Financial Review

Everybody’s Doing It

Sinclair Noe — November 7, 2017

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DOW + 8 = 23,557 (Record)
SPX – 0.49 = 2590
NAS – 18 = 6767
RUT – 18 = 1479
10 Y – .01 = 2.31%
OIL – .41 = 56.94
GOLD – 6.70 = 1275.80

Cryptocurrency

• Number of Currencies: 902
• Total Market Cap: $201,041,381,484
• 24H Volume: $5,222,370,086

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	7,279.0	$122.09B	$2.44B	46.66%	1	+2.49%	+14.15%
	Ethereum	ETH	293.21	$28.28B	$544.34M	10.42%	0.0404424	+0.49%	-3.10%
	Bitcoin Cash	BCH	623.42	$10.62B	$389.40M	7.46%	0.0865799	+3.13%	+41.45%
	Ripple	XRP	0.20416	$8.03B	$117.18M	2.24%	0.00002847	-0.75%	+3.87%
	Litecoin	LTC	60.290	$3.28B	$440.74M	8.44%	0.00835343	-0.76%	+9.78%
	Dash	DASH	284.79	$2.22B	$85.71M	1.64%	0.039539	-0.87%	+3.68%
	NEO	NEO	26.194	$1.71B	$33.20M	0.64%	0.00359807	-0.30%	-7.02%
	NEM	XEM	0.18085	$1.63B	$5.08M	0.10%	0.00002476	+1.03%	-2.87%
	Monero	XMR	98.23	$1.52B	$65.79M	1.26%	0.0135968	-0.16%	+13.54%
	Ethereum Classic	ETC	13.7054	$1.37B	$181.84M	3.48%	0.00192914	+1.22%	+33.03%

The Dow Industrial average floundered in negative territory for much of the trading day, and then managed to pull out a modest gain – enough for another record high close. Go figure.

Tax reform is the number one thing on everybody’s minds right now. The Senate has indicated they’re going to announce their own bill Thursday, and that bill is extensively based off the House bill, but there’s likely to be some important differences.

The number of job openings in the U.S. rose slightly in September to 6.09 million, keeping them near a record high. Job openings have topped 6 million for four months in a row for the first time ever. The Labor Department’s JOLT survey, or Job Openings and Labor Turnover, shows 5.27 million people were hired in September, down from 5.42 million. And 5.24 million people lost their jobs, also down from the prior month.

The so-called quits rate among private-sector employees was unchanged at 2.4%. The quit rate edged up to 2.2% from 2.1% if government workers are included. The higher quit rate indicates more people are confident about landing a new job and therefore willing to quit their old job.

Total consumer credit increased $20.8 billion in September to a record seasonally adjusted $3.79 trillion, posting an annual growth rate of 6.6%. This is up from a $13.1 billion gain in August.  All categories of borrowing showed strength in September.

Nonrevolving credit, which covers loans for education and cars, rose at an annual rate of 6.3% in September, up from 3.3% rate in August. Revolving credit, which is mostly made up of credit-card loans, increased at an annual rate of 7.7% in September.

Self-driving cars have graced public roads for almost a decade—but always with a person behind the wheel. Waymo, the autonomous car unit from Google parent Alphabet, will soon start chauffeuring people in minivans without “safety drivers,” a milestone for the internet giant’s bid to lead the crowded pack trying to commercialize driverless technology. And they have picked Phoenix as their test market.

We don’t yet know the specific date for the beginning of the pilot program, but a Waymo service will arrive soon, allowing people/volunteers/guinea pigs to hail the cars with a mobile app, like services like Uber and Lyft. Waymo has partnered with Lyft but hasn’t shared details on that deal. Waymo’s driver-less cars will roll out in selected areas of Chandler, Arizona and then expand throughout the metro Phoenix area.

Third quarter earnings have been coming in better than expected, but a miss can result in sharp punishment. Today’s example – Snap. The company, which runs the Snapchat mobile-messaging app, said third-quarter revenue was $207 million, falling short of the $235 million analysts predicted, as the price per ad declined 60 percent. Daily users averaged 178 million, missing estimates. Shares dropped 22% in after-hours trade.

