agreement to merge with Energy Future Holdings Corp in an all-cash transaction totaling $9.0 billion, which the company said will ultimately result in the acquisition of Oncor, the largest electricity-transmission operator in Texas. Berkshire traded modestly higher.

Qualcomm Inc. (QCOM $55) announced that it has filed a patent infringement complaint with the U.S. International Trade Commission (ITC) against Dow member Apple Inc. (AAPL $144), seeking to ban certain iPhones from being imported to the U.S.

Shares of both companies traded higher as the technology sector rebounded on the heels of the group's recent rollover after leading the markets higher for the past twelve months to record levels. Schwab's Chief Investment Strategist Liz Ann Sonders offers her commentary, The Space Between … Tech Today Doesn't Resemble Tech Circa 2000, and her latest, 2017 Mid-year US Equity Outlook: Rattle and Hum. Meanwhile, we are maintaining our outperform rating on the tech sector, as discussed in Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, latest Schwab Sector Views: Christmas in July! (Status of the Consumer). Read these articles on the Markets & Economy page at www.schwab.com and be sure to follow us and Liz Ann on Twitter: @schwabresearch and @lizannsonders.

June nonfarm payroll report shows job growth easily tops forecasts

Nonfarm payrolls (chart) rose by 222,000 jobs month-over-month (m/m) in June, compared to the Bloomberg forecast of a 178,000 increase. The rise of 138,000 seen in May was revised to a gain of 152,000 jobs. The total upward revision to the job gains in May and April was 47,000. Excluding government hiring and firing, private sector payrolls increased by 187,000, versus the forecasted gain of 170,000, after increasing by 159,000 in May, revised from the 147,000 rise that was initially reported. Job growth came in healthcare, social assistance, financial activities and mining, while professional and business services and food services and drinking places remained on upward trends.

The unemployment rate ticked higher to 4.4% from 4.3%, where it was forecasted to remain, as the labor force participation rate ticked higher from 62.7% to 62.8%. Average hourly earnings rose 0.2% m/m, below projections of a 0.3% gain and versus May's downwardly revised 0.1% increase. Compared to the last year, average hourly earnings were 2.5% higher, versus the prior month's downwardly revised 2.4% pace and below the projected 2.6% rate. Finally, average weekly hours rose to 34.5 from May's unrevised 34.4 rate, where it was projected to remain.

The report showed job growth remains steady, averaging 180,000 per month thus far this year, roughly in line with the average 187,000 seen in 2016, likely not changing expectations of one more rate hike this year and the beginning of balance sheet reduction by the Fed. The U.S. dollar was higher and Treasury yields added to a recent rally following the employment report, with the yield on the 2-year note increasing 1 basis point (bp) to 1.40%, the yield on the 10-year note rising 2 bps to 2.39%, and the 30-year bond rate gaining 3 bps to 2.93%. Bond yields have rebounded notably from depressed levels seen in mid-June.

However, the Fed noted in its June statement that it was "monitoring inflation closely" and today's weaker-than-expected wage growth suggests inflation remains subdued, possibly throwing a wrench into the Fed's plans if inflation continues to soften. Schwab's Chief Fixed Income Strategist Kathy Jones notes in her Bond Market Mid-Year Outlook: Redefining the Borders of 'Lower for Longer' despite the positives forces on the economic front, we don't see inflation picking up significantly. While the labor market is tightening and wages should pick up, structural changes seem to be tempering the gains. We expect one more rate hike this year by the Fed and a gradual reduction in its balance sheet, assuming inflation doesn't slip further. 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, including how we feel investors should position themselves in this environment on the Fixed Income page at www.schwab.com and follow Kathy on Twitter: @kathyjones.

Finally, for a look at the political front amid heightened geopolitical and policy implementation uncertainty, see Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend's latest article, Washington Midyear Update: 4 Key Issues for Investors to Watch, on the Insights & Ideas page at www.schwab.com.

Europe mixed, Asia mostly lower

European equities finished mixed following today's stronger-than-expected U.S. job growth and as U.K. stocks benefitted from a drop in the British pound on the heels of unexpected declines in the nation's manufacturing and industrial production. Oil & gas issues led to the downside as crude oil prices gave back yesterday's gains, while the markets continued to grapple with recent hawkish commentary from global central banks. Geopolitical concerns remained heightened on the heels of this week's intercontinental ballistic missile (ICBM) test by North Korea and as the G-20 Summit in Germany garnered attention. The G-20 Summit delivered the first meeting between U.S. President Donald Trump and Russian President Vladimir Putin though very few details of the talks were released. The euro was lower versus the U.S. dollar and bond yields in the region were mixed. For a look at the global environment, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, article, Are bonds signaling a major stock market peak? on the Markets & Economy page at www.schwab.com, as well as Jeff's and Vice President of Trading and Derivatives, Randy Frederick's video, How Do U.S. Equity Market Valuations Compare to Other Developed Markets?, on the Insights & Ideas page at www.schwab.com. Follow Jeff and Randy on Twitter: @jeffreykleintop and @randyafrederick. In other economic news, German and Spanish industrial production grew more than expected and France's trade deficit narrowed more than anticipated.

Stocks in Asia finished mostly to the downside, following the declines in the U.S. ahead of today's June employment report and amid heightened geopolitical concerns with North Korea's latest missile test and the G-20 Summit in Germany garnering attention. For more, 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. Also, the recent rally in global bond yields on a flare-up in hawkish central bank tones remained in focus. Japanese equities declined despite some weakness in the yen as the Bank of Japan announced ramped up bond-buying operations. Mainland Chinese stocks rose and shares traded in Hong Kong declined amid a rise in foreign exchange reserves for the fifth-straight month in June and weakness in banking, telecom and video game stocks. Australian securities were dragged down by weakness in oil & gas issues as crude oil prices gave back some of yesterday's gains. South Korean equities traded lower and Indian listings finished flat. With 2017 reaching the halfway point, see Jeffrey Kleintop's, CFA, 2017 Mid-year Global Market Outlook: Broader Growth, Narrower Risks on the International Investing page at www.schwab.com.

Stocks tick higher amid sector divergence

The shortened week for stocks finished with modest gains as the divergence among the major sectors continued to begin the second-half of 2017. Financials extended a rally, along with Treasury yields amid a rise in global bond rates on the recent increase in hawkish sentiment toward global central banks, bolstered by some upbeat data. The U.S. dollar ticked higher as Friday's upbeat domestic labor report was preceded by a plethora of global business activity reports that came in mostly stronger than expected, headlined by U.S. ISM Manufacturing and non-Manufacturing Indexes that unexpectedly showed growth accelerated for June. Technology stocks modestly pared a recent rollover after Friday's rally, though volatility in the group remained elevated. The energy sector saw pressure to hamstring the markets as crude oil prices fell sharply as continued supply concerns overshadowed some bullish domestic oil inventory data. Conviction appeared stunted by the aforementioned global central bank focus and as geopolitical uncertainty flared-up as North Korea conducted its first ICBM test and the market paid close attention to the G-20 Summit in Germany.

As such, next week's U.S. economic calendar is poised to garner heavy attention as the markets grapple with what path the Fed's monetary policy normalization will take. Inflation will come into focus, with the releases of the Producer Price Index (PPI) and Consumer Price Index (CPI), while key hard data will come in the form of retail sales, as well as industrial production and capacity utilization. Sentiment and business activity indicators will also be released, courtesy of the Fed's Beige Book, along with the NFIB Small Business Optimism Index and the preliminary July University of Michigan's Consumer Sentiment Index. However, amid the aforementioned market backdrop, next week's two-day Congressional monetary policy testimony by Fed Chairwoman Janet Yellen will likely headline the docket. Also, earnings season is set to kick off with some major companies out of the financial sector delivering results.