Twitter says users can now send tweets with as many as 280 characters, double the current limit, the latest attempt by the social media company to revive anemic user growth. The company started testing the longer tweet limit with a small group of users in September. Twitter found that people with the expanded character limit spent less time editing their tweets. Those people also got more followers, spent more time on the platform and interacted more with other users on the service.

Some Twitterati think brevity is the soul of the service and worry the longer form will ruin what’s special about it. However, many of Twitter’s 330 million monthly active users were already getting around the limit by linking to longer pieces, taking screenshots of full stories, and sending streams of tweets … called tweetstorms to complete thoughts.

All major Persian Gulf stock markets slid today and oil prices are adding a risk premium on jitters about Saudi Arabia’s sweeping anti-graft purge. Authorities detained dozens of top Saudis including billionaire Prince Alwaleed bin Talal in a move widely seen as an attempt by Crown Prince Mohammed bin Salman to suppress political opposition.

Trump endorsed the crackdown, saying some of those arrested have been “milking” Saudi Arabia for years. Saudi banks have frozen more than 1,200 accounts belonging to individuals and companies in the kingdom and the number keeps rising.

Investors worry that his campaign against corruption – involving the arrests of the kingdom’s most internationally known businessmen – could see the ownership of businesses and assets become vulnerable to unpredictable policy shifts.

Authorities sought to reassure the business community, with the Saudi central bank saying it was freezing suspects’ personal bank accounts at the request of the attorney general but not suspending operations of their companies.

In Washington, the U.S. State Department said it was not informed in advance of the Saudi crackdown, but it had been reassured by Riyadh that any prosecutions of suspects would be undertaken in a fair and transparent manner.

The show of investor nerves coincided with sharply heightened strains between Riyadh and Tehran, as Prince Mohammed denounced Iran over its role in Yemen. Iran has denied it was behind a recent Yemen-based missile launch that targeted Riyadh. The Saudi military intercepted the missile.

A new set of data taken from an offshore law firm again threatens to expose the hidden wealth of individuals and show how corporations, hedge funds and others may have skirted taxes. A year after the Panama Papers, the International Consortium of Investigative Journalists has published the Paradise Papers, a massive collection of confidential information on offshore accounts.

The Paradise Papers documents include nearly 7 million loan agreements, financial statements, emails, trust deeds and other paperwork over nearly 50 years from inside Appleby, a prestigious offshore law firm with offices in Bermuda and beyond.

The Paradise Papers reveal offshore interests and activities of more than 120 politicians and world leaders, plus information on more than 100 multinational corporations. Here are some of the findings:
Jim Simons, the billionaire founder of hedge fund Renaissance Technologies, has amassed more than $7.5 billion in a previously undisclosed, four-decade-old fund set up in Bermuda.

Warren Stephens, an Arkansas banker and Republican donor, used a Bermuda-based family trust to reduce his tax bill and conceal his interest in a payday lender under U.S. scrutiny.

More than a dozen members of President Donald Trump’s inner circle, including Secretary of State Rex Tillerson and top economic adviser Gary Cohn, held undisclosed offshore companies.

Robert Mercer, a Republican donor who just said he would step down as Renaissance Technology’s co-CEO, was revealed to be a director of more than eight of RenTech’s offshore subsidiaries, who used other offshore firms to shelter money his family funneled to political causes.

The Blackstone Group, co-founded by Trump economic adviser Stephen Schwarzman, used trusts and companies registered in tax havens to avoid paying taxes on two U.K. commercial properties.

Irish officials closed a tax loophole that had allowed Apple to avoid billions of dollars in taxes, Apple then enlisted international law firms to help it find a new tax home and settled in the English Channel island of Jersey. The documents helped solve a two-year mystery of where the world’s biggest company by market capitalization is booking a big share of its revenue.

Bank of Utah manages more than 1,390 aircraft trust accounts that obscure the identities of the jets’ (largely foreign) owners. Among the wealthy foreigners said to use the bank’s services: Russian oligarch Leonid Mikhelson, an ally of Russian leader Vladimir Putin whose gas company is under U.S. sanctions.

Commerce Secretary Wilbur Ross faces questions about his financial disclosures to Congress and the government after a report that he didn’t disclose business ties to the son-in-law of Russian President Vladimir Putin and an oligarch under U.S. sanctions. The Appleby documents included details of Ross’s stake in a shipping company, Navigator Holdings.

Commodities trader Glencore was one of the top clients of Appleby, which even had a “Glencore Room” at its Bermuda office that kept information on the trader’s 107 offshore companies.

Silicon Valley investor Yuri Milner, who was an early backer of Facebook Inc., partnered in two investments with the Russian state-controlled bank VTB Bank before it was sanctioned.

Queen Elizabeth II of the U.K. made a series of investments in a Cayman Islands fund through the British Royal Family’s private estate, the Duchy of Lancaster.

Everybody’s doing it.

Technology Shares Lead Mild Advance

Charles Schwab: On the Market

Posted: 10/11/2017 4:15 PM EDT

Technology Shares Lead Mild Advance 

 

U.S. stocks finished the trading session higher with technology shares leading the advance, while financials lagged ahead of tomorrow's quarterly results from some key banking sector heavyweights. In economic news, a measure of unmet demand for labor and weekly mortgage applications declined ahead of the afternoon release of the Fed's September meeting minutes. Treasury yields and the U.S. dollar were lower, gold was higher and crude oil prices were mixed. Delta Air Lines and BlackRock topped quarterly earnings expectations and Kroger announced it is exploring strategic options.

The Dow Jones Industrial Average (DJIA) increased 42 points (0.2%) to 22,873, the S&P 500 Index gained 5 points (0.2%) to 2,555, and the Nasdaq Composite added 16 points (0.2%) to 6,604. In moderate volume, 742 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil increased $0.38 to $51.30 per barrel and wholesale gasoline was $0.02 higher at $1.61 per gallon. Elsewhere, the Bloomberg gold spot price was up $5.21 to $1,293.24 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% lower at 92.90.

Delta Air Lines Inc. (DAL $53) reported Q3 earnings-per-share (EPS) of $1.64, or $1.57 ex-items, versus the $1.53 FactSet estimate, as revenues rose 5.5% year-over-year (y/y) to $11.1 billion, compared to the projected $11.0 billion. The company cited challenges from multiple hurricanes and an earthquake in Mexico, but said three of its four entities reported positive unit revenues and it sees continued opportunity in business yields. DAL issued a positive outlook for Q4 passenger revenue. Shares traded higher.

BlackRock Inc. (BLK $474) posted Q3 EPS of $5.78, or $5.92 ex-items, versus the projected $5.57, with revenues growing 14.0% y/y to $3.2 billion, above the expected $3.1 billion. The company noted strong organic asset and base fee growth amid continued growth of its global investment and technology platform. BLK closed higher.

Kroger Co. (KR $21) reaffirmed its 2017 guidance, while announcing plans to redefine its food and grocery customer experience and the exploration of strategic alternatives for its convenience-store business, including a potential sale. Shares finished higher.

Job openings slip from record highs, Fed release's meeting minutes

The Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, declined to a level of 6.08 million jobs available to be filled in August, from July's downwardly revised record high of 6.14 million jobs. The Bloomberg forecast called for a decrease to 6.13 million. The hiring rate dipped to 3.7% from July's 3.8% pace, and the separation rate declined to 3.6% from the prior month's 3.7% rate.

The MBA Mortgage Application Index declined 2.1% last week, following the prior week's 0.4% dip. The decrease came as a 4.2% drop in the Refinance Index The average 30-year mortgage rate rose 4 basis points (bps) to 4.16%.

At 2:00 p.m. ET, the Federal Reserve released the minutes from its September monetary policy meeting. The information contained in the report showed that labor market conditions continued to strengthen and that real GDP appeared to be moderately rising ahead of Hurricanes Harvey and Irma. The minutes also indicated that many participants thought that another increase in the target range for the federal funds rate before the end of the year "was likely to be warranted if the medium-term outlook remained broadly unchanged." And "all agreed that they would closely monitor and assess incoming data before making any further adjustment to the federal funds rate."

Treasuries were mostly higher, with the yield on the 2-year note flat at 1.51%, while the yields on the 10-year note and the 30-year bond declined 2 bps to 2.34% and 2.87%, respectively.