As noted in the latest Schwab Market Perspective: Smooth Sailing for Stocks?, stocks have been drifting along near record highs and background conditions remain relatively positive in the near term. But seasonal tendencies remain a risk and volatility has picked up a bit, so investors should be on alert for a summer pullback. The U.S. economy continues to glide along, with subdued inflation, providing what typically has been a good environment for stocks, though uncertainty regarding future Fed actions has risen. Bond yields have ticked higher and some commodities have recovered, but it's too early to say that the reflation story is regaining credence. Read more on the Markets & Economy page at www.schwab.com.

International reports due out next week that deserve a mention include: Australia—consumer confidence. China—CPI and PPI, along with lending statistics and trade balance. India—CPI, industrial production and trade balance. Japan—machine orders and trade balance. Eurozone—industrial production, new car registrations and trade balance. U.K.—employment change.

Stocks Mixed to Begin the Week

Charles Schwab; On the Market

Posted: 5/1/2017 4:15 PM ET

Stocks Mixed to Begin the Week

Technology issues did the heavy-lifting in today's session, giving the Nasdaq a solid boost and helping the S&P 500 to post a modest gain, but the Dow lost ground in the final minutes. The upward momentum was somewhat tempered by softer-than-expected reads on manufacturing and personal income and spending. As well, caution may have come into play ahead of this week's upcoming Fed decision and April labor report. Elsewhere, Treasury yields continued to recover, gold and crude oil fell, while the U.S. dollar was flat.

The Dow Jones Industrial Average (DJIA) fell 27 points (0.1%) to 20,913, the S&P 500 Index rose 4 points (0.2%) to 2,388, and the Nasdaq Composite jumped 44 points (0.7%) to 6,092. In moderate volume, 754 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil declined $0.49 to $48.84 per barrel and wholesale gasoline was $0.02 lower at $1.53 per gallon. Elsewhere, the Bloomberg gold spot price fell $11.27 to $1,257.01 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 99.11.

Dish Network Corp. (DISH $63) reported Q1 earnings-per-share (EPS) of $0.76, above the $0.70 FactSet estimate, as revenues declined 3.9% year-over-year (y/y) to $3.7 billion, versus the projected $3.8 billion. The satellite TV company's net subscriber additions declined more than expected for the quarter. Shares of DISH finished lower.

Shares of Intra-Cellular Therapies Inc. (ITCI $10) tumbled after the U.S. Food & Drug Administration raised questions regarding the company's experimental schizophrenia treatment and is requesting additional information.

Twitter Inc. (TWTR $18) was nicely higher after Chief Executive Officer (CEO) Jack Dorsey disclosed the purchase of 574,002 shares of the social media company, and as the company announced a streaming video channel partnership with Bloomberg.

Manufacturing growth decelerates, personal income and spending miss

The Institute for Supply Management (ISM) Manufacturing Index (chart) for April slowed but remained in expansion territory (above 50) after declining to 54.8 from 57.2 in March, and versus the Bloomberg forecast of a dip to 56.5. New orders declined but remained solidly in expansion territory and employment growth slowed, while expansion in production and new export orders both accelerated. The ISM said comments from the survey generally reflected stable to growing business conditions.

The final Markit U.S. Manufacturing PMI Index was unrevised at 52.8 for April from the preliminary level, matching estimates, but was down from the 53.3 level posted in March. A reading above 50 denotes expansion. The release is independent and differs from ISM's manufacturing report, as it has less historic value and Markit weights its index components differently.

Personal income (chart) was up 0.2% month-over-month (m/m) in March, below forecasts of a 0.3% gain, and compared to February's downwardly revised 0.3% increase. Personal spending came in flat last month, south of expectations of a 0.2% rise and February's unfavorably revised flat reading. The March savings rate as a percentage of disposable income was 5.9%. The PCE Deflator was down 0.2%, in line with expectations. Compared to last year, the deflator was 1.8% higher, below estimates of a 1.9% gain. Excluding food and energy, the PCE Core Index was down 0.1% m/m, matching expectations, and the index was 1.6% higher y/y, in line with estimates. February's y/y figure was unrevised at a 1.8% increase.

Construction spending (chart) declined 0.2% m/m in March, versus projections of a 0.4% advance, and following February's favorably revised 1.8% jump. Residential spending grew 1.2%, while non-residential spending declined 1.2%.

While the economic calendar will take a breather tomorrow, the rest of the week will bring looks at activity on the heels of the sluggish Q1, including April reads on domestic auto sales and Friday's key nonfarm payroll report. The headlining event will likely be Wednesday's Federal Open Market Committee's (FOMC) monetary policy decision, expected not to deliver another rate hike and be sans updated economic projections and press conference by Chairwoman Janet Yellen. However, the statement could be highly scrutinized for clues to the timing of future rate hikes. Also, earnings will continue to pour in, likely garnering attention.

As noted in the latest Schwab Market Perspective: Should Sharp Sentiment Shifts Mean a Change in Strategy?, we have started to see a modest retreat in "soft" data which may indicate more realism entering the market. We believe this taming of optimism is both healthy and a bit more realistic. 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 that fuel for the bull market will also come from improving earnings. Read more on the Markets & Economy page at www.schwab.com.

Treasuries were lower, as the yield on the 2-year note rose 2 basis points (bps) to 1.28%, the yield on the 10-year note gained 5 bps to 2.33%, and the 30-year bond rate increased 6 bps to 3.01%. Bond yields have shown some signs of recovery on eased European political risk concerns and as earnings season has remained favorable. 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. Also, 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. Follow Randy on Twitter: @randyafrederick.

Finally, the markets are digesting last week's rough framework of President Trump's tax-reform plan, while political uncertainty remains elevated. For a look at the political front, 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, where you can also find Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, and Randy's video, Political Risk: How Should Investors Respond?. Follow Jeff on Twitter: @jeffreykleintop.

International markets mostly higher though several are closed

Stocks in Japan rose with the yen losing ground on the U.S. dollar to boost the Nikkei 225 Index 0.6% higher, while Australia's S&P/ASX 200 Index gained 0.6%, ahead of tomorrow's monetary policy decision from the Reserve Bank of Australia. However, volume was lighter than usual, with markets in Europe, China, India and South Korea remaining closed for holidays. The markets also digested data showing China's manufacturing and services sector growth slowed in April, while continuing to grapple with lingering geopolitical and political uncertainty. For more on this, see Schwab's Jeffrey Kleintop's, CFA, commentary in his article, Missiles and Markets: An investor guide to geopolitical risks on the Markets & Economy page at www.schwab.com, while he also delivers 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.

International markets mostly higher though several are closed

Stocks in Japan rose with the yen losing ground on the U.S. dollar, while securities in Australia also gained ground ahead of tomorrow's monetary policy decision from the Reserve Bank of Australia. However, volume was lighter than usual, with markets in Europe, China, India and South Korea remaining closed for holidays. The markets also digested data showing China's manufacturing and services sector growth slowed in April, while continuing to grapple with lingering geopolitical and political uncertainty. For more on this, see Schwab's Jeffrey Kleintop's, CFA, commentary in his article, Missiles and Markets: An investor guide to geopolitical risks on the Markets & Economy page at www.schwab.com, while he also delivers 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.

Manufacturing PMI reports from around the globe will dominate tomorrow's international calendar, while other items scheduled for release include CPI from South Korea, trade data from Japan, and employment figures from Germany and the Eurozone.