Bond yields and the U.S. dollar have pulled back somewhat from recent rallies to multi-month highs, with the markets grappling with uncertainty regarding the long road to tax-reform as discussed by Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend, in his article,  

Tax Reform Framework Released, But The Road Ahead Is Long.

Treasury yields and the greenback have been bolstered by an upbeat global economic backdrop, as well as signs that inflation may be starting to nudge higher, notably the strong wage growth figure of last week's September nonfarm payroll report. As such, the Fed, the Bank of England and European Central Bank have signaled shifts in monetary policy, with the former expected to continue to raise rates in December and begin to shrink its massive $4.5 trillion balance sheet this month.
Inflation has gained more global market attention and Schwab's Chief Investment Strategist Liz Ann Sonders notes that with wage growth picking up and the labor market even tighter, it’s time to put even traditional measures of inflation back on the radar screen in her article, The Waiting: Wage Growth and Inflation Finally Getting in Gear?.

Also, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, points out in his commentary, Inflation May Be The Biggest Question For Investors In 2018, that central banks are behaving as if wages and inflation will revive in the year ahead. If they don’t, and central banks don’t alter their policy path, the global stock markets could be in for a rough 2018. Jeff also discusses, How the Shift by Central Banks May Affect the Stock Market, noting that despite the coming shift by central banks towards trimming/tapering their balance sheets, we don’t believe the bull market is at risk.

Read these articles and other timely commentary from our Schwab experts on the Market Commentary page at www.schwab.com. Follow Liz Ann, Jeff and Schwab on Twitter: @lizannsonders, @jeffreykleintop, and @schwabresearch.

Tomorrow, investors will get a look at some inflation data for the month of September from the Producer Price Index (PPI), with the measure of prices at the wholesale level expected to have increased 0.4% m/m, while excluding food and energy, the core rate is forecasted to have risen 0.2% m/m. Weekly initial jobless claims will also be reported, forecasted to have declined by 10,000 to a level of 250,000 from 260,000 the week prior.

Europe mixed on data and political focus, Asia mostly higher 

European equity markets finished mixed, with Japan's strong machine orders data joining yesterday's larger-than-expected rise in German exports to preserve optimism regarding global economic growth. Spanish stocks rallied amid eased political concerns after yesterday's speech from Catalan President Puigdemont in which he said he would hold off on an immediate declaration of independence for now as he seeks talks with the Spanish government. However, uncertainty remained as Spain's Prime Minister Rajoy held a special session of cabinet that concluded with a formal request to the Catalan government to clarify if independence had been declared. This move by Rajoy is a precursor to triggering Article 155, which could lead to suspension of Catalonia's government. U.K. political and Brexit uncertainties also festered as Prime Minister Theresa May faced questions in parliament today and as the fifth round of complicated Brexit negotiations continue. May stressed that there would not be a second vote on whether to exit the European Union and reiterated that Brexit will happen in March 2019. The euro gained ground on the U.S. dollar and the British pound was flat, while bond yields in the region finished mixed. For analysis, see Schwab's Jeffrey Kleintop's, CFA, and Vice President of Trading and Derivatives, Randy Frederick's video, Political Risk: How Should Investors Respond?, and our article, Brexit Begins: What's Next for the U.K?, on the Insights & Ideas page at www.schwab.com. Follow Randy on Twitter: @randyafrederick.

Stocks in Asia finished mostly higher following the advance in the U.S. yesterday back to near record high territory. Global economic optimism continues to support the markets, bolstered by today's much stronger-than-expected rise in Japan's core machine orders, which suggested business spending is ramping up. Following the report, Japanese equities rose to their highest level since December 1996, despite some strength in the yen. Australian securities advanced and South Korean shares rallied. Schwab's Jeffrey Kleintop, CFA, and Randy Frederick discuss in the video, Are Investors Underestimating the Stock Market Rally?, on the Insights & Ideas page at www.schwab.com.

Mainland Chinese stocks nudged higher, though those trading in Hong Kong declined amid weakness in property developers amid disappointment regarding a policy address by the government that failed to deliver details on farmland conversion into residential projects which was anticipated, per Bloomberg. Indian equities snapped a three-day winning streak on some caution ahead of earnings season.