Stocks Touch New All-Time Highs

Charles Schwab: On the Market

Posted: 3/1/2017 4:15 PM ET

Stocks Touch New All-Time Highs

U.S. stocks rallied to fresh all-time highs and international equities were also mostly higher, courtesy of some upbeat manufacturing reports from across the globe which aided an ascent that was seemingly influenced by last night's Presidential address that was delivered to a joint session of Congress. Treasury yields and the U.S. dollar were solidly higher amid heightened expectations of a possible Fed rate hike this month. Crude oil prices dipped and gold was slightly to the upside, while in equity news, Lowe's highlighted the earnings front.

The Dow Jones Industrial Average (DJIA) surged 303 points (1.5%) to 21,115, the S&P 500 Index jumped 32 points (1.4%) to 2,396, and the Nasdaq Composite rallied 79 points (1.3%) to 5,904. In heavy volume, 1.0 billion shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq. WTI crude oil ticked $0.18 lower to $53.83 per barrel and wholesale gasoline lost $0.05 to $1.68 per gallon. Elsewhere, the Bloomberg gold spot price ticked $1.30 higher to $1,249.75 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.6% higher at 101.71.

Lowe's Companies Inc. (LOW $82) reported 4Q earnings-per-share (EPS) of $0.74, or $0.86 ex-items, versus the FactSet estimate of $0.79, as revenues gained 19.2% year-over-year (y/y) to $15.8 billion, topping the projected $15.4 billion. 4Q same-store sales grew 5.1% y/y, north of the estimated 2.4% increase. LOW issued stronger-than-expected current year EPS and revenue guidance. Shares rallied.

Best Buy Co. Inc. (BBY $42) posted 4Q profits of $1.91 per share, or $1.95 ex-items, compared to the expected $1.67, as revenues decreased 1.0% y/y to $13.5 billion, below the forecasted $13.6 billion. Quarterly same-store sales declined 0.7% y/y, versus the estimated 0.7% rise. BBY delivered 1Q guidance that missed the Street's projections. Separately, the company increased its dividend by 21.4% to $0.34 per share and announced a new $3 billion share repurchase program. BBY saw solid pressure.

Dow member McDonald's Corp. (MCD $129) got an afternoon boost after the company announced its new global growth plan during its investor day, including enhancing digital capabilities, establishing new financial targets and initiating a new 3-year plan to return cash to shareholders.

Dollar Tree Inc. (DLTR $77) announced 4Q EPS of $1.36, or $1.39 ex-items, versus the expected $1.32, as revenues increased 5.0% y/y to $5.6 billion, roughly in line with forecasts. 4Q same-store sales rose 1.2% y/y, versus the anticipated 1.8% gain. DLTR issued 1Q and full-year EPS guidance that missed estimates, while its revenue forecasts for the periods bracketed expectations. Shares were higher.

Salesforce.com Inc. (CRM $84) reported a 4Q loss of $0.07 per share, or a profit of $0.28 ex-items, compared to the forecasted $0.25, with revenues rising 27% y/y to $2.3 billion, roughly in line with expectations. CRM issued 1Q guidance that missed forecasts, while its full-year EPS outlook matched estimates and it raised its revenue projection for the year. Shares gained ground.

The big three U.S. automakers reported February sales today, with General Motors Co's (GM $38) sales rising 4.2% y/y, compared to the projected 2.2% increase. Fiat Chrysler Automobiles NV's (FCAU $11) sales fell 10.1%, compared to the expected 8.4% drop. Ford Motor Co (F $13) reported a 4.0% decline in sales, versus the expected 4.7% decrease. Shares of all three companies traded higher.

For a look at investing strategies in the current bull market, see Schwab’s Chief Investment Strategist Liz Ann Sonders' latest article, Radioactive: Is Passive's Dominance Over Active Set to Wane?, at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders.

ISM manufacturing joins string of upbeat global data

The Institute for Supply Management (ISM) Manufacturing Index (chart) for February jumped further into expansion territory (above 50) after rising to 57.7—the highest level since August 2014—from January's 56.0 level and compared to the Bloomberg forecast of a modest rise to 56.2. New orders and production moved further north of 60, though employment dipped but remained above 50. On the heels of the post-election surge in the U.S. dollar, new export orders ticked higher to 55.0. The ISM said comments from the survey largely indicated strong sales and demand, and reflect a positive view of business conditions with a watchful eye on commodities and the potential for inflation.

The report joins a host of upbeat manufacturing data, adding credence to the latest Schwab Market Perspective: Not So Fast!, which notes that the growth outlook for the rest of the world is stable, while the U.S. economy has accelerated thus far in 2017, bolstering our view that the bull market in domestic stocks will continue. Read more at www.schwab.com/marketinsight.

The final Markit U.S. Manufacturing PMI Index was revised slightly lower to 54.2 for February from the 54.3 preliminary level, compared to estimates calling for an adjustment to 54.5. The index is down from the 55.0 level posted in January. A reading above 50 denotes expansion. The release is independent and differs from ISM's manufacturing report, as it has less historic value and Markit weights its index components differently.

Personal income (chart) was up 0.4% month-over-month (m/m) in January, versus the Bloomberg forecast to match December's unrevised 0.3% gain. Personal spending increased 0.2% last month, missing expectations of a 0.3% rise and versus December's unrevised 0.5% gain. The January savings rate as a percentage of disposable income was 5.5%. The PCE Deflator was up 0.4%, below expectations of a 0.5% increase. Compared to last year, it was 1.9% higher, versus of estimates of a 2.0% gain. Excluding food and energy, the PCE Core Index was up 0.3% m/m, matching expectations, and the index was 1.7% higher y/y, in line with estimates to match December's unrevised increase.

Construction spending (chart) fell 1.0% m/m in January, versus projections of a 0.6% advance, and following December's upwardly revised 0.1% increase from a 0.2% decline. Residential spending was 0.3% higher, while non-residential spending fell 1.9%.

The MBA Mortgage Application Index rose 5.8% last week, following the previous week's 2.0% drop. The increase came as a 5.1% gain for the Refinance Index was met with a 6.5% rise for the Purchase Index. The average 30-year mortgage rate dropped 6 basis points (bps) to 4.30%.

At about 2:00 p.m. ET, the Federal Reserve released its Beige Book—an anecdotal look at national economic activity—used as a tool by the Federal Open Market Committee (FOMC) to prepare for its next two-day monetary policy meeting scheduled to end March 15. The report indicated that growth continued at a modest to moderate pace across all twelve districts from early January through mid-February. In regard to jobs the report revealed that labor markets remained tight, but employment grew moderately in most of the nation and pricing pressures were little changed from the prior release.

Treasuries were lower, with the yield on the 2-year note rising 2 bps to 1.28%, and the yields on the 10-year note and the 30-year bond gaining 6 bps to 2.45% and 3.06%, respectively.

Treasury yields and the U.S. dollar rebounded from recent stalls amid heightened expectations regarding the possibility of a Fed rate hike this month. The U.S. stock markets are getting back into rally mode, hitting all-time highs again, bolstered by last night's dialed-down tone in the first Congressional address by President Donald Trump, which although lacked policy plan details, appears to be getting a positive reaction.

For a look at the bond markets, see our article, Should You Hold Bonds or Bond Funds When Interest Rates Rise?, at www.schwab.com/insights, where you can also find Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend's latest article, Washington's Way: Why Trump's Policy Changes Could Take Time. Follow Schwab on Twitter: @schwabresearch. Also, for analysis of the Fed, check out Schwab's Chief Fixed Income Strategist, Kathy Jones' article, What would a shake-up at the Fed mean for bond investors? at www.schwab.com/onbonds, and follow Kathy on Twitter: @kathyjones.

Tomorrow, the U.S. economic calendar will be light, offering weekly initial jobless claims, expected to have ticked slightly higher to a level of 245,000 after registering 244,000 the week prior.

Europe and Asia mostly higher following data and U.S. Presidential address

European equities moved nicely higher, despite heightened expectations of a potential March rate hike in the U.S., with the euro and British pound seeing some pressure and bond yields in the region rising to aid the financial sector. Political concerns cooled in the wake of last night's speech to Congress by U.S. President Donald Trump, though French elections loom to keep political uncertainty intact on this side of the Atlantic. For more on the European political risk, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, and Vice President of Trading and Derivatives, Randy Frederick's video, Why Should the French Presidential Election Be Important to Investors? at www.schwab.com/insights. Also, be sure to check out Jeff's article, Five Reasons to Stay Invested Despite Heightened Uncertainty at www.schwab.com/oninternational. Follow Jeff on Twitter: @jeffreykleintop. Upbeat February global manufacturing reports aided sentiment, with China's stronger-than-expected data being followed by eurozone activity growing solidly and U.S. output hitting a multi-year high.

Stocks in Asia finished mostly higher following some upbeat economic data and as the markets digested last night's Congressional speech from U.S. President Donald Trump without exacerbated concerns. Japanese equities advanced as the yen giving back some recent gains, while a read on the nation's capital spending rose much more than expected in 4Q. Also, the Japan PMI Manufacturing Index for February showed expansion. Stocks trading in mainland China and in Hong Kong increased on the heels of reports showing the nation's manufacturing and services sector growth continued, with the former topping expectations. Australian securities dipped as telecommunications issues fell solidly and despite a stronger-than-expected 4Q GDP report. Indian equities advanced, with banks leading the way, on the heels of late-yesterday's 4Q GDP report that topped estimates. Markets in South Korea were closed for a holiday.

Schwab's Director of International Research, Michelle Gibley, CFA, provides some timely analysis of global investing in her articles, Currency Hedging: 5 Things You Need to Know and Emerging Markets: Why They Deserve a Place in Your Portfolio at www.schwab.com/oninternational, and be sure to check out our release, Why Your Portfolio Needs International Stocks—Despite 2017 Risks at www.schwab.com/insights.

The international economic docket for tomorrow will be relatively light, offering the Import Price Index from Germany and the unemployment rate from Italy and the eurozone, while the latter will also report CPI and PPI.

Stocks Manage Gains Following Jobs Report

Charles Schwab: On the Market

Posted: 2/3/2017 4:15 PM ET

Stocks Manage Gains Following Jobs Report

U.S. stocks staged a solid advance on the heels of a mostly better-than-expected January labor report, though wage growth decelerated more than forecasted. Financials led the ascent as President Trump signed a couple of injunctions aimed at reforming parts of the Dodd-Frank Act and rescinding what's commonly referred to as the fiduciary rule, which deals with the relationship between certain retirement account owners and their advisors. Treasuries were mixed, crude oil prices and gold ticked higher and the U.S. dollar was nearly unchanged.

The Dow Jones Industrial Average (DJIA) increased 187 points (0.9%) to 20,071, the S&P 500 Index was 17 points (0.7%) higher at 2,297, and the Nasdaq Composite gained 31 points (0.5%) to 5,667. In moderate volume, 851 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil ticked $0.29 higher to $53.83 per barrel and wholesale gasoline lost $0.02 to $1.53 per gallon. Elsewhere, the Bloomberg gold spot price added $3.17 to $1,219.13 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—nearly unchanged at 99.76. Markets were mixed for the week, as the DJIA decreased 0.1%, while the S&P 500 Index and Nasdaq Composite gained 0.1%.

Amazon.com Inc. (AMZN $810) reported 4Q earnings-per-share (EPS) of $1.54, above the $1.37 FactSet estimate, as revenues rose 22.0% year-over-year (y/y) to $43.7 billion, compared to the forecasted $44.7 billion. AMZN issued 1Q revenue guidance that missed expectations. Shares traded solidly lower.

Dow member Visa Inc. (V $86) posted fiscal 1Q EPS of $0.86, above the projected $0.78, with revenues rising 25.0% y/y to $4.5 billion, exceeding the forecasted $4.3 billion. The company reiterated its full-year revenue outlook. Shares rallied.

Amgen Inc. (AMGN $168) announced 4Q profits ex-items of $2.89 per share, above the estimated $2.79, as revenues increased 8.0% y/y to $6.0 billion, topping the projected $5.8 billion. AMGN issued 2017 guidance that came in a bit shy of expectations. Shares were nicely higher despite the guidance as the company also announced positive results from a trial of its cholesterol drug Repatha.

Macy's Inc. (M $33) jumped on a report from Dow Jones that Canada's Hudson's Bay Co. (HBAYF $8) made a takeover approach of the department store, citing people familiar with the matter. The report also noted that talks are in the early stage and may not lead to a deal. The Wall Street Journal added that the two companies are also discussing other ways to cooperate, including the possibility of doing a real estate deal. Both companies declined to comment on the reports.

January labor report tops forecasts but wages slow, services sector growth continues

Nonfarm payrolls (chart) rose by 227,000 jobs month-over-month (m/m) in January, compared to the Bloomberg forecast of a 180,000 increase. December was upwardly revised to a gain of 157,000 jobs though the total revision to the prior two months' growth was to the downside by 39,000. Excluding government hiring and firing, private sector payrolls increased by 237,000, versus the forecasted gain of 175,000, after increasing by 165,000 in December, revised positively from the 144,000 rise that was initially reported. Job gains were led by retail trade, construction and financial activities.

The unemployment rate ticked higher to 4.8% from 4.7%, where it was expected to remain, while average hourly earnings rose 0.1% m/m, versus projections of a 0.3% increase, and December's downwardly revised 0.2% increase. Y/Y, wage growth decelerated to a 2.5% increase, the slowest pace since August, from December's downwardly revised 2.8% gain. Finally, average weekly hours remained at December's upwardly revised 34.4 rate, compared to expectations of a 34.3 hours level.

Despite the strong job growth, the slowdown in wage growth likely fostered concerns about the strength in the consumer, the largest contributor to GDP output, but also appeared to ease concerns about the pace of Fed rate hikes this year. The wage data follow's this week's Fed monetary policy decision, which appeared to foster a dovish takeaway by the markets. Schwab’s Chief Investment Strategist Liz Ann Sonders notes in her latest article, Fed Leaves Rates Unchanged, expectations for future rate hikes eased in the immediate aftermath of the Fed's decision, and our view had been that a March rate hike could be on the table; however if the probability does not rise to at least 50% before the meeting, we would expect the Fed to hold off until May or June. As always, the probabilities remain data-dependent. Read more at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders.

The January Institute for Supply Management (ISM) non-Manufacturing Index (chart) dipped to 56.5 from December's downwardly revised 56.6 level, and compared to forecasts of 57.0. However, a reading above 50 denotes expansion. New orders declined but remained comfortably in expansion territory, and prices rose to 59.0, while growth in employment accelerated. The ISM said comments from respondents were mixed, indicating both optimism and a degree of uncertainty in the business outlook as a result of the change in government administration.

The final Markit U.S. Services PMI Index was revised to 55.6 in January from the preliminary 55.1 level, and compared to the 53.9 figure posted in December. The release is independent and differs from ISM's report, as it has less historic value and Markit weights its index components differently. A reading above 50 denotes expansion.

Factory orders (chart) rose 1.3% m/m in December, versus expectations of a 0.5% increase, while November's figure was adjusted favorably to a 2.3% decline. December durable goods orders—preliminarily reported a week ago—were adjusted lower to a 0.5% decrease, versus expectations of an unrevised 0.4% decline. Orders of non-defense capital goods excluding aircraft—a proxy for business spending—were revised slightly lower to a 0.7% increase.

Treasuries were mixed, as the yield on the 2-year note declined 1 basis point (bp) to 1.20%, the yield on the 10-year note was nearly unchanged at 2.48%, and the 30-year bond rate increased 1 bp to 3.10%. For a look at the bond markets, see Schwab's Director of Income Planning, Rob Williams', CFP, and Senior Research Analyst, Cooper Howard's, CFA, latest article, Short-Term Bonds: Why They Could Outperform As Interest Rates Rise, at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch.

Treasury yields, the U.S. dollar and the stock markets have been choppy amid the heightened political uncertainty in the wake of the plethora of moves from President Donald Trump, recent record highs for stocks, and this week's unchanged monetary policy decision from the Fed. Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, 5 Themes to Watch as the Trump Era Begins, at www.schwab.com/insights. Also, Schwab’s Liz Ann Sonders points out in Rise Up: Dow 20k Fails to Thrill Individual Investors, that individual sentiment has become less bullish, while other measures show highly elevated optimism. She adds that extremely low volatility isn't likely to persist, but the bull market is. Read more at www.schwab.com/marketinsight.

Europe gains ground, Asia mixed 

European equities moved higher, with the markets digesting a plethora of mixed earnings and economic data, including the January U.S. nonfarm payroll report, and shrugging off lingering U.S. political uneasiness. Markit's final Eurozone Composite PMI Index—a gauge of business activity in both the services and manufacturing sectors—was revised higher to 54.4 for last month, matching December's level, with a reading above 50 denoting expansion. Separately, eurozone retail sales for December unexpectedly declined. Shares of Banco Popular Espanol SA (BPESY $4) fell after the Spanish bank posted a loss, while Skanska AB (SKBSY $26) rallied after the Swedish builder reported growth in quarterly earnings. The euro was higher and the British pound dipped versus the U.S. dollar, while bond yields in the region were mixed.

For more on global market investing, see Schwab's Jeffrey Kleintop's, CFA, latest article, Five Reasons to Stay Invested Despite Heightened Uncertainty. Also, Jeff delivers his articles, The CURE for a calm Market: Four risks for 2017, and 5 Reasons International Stocks May Underperform In 2017. Read all these articles at www.schwab.com/oninternational.

Stocks in Asia finished mixed ahead of today's January employment report in the U.S., while the markets continued to grapple with U.S. political uncertainty. For more on Trump's policies, see Schwab's Jeffrey Kleintop's, CFA, article, President Trump and Global Trade: How Will Campaign Promises Play Out? at www.schwab.com/oninternational, where you can also find Schwab's Director of International Research, Michelle Gibley's, CFA, latest article, Currency Hedging: 5 Things You Need to Know. Meanwhile, mainland Chinese markets declined, returning to action follow a week long Lunar New Year holiday, while the People's Bank of China increased its short-term interest rate unexpectedly and a report showed growth in manufacturing activity slowed for January. Stocks trading in Hong Kong were also lower.

Japanese equities finished flat as skepticism of the Bank of Japan's bond yield targeting actions was met with the yen pulling back from a recent jump. Australian securities declined and South Korean stocks ticked higher. Indian listings nudged to the upside, continuing a rally that stemmed from this week's annual budget release. For more on international investing, see Michelle Gibley's, CFA, 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.

Stocks end little changed on the week

U.S. stocks finished mixed after oscillating around the unchanged mark, with another flurry of policy actions and comments from President Donald Trump exacerbating concerns regarding, geopolitics, trade relations and immigration. The focus on the political front continued to vector attention away from another string of upbeat economic data, highlighted by accelerated manufacturing output reported by ISM, as well as a mixed earnings front, as Dow member Apple Inc. (AAPL $129) stood out on the upside, while shares of Under Armour Inc. (UA $18) and United Parcel Service Inc. (UPS $106) were hurt by their results. Per data compiled by Bloomberg, of the 274 companies that have reported out of the S&P 500, roughly 50% have topped revenue forecasts, while about 75% have bested earnings estimates. The U.S. dollar continued its recent pullback to a more than two-month low and Treasury yields on the short-to-mid end of the curve retreated. The moves came amid a slightly weaker-than-expected January wage growth component of the labor report and the Fed's unchanged monetary policy decision, which appeared to ease expectations about an acceleration in rate hikes this year. Crude oil prices moved to the upside.

Although next week's domestic economic calendar will be relatively light, headlined by the trade balance, the JOLTS job openings report and the preliminary University of Michigan Consumer Sentiment Index, earnings season will continue to roll on and focus on U.S. politics shows no signs of easing.

As noted in the latest Schwab Market Perspective: A New World, the recent sideways movement of U.S. stocks was a healthy pause in the sharp post-election rally. Continued solid economic data and a decent earnings reporting season bolster our confidence in the continuation of the bull market in stocks. However, rising inflation, possibly forcing the Fed to be more aggressive, could lead to bouts of volatility and more pullbacks. Issuing executive orders to roll back previous executive orders is relatively easy in a lot of cases; but getting tax reform and new health care legislation written and passed will prove to be more difficult for President Trump. Investor and corporate confidence may have gotten a bit ahead of the pace at which many of the administration’s policy priorities can get enacted, and the balance between those which are growth-friendly and those which could retard growth and confidence. Read more at www.schwab.com/marketinsight.

International reports next week that deserve a mention include: Australia—retail sales and the Reserve Bank of Australia's monetary policy decision. China—Caixin China PMI Services Index and trade balance. India—the Reserve Bank of India's monetary policy decision, industrial production and trade balance. Japan—trade balance and machine orders. Eurozone—investor confidence, along with German factory orders, industrial production and trade balance. U.K.—trade balance and industrial production.

Stocks Manage Mild Gains as Fed Holds Steady

Charles Schwab: On the Market

Posted: 2/1/2017 4:15 PM ET

Stocks Manage Mild Gains as Fed Holds Steady

U.S. stocks managed to finish with mild gains amid some favorable earnings results from Dow component Apple and a host of upbeat manufacturing reports out of China, Europe and the U.S. Investors seemed cautious ahead of today's Fed monetary policy decision, which showed the Central Bank will hold its current target rate range. Crude oil prices and the U.S. dollar were higher, while Treasuries and gold were lower.

The Dow Jones Industrial Average (DJIA) increased 27 points (0.1%) to 19,891, the S&P 500 Index was nearly unchanged at 2,279, and the Nasdaq Composite advanced 28 points (0.5%) to 5,643. In moderately heavy volume, 903 million shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq. WTI crude oil ticked $1.07 higher to $53.88 per barrel and wholesale gasoline added $0.03 to $1.58 per gallon. Elsewhere, the Bloomberg gold spot price declined $6.47 to $1,212.17 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—increased 0.2% to 99.51.

Dow member Apple Inc. (AAPL $129) reported fiscal 1Q earnings-per-share (EPS) of $3.36, above the $3.22 FactSet estimate, as revenues rose 3.3% year-over-year (y/y) to $78.4 billion, topping the projected $77.3 billion. The company said its holiday quarter results generated all-time revenue records for its iPhone, Services, Mac and Apple Watch units, with services revenue growing "strongly" y/y, led by record customer activity on the App Store. AAPL's 2Q revenue guidance came in just shy of expectations. Shares finished nicely higher.

Advanced Micro Devices Inc. (AMD $12) posted a fiscal 4Q loss of $0.01 per share, matching forecasts, with revenues rising 15.9% y/y to $1.1 billion, roughly in line with estimates. The graphic chipmaker's 1Q revenue forecast topped expectations and shares rallied.

The big three U.S. automakers reported January sales today, with General Motors Co's (GM $36) sales declining 3.8% y/y, compared to the projected 1.0% decline. Fiat Chrysler Automobiles NV's (FCAU $11) sales fell 11.2%, compared to the expected 14.9% drop. Ford Motor Co (F $12) reported a 0.6% dip in sales, versus the expected 3.2% decline. GM, F and FCAU declined.

Manufacturing growth accelerates in January, Fed holds steady

The Institute for Supply Management (ISM) Manufacturing Index (chart) for January moved farther into expansion territory (above 50) than expected after rising to 56.0—the highest since November 2014—from December's 54.5 level, and compared to the Bloomberg forecast of a modest rise to 55.0. Production and new orders both improved to levels north of 60, and growth in employment accelerated. Prices rose to 69.0 from 65.5, and inventories increased but remained in contraction territory. Amid the backdrop of the strong U.S. dollar, new export orders decreased but remained above 50. The ISM said comments from the survey were generally positive regarding demand levels and business conditions.

The final Markit U.S. Manufacturing PMI Index was revised slightly lower to 55.0 for January from the 55.1 preliminary level, where it was expected to remain. However, the index is up from the 54.3 level posted in December. A reading above 50 denotes expansion. The release is independent and differs from ISM's manufacturing 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 246,000 jobs in January, well above the Bloomberg forecast of a 168,000 gain, while December's increase of 153,000 jobs was revised slightly lower to a 151,000 rise. Today’s ADP data, which does not include government hiring and firing, comes ahead of Friday's broader January  nonfarm payroll report, expected to show an increase of 175,000 jobs, while private sector payrolls are projected to rise by 170,000 (economic calendar). The unemployment rate is forecasted to remain at 4.7%, and average hourly earnings are projected to rise 0.3% month-over-month (m/m).

Today's manufacturing and employment data adds credence to our view in the latest Schwab Market Perspective: A New World, that we believe the market's post-election gains were not solely related to optimism about the pro-business leanings of the new administration, but also reflected improving economic data and better corporate earnings. Continued solid economic data and a decent earnings reporting season bolster our confidence in the continuation of the bull market in stocks. However, rising inflation, possibly forcing the Fed to be more aggressive, could lead to bouts of volatility and more pullbacks. Read more at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch.

The Federal Open Market Committee (FOMC) concluded its two-day monetary policy meeting, opting to keep the target range for the Fed funds rate unchanged at 0.50%-0.75%, as many had expected, after agreeing unanimously to raise the target rate range at its December meeting. It was revealed in the Federal Reserve's FOMC statement that "in view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate." There was no press conference or updated economic projections following the decision. Be sure to check out analysis of the Fed's decision from Schwab's Chief Investment Strategist Liz Ann Sonders later today at www.schwab.com/marketinsight.

Construction spending (chart) declined 0.2% m/m in December, versus projections of a 0.2% advance, and following November's unrevised 0.9% gain. Residential spending was 0.4% higher, and non-residential spending declined 0.7%.

The MBA Mortgage Application Index declined 3.2% last week, following the previous week's 4.0% gain. The decrease came as the Refinance Index fell 1.4%, while the Purchase Index dropped 5.6%. The average 30-year mortgage rate rose 4 basis points (bps) to 4.39%.

Treasuries were lower, with the yield on the 2-year note gaining 1 basis point (bp) to 1.22%, the yield on the 10-year note rising 3 bps to 2.48% and the 30-year bond rate advancing 2 bps to 3.08%.Treasury yields and the U.S. dollar remain in focus with the global markets grappling with the latest policy moves from President Donald Trump, and Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, 5 Themes to Watch as the Trump Era Begins, at www.schwab.com/insights.

On the heels of the pullback in stocks from record highs, Schwab’s Chief Investment Strategist Liz Ann Sonders notes in her latest article, Rise Up: Dow 20k Fails to Thrill Individual Investors, individual sentiment has become less bullish, while other measures show highly elevated optimism. She adds that extremely low volatility isn't likely to persist, but the bull market is. Read more at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders.

Tomorrow's U.S. economic calendar will bring reports on weekly jobless claims, expected to have declined to 250,000 from the prior week's 259,000 level, and preliminary 4Q nonfarm productivity and unit labor costs, with productivity anticipated to have increased 1.0% on an annualized basis and costs forecasted to have risen 1.9%.

Europe snaps losing streak, Asia mostly higher following data

European equities gained ground, snapping a string of losses, with some upbeat Chinese business activity reports being met with some favorable eurozone and U.K. manufacturing data. The currency markets were in focus ahead of today's monetary policy decision in the U.S. and amid festering Brexit uncertainty, while U.S. President Donald Trump criticized currency valuations in Japan, China and Germany. The euro traded lower and the British pound moved higher versus the U.S. dollar, while bond yields in the region traded to the upside. Earnings results in the region were mostly upbeat to help sentiment, and the global tech sector got a boost from results from Dow member Apple.

For more on the global markets, see Schwab's Jeffrey Kleintop's, CFA, latest article, Five Reasons to Stay Invested Despite Heightened Uncertainty. Also, Jeff delivers his articles, The CURE for a calm Market: Four risks for 2017, and 5 Reasons International Stocks May Underperform In 2017. Read all these articles at www.schwab.com/oninternational.

Stocks in Asia finished mostly higher ahead of the U.S. monetary policy decision and some continued volatility in the currency markets following comments from U.S. President Donald Trump that criticized the low valuation of currencies in Japan, China and Germany. For more on Trump's policies, see Schwab's Jeffrey Kleintop's, CFA, article, President Trump and Global Trade: How Will Campaign Promises Play Out? at www.schwab.com/oninternational, where you can also find Schwab's Director of International Research, Michelle Gibley's, CFA, latest article, Currency Hedging: 5 Things You Need to Know. Some upbeat economic data in the region lent some support, with manufacturing and services sector reports out of China both showing growth accelerated in January, with the former topping estimates, while South Korea posted a larger-than-expected jump in exports for last month.

Stocks trading in Hong Kong declined, returning to action after the long Lunar New Year holiday break, while mainland Chinese markets remained closed. South Korean and Australian equities advanced, while Indian securities rallied as traders digested the nation's annual budget. For more on international investing, see Schwab's Michelle Gibley's, CFA, 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.

The international economic docket for tomorrow will include consumer confidence from Japan and PPI from the eurozone, while in central bank action, the Bank of England will announce its rate decision.

Markets Mixed in Choppy Action

Charles Schwab: On the Market

Posted: 1/5/2017 4:15 PM ET

Markets Mixed in Choppy Action

U.S. equities finished mixed, as investors weighed disappointing holiday sales reports from Macy's and Kohl's, as well as a host of upbeat global services sector reports. Treasuries rallied amid mixed labor data ahead of tomorrow's key December nonfarm payroll report, while the U.S dollar tumbled, and gold jumped. Crude oil prices inched higher in the wake of a larger-than-expected drop in the government's oil inventory report.

The Dow Jones Industrial Average (DJIA) declined 43 points (0.2%) to 19,899, the S&P 500 Index ticked 2 points (0.6%) lower to 2,269, while the Nasdaq Composite increased 11 points (0.2%) to 5,488. In moderate-to-heavy volume, 912 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.50 to $53.76 per barrel and wholesale gasoline lost $0.01 to $1.64 per gallon. Elsewhere, the Bloomberg gold spot price jumped $17.64 to $1,181.29 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—tumbled 1.2% to 101.51.

Macy's Inc. (M $31) reported that its same-store sales for November and December were down 2.0% year-over-year (y/y), the low end of its guidance, while also lowering its full-year earnings-per-share (EPS) outlook. The company said its performance during the holiday season reflects the broader challenges facing much of the retail industry. M reaffirmed its full-year same-store sales guidance. The company also announced that it plans to eliminate jobs and close stores. Shares were sharply lower.

Shares of Kohl's Corp. (KSS $42) fell after saying its holiday season same-store sales fell 2.1% y/y, and lowered its full-year EPS outlook. The company said sales were volatile throughout the holiday season, with strong sales on Black Friday and during the week before Christmas being offset by softness in early November and December.

Costco Wholesale Corp. (COST $163) gained ground after the company posted a 3.0% y/y gain in December same-store sales, topping the expected 2.4% increase.

Services sector activity reports top forecasts, ADP employment report misses

The December Institute for Supply Management (ISM) non-Manufacturing Index (chart) remained at November's 57.2, which was the highest since October 2015, and compared to the Bloomberg forecast of a dip to 56.8. A reading above 50 denotes expansion. New orders rose solidly to 61.6 and prices increased modestly to 57.0, while employment fell but continued to denote expansion. 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 53.9 in December from the preliminary 53.4 level, where it was forecasted to remain. The index was below the 54.6 figure posted in November. The release is independent and differs from ISM's report, as it has less historic value and Markit weights its index components differently. A reading above 50 denotes expansion.

The stronger-than-expected growth in the services sector complemented a plethora of upbeat global reports that has helped continue the post-election rally in stocks as discussed by Schwab’s Chief Investment Strategist Liz Ann Sonders in her latest article, Luminous Times: Looking Ahead With Optimism About 2017. She notes that much of the stock market's sharp rally since November has been credited with the presidential election, which fostered rising business, consumer and investor confidence. However, Liz Ann points out that you could have looked in the rearview mirror on Election Day and seen an improvement in the economy along with a return to positive earnings growth. She concludes that we remain optimistic that this is an ongoing secular bull market in U.S. stocks; and the risk of it ending swiftly is low. Read more at www.schwab.com/marketinsight, and follow Liz Ann and Schwab on Twitter: @lizannsonders and @schwabresearch.

The ADP Employment Change Report showed private sector payrolls rose by 153,000 jobs in December, below forecasts of a 175,000 gain, while November's increase of 216,000 jobs was revised slightly lower to a 215,000 rise. Today’s ADP data, which does not include government hiring and firing, comes ahead of tomorrow's broader December nonfarm payroll report, expected to show an increase of 175,000 jobs, while private sector payrolls are projected to rise by 165,000 (economic calendar). The unemployment rate is forecasted to tick higher to 4.7% from 4.6%, and average hourly earnings are projected to rise 2.8% year-over-year (y/y), which would match the biggest y/y advance since the expansion began in June 2009, per Bloomberg.

The wage component of tomorrow's report is likely to garner the heaviest scrutiny as solid job growth has persisted for some time and given the positive impact of accelerating wage growth on the all-important U.S. consumer. However, a sharp upside surprise could foster further rallies for Treasury yields and the U.S. dollar and, as well as stoke simmering inflation expectations, to counter some of the enthusiasm. Schwab's Fixed Income Director, Collin Martin, CFA, discusses the impact of higher inflation in his article, Inflation Is Rising: Time to Consider Treasury-Inflation Protected Securities? at www.schwab.com/onbonds.

Weekly initial jobless claims (chart) fell 28,000 to 235,000 last week, below forecasts of a decline to 260,000, as the prior week's figure was revised lower to 263,000, while volatility around the holiday period likely had an impact. The four-week moving average dropped by 5,750 to 256,750, while continuing claims rose 16,000 to 2,112,000, north of the estimated level of 2,045,000.

Treasuries finished higher, with the yield on the 2-year note declining 5 basis points (bps) to 1.16%, the yield on the 10-year note dropping 8 bps to 2.36%, and the 30-year bond rate falling 9 bps to 2.95%.

Bond yields have been giving back some of a post-election rally, which had been bolstered by a string of upbeat economic data. Moreover, the rally in rates has been fostered by the Fed's December rate hike and a faster-than-previously-forecasted pace of rate increases for 2017. Schwab's Chief Fixed Income Strategist, Kathy Jones discusses the bond markets in a video with Schwab's Vice President of Trading and Derivatives, Randy Frederick titled, How Should Bond Investors Prepare in Light of Fed Outlook for 2017? at www.schwab.com/insights. Kathy also addresses some common questions from investors and considers some of the potential changes facing the fixed income market in her article, Changing Conditions: A Bond Market FAQ, where she notes that yields have surged in recent weeks, extending a rise that started this summer. Kathy concludes that the incoming administration of President-elect Donald Trump raises the prospect of new tax and spending policies that could make the fixed income market more volatile. Read more at www.schwab.com/marketinsight, and follow Kathy and Randy on Twitter: @kathyjones and @randyafrederick.

In addition to the jobs report, tomorrow’s domestic docket holds the trade balance, with economists expecting the November deficit to widen slightly to $44.5 billion from the $42.6 shortfall posted in October, as well as factory orders, forecasted to have fallen 2.5% during November following the 2.7% increase seen the month prior.

Europe ticks higher, Asia mixed following string of upbeat global data

Most European equities finished modestly higher, with a majority of the major sectors rising on continued global economic optimism fueled by a plethora of favorable data, including today's upbeat services sector reports out of the U.S., U.K., Japan, China and Australia. However, financials, which have enjoyed a reprieve this week on eased banking sector concerns, dipped as bond yields in the region were choppy and fell in the U.S. The euro and the British pound rallied versus the U.S. dollar amid some volatility in the currency markets. The greenback continued to give back its recent jump despite the aforementioned economic data, while yesterday's release of the U.S. Federal Reserve's December meeting minutes reiterated intentions of a gradual approach to monetary policy. Also, China's currency continued to stem a recent slide and the Mexican peso reversed to the upside as the nation's central bank announced that it has been intervening in the currency markets. In other economic news, eurozone retail sector output returned to expansion territory for last month.

For timely analysis of the global landscape, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, latest article, 5 Reasons International Stocks May Underperform In 2017, at www.schwab.com/oninternational, as well as his video with Senior Derivatives Analyst Nathan Peterson titled, Brexit, Germany, China: How the Global Economy Could Fare in the New Year at www.schwab.com/insights. Follow Jeff on Twitter: @jeffreykleintop.

Stocks in Asia finished mostly to the upside, with energy issues gaining ground as crude oil prices recovered from the previous day's sharp downside reversal and as services sector reports out of China, Japan and Australia showed growth in the sector accelerated in December. However, Japanese equities declined, giving back some of yesterday's rally as the yen recovered from a recent drop. The economic reports add to a recent string of favorable global data that has buoyed economic sentiment and adds credence to Schwab's Jeffrey Kleintop's, CFA, view in his article, Happy Unrecession: The Alice in Wonderland economy, that while volatility may lie ahead for stocks, a prolonged bear market and recession seem unlikely for 2017. Mainland Chinese stocks and those traded in Hong Kong gained ground as the services sector reports were accompanied by eased liquidity/currency concerns as the yuan extended yesterday's jump and the U.S. dollar fell in the wake of the release of the U.S. Fed's December meeting minutes reiterated intentions of a gradual approach. Listings in India and Australia advanced, while South Korean stocks declined. Schwab's Director of International Research, Michelle Gibley, CFA, offers timely analysis of emerging markets in her latest article, Emerging Markets: Why They Deserve a Place in Your Portfolio. Read the above articles 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, the international economic calendar will be fairly light, with reports scheduled for release to include manufacturing orders and retail sales from Germany, as well as confidence data and retail sales from the Eurozone.

Markets Ring in New Year on Positive Note

Charles Schwab: On the Market

Posted: 1/3/2017 4:15 PM ET

Markets Ring in New Year on Positive Note

Though off the best levels of the day, U.S. equities started 2017 in the green amid a plethora of upbeat global manufacturing reports, headlined by a two-year high in U.S. output, and despite a tumble in crude oil prices. Treasuries finished mixed, while gold and the U.S. dollar were sharply higher. News on the equity front was light, though General Motors responded to a tweet about the automaker's Mexican production from President-elect Trump, and Ford canceled plans for a new $1.6 billion Mexican factory.

The Dow Jones Industrial Average (DJIA) increased 119 points (0.6%) to 19,882, the S&P 500 Index gained 19 points (0.8%) to 2,258 and the Nasdaq Composite added 46 points (0.9%) to 5,429. In heavy volume, 968 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil fell $1.39 to $52.33 per barrel and wholesale gasoline shed $0.05 to $1.62 per gallon. Elsewhere, the Bloomberg gold spot price rose $10.47 to $1,157.97 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—jumped 0.9% higher to 103.18.

General Motors Co. (GM $35) was in focus after President-elect Donald Trump said today on Twitter that the automaker could face a "big border tax" if it does not make its Chevy Cruze automobiles in the U.S. GM responded by saying that it manufactures all Chevy Cruze sedans sold in the U.S. in Lordstown, Ohio, and it builds the Chevy Cruze hatchback for global markets in Mexico, with a small number sold in the U.S. Shares were higher.

Separately, Ford Motor Co. (F $13) announced that it is cancelling plans for a $1.6 billion new plant in San Luis Potosi, Mexico, and will invest $700 million to expand its Flat Rock plant in Michigan into a factory that will build autonomous and electric vehicles along with the Mustang and Lincoln Continental. Shares gained ground.

Revlon Inc. (REV $30) was nicely higher after the company announced restructuring actions in the wake of its merger with Elizabeth Arden that include the elimination of 350 jobs worldwide.

U.S. data joins positive global manufacturing sentiment

The Institute for Supply Management (ISM) Manufacturing Index (chart) for December moved further into expansion territory (above 50) than expected after rising to 54.7 from November's 53.2 level, and compared to the Bloomberg forecast of a modest rise to 53.8. Production and new orders both rose solidly to levels above 60, and growth in employment accelerated slightly, with all these posting new highs for 2016. Prices jumped to 65.5 and inventories declined further below 50. The ISM said forward-looking comments from the survey were largely positive.

The final Markit U.S. Manufacturing PMI Index was revised higher to 54.3 for December from the 54.2 preliminary level, where it was expected to remain. The index is up from the 54.1 level posted in November. A reading above 50 denotes expansion. The release is independent and differs from ISM's manufacturing report, as it has less historic value and Markit weights its index components differently.

Both reports, notably the ISM's index hitting the highest level in two years, add to favorable December manufacturing data out of China, Eurozone and the U.K., bolstering global economic sentiment. The data adds credence to our view in the Schwab Market Perspective: Will the Momentum Continue Into 2017?, that the populist trend seen globally last year may not continue and investors should focus on market reactions in the face of political "shocks" and on the improving global manufacturing picture. Some of the enthusiasm since the election may have pulled some gains from 2017 into 2016, but we believe the economic momentum seen in the latter half of 2016 will continue into 2017. Read more at www.schwab.com/marketinsight, where you can also find Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, look at investing in the major sectors in the New Year in his latest Schwab Sector Views: Entering 2017 the Same Way as 2016.

Construction spending (chart) rose 0.9% month-over-month (m/m) in November, versus projections of a 0.5% advance, and following October's favorably revised 0.6% gain. Residential spending was 1.0% higher, and non-residential spending rose 0.8%.

Treasuries were mixed, as the yield on the 2-year note rose 1 basis point (bp) to 1.22%, while the yield on the 10-year note was flat at 2.44%, and the 30-year bond rate declined 2 bps to 3.05%.

Bond yields are getting back into rally mode as the global manufacturing reports add to a recent string of upbeat economic data. Rates have also been bolstered by high expectations for fiscal stimulus, tax reform and regulatory rollbacks as President-elect Donald Trump is set to take office and the Republicans gain control of Congress later this month. Also, the Fed's highly expected 25 bp increase to its target for the fed funds rate in December included a forecast for more rate hikes in 2017 than it had previously projected. Tomorrow, we will get details of the Fed's decision and 2017 estimates in the form of the minutes from the December meeting (economic calendar). Schwab's Chief Fixed Income Strategist, Kathy Jones discusses the bond markets in a video with Schwab's Vice President of Trading and Derivatives, Randy Frederick titled, How Should Bond Investors Prepare in Light of Fed Outlook for 2017? at www.schwab.com/insights, where you can also find her latest, Changing Conditions: A Bond Market FAQ. Follow Kathy and Randy on Twitter: @kathyjones and @randyafrederick.

Signs of rising inflation have also pressured bond prices and Schwab's Fixed Income Director, Collin Martin, CFA, discusses in his article, Inflation Is Rising: Time to Consider Treasury-Inflation Protected Securities? at www.schwab.com/onbonds.

In addition to the Fed minutes, tomorrow’s economic calendar will offer only MBA Mortgage Applications.

Europe and Asia move higher on global data

European equities mostly traded to the upside, with financials leading the way, bolstered by a recovery in the troubled Italian banking sector, while upbeat global economic data boosted sentiment and commodity-related issues. U.K. manufacturing output grew at the fastest pace since June 2014 and complemented today's upbeat U.S. reports out of the sector. Global economic optimism was bolstered by signs of continued expansion in the eurozone and China that were posted in the past few days. Also, inflation statistics in Germany heated up for December, joining a separate release showing German unemployment fell more than expected last month. The euro and the British pound lost ground versus the U.S. dollar, while bond yields in the region mostly moved to the upside. For timely analysis of the global landscape, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, latest article, 5 Reasons International Stocks May Underperform In 2017, at www.schwab.com/oninternational, as well as his video with Senior Derivatives Analyst Nathan Peterson titled, Brexit, Germany, China: How the Global Economy Could Fare in the New Year at www.schwab.com/insights. Follow Jeff on Twitter: @jeffreykleintop.

Stocks in Asia finished higher following some upbeat Chinese manufacturing data, while volume was lighter than usual as markets in Japan were closed for a holiday. The Caixin China PMI Manufacturing Index improved to 51.9 in December from 50.9 in November, where it was expected to remain. The report followed China's official manufacturing and services sector reports over the weekend that showed growth continued to expand last month. Mainland Chinese stocks and those traded in Hong Kong gained ground following the data, which added to a recent string of data suggesting stabilization in the world's second-largest economy. 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). The data also bolstered commodity-related issues, helping equities in Australia finish higher, while listings in South Korea and India also notched gains. 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. Read both articles at www.schwab.com/oninternational, and be sure to check out our latest release, Why Your Portfolio Needs International Stocks—Despite 2017 Risks at www.schwab.com/insights.

Markit’s Manufacturing PMI readings from across the globe will dominate tomorrow’s international economic calendar, while other reports slated for release include employment data from Spain, lending statistics from the U.K., and CPI from Italy.