The international economic docket for tomorrow will yield PPI from Japan, CPI and industrial production from India, consumer inflation and home loans data from Australia, CPI from France and industrial production for the Eurozone.

Markets Add to Recent Gains

Charles Schwab: On the Market

Posted: 9/12/2017 4:15 PM ET

Markets Add to Recent Gains

U.S. equities added to their recent run, amid continued eased anxiety toward North Korea and the economic impact of Hurricane Irma. Financials also got a boost as Treasury yields continued to recover from multi-month lows, getting a lift from by an unexpected record high in U.S. job openings. The dollar also continued to rebound from multi-year lows, while crude oil and gold were modestly higher. News on the equity front focused on Dow member Apple, as the tech giant offered its latest products at a gathering at its newest headquarters.

The Dow Jones Industrial Average (DJIA) increased 62 points (0.3%) to 22,119, the S&P 500 Index gained 8 points (0.3%) to 2,497, and the Nasdaq Composite added 22 points (0.3%) to 6,454. In moderate volume, 767 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.16 to $48.23 per barrel and wholesale gasoline moved $0.03 higher to $1.66 per gallon. Elsewhere, the Bloomberg gold spot price rose $4.07 to $1,331.61 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% higher at 91.94.

Shares of DowDuPont Inc. (DWDP $69) were higher as the Street digested the announcement from the company formed by the merger of Dow Chemical and Dow member DuPont of changes to its spin-off plans of materials science and specialty products divisions.

Shares of Sage Therapeutics Inc. (SAGE $76) fell nearly 15% after the company announced disappointing results from a late-stage trial of its treatment of super-refractory status epilepticus.

Intercept Pharmaceuticals Inc. (ICPT $98) was sharply lower after the company sent a letter to doctors saying that injuries, organ failure and death tied to patients taking its treatment for liver disease, its main product, occurred when they took the drug more frequently than recommended. ICPT said this was reported to the Food and Drug Administration and it is working with the agency to reinforce dosing recommendations for patients with liver impairment.

Apple Inc. (AAPL $161) was in focus as the tech giant unveiled its latest line of products at an event at its new headquarters, including a new version of its AppleWatch, as well as the unveiling of the iPhone 8 and its high-end iPhone X. However, shares of AAPL finished lower, as some expressed concerns over the late timing of the iPhone X's pre-order and on-sale dates.

Job openings surprisingly post new record, small business optimism unexpectedly improves

The Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, rose to a level of 6.17 million jobs available to be filled in July—a fresh record high—from June's downwardly revised 6.12 million level. The Bloomberg forecast called for a decrease to 6.00 million. The hiring rate ticked higher to 3.8% from June's 3.7% pace, and the separation rate remained at the prior month's 3.6% rate.

The National Federation of Independent Business (NFIB) Small Business Optimism Index for August rose to 105.3, from July's unrevised 105.2 level, versus the Bloomberg expectation of a decline to 104.8.

Treasuries were lower, as the yield on the 2-year note rose 1 basis point (bp) to 1.33%, while the yields on the 10-year note and the 30-year bond advanced 3 bps to 2.17% and 2.77%, respectively. For analysis of the bond markets, see Schwab's Chief Fixed Income Strategist Kathy Jones' article, What's the Bigger Risk: Bond Market Bubble or Complacency?, on the Fixed Income page at www.schwab.com. Follow Kathy on Twitter: @kathyjones.

Treasury yields continue to rebound from last week's drop that took them to levels not seen since November and the U.S. dollar has slightly extended its recovery from lows not seen since early 2015. Geopolitical and U.S. political concerns continue to fade as North Korea held off on further missile tests and Congress approved three-month extensions of government funding and the debt ceiling. Also, investor sentiment got a boost from early economic cost assessments of Hurricane Irma that appear less than feared.

Amid this backdrop, Schwab's Chief Investment Strategist Liz Ann Sonders notes in her latest article, Trying to Reason with Hurricane Season: The Aftermath of "Harma", Hurricanes Harvey and Irma, or "Harma," 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.

Also, Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend points out in his article, Debt Ceiling Deal Pushes Showdown in Congress to December, December is now suddenly jam-packed with the complex, time-consuming debate that was expected to happen this month. It is hard to imagine Congress dealing with those issues and a major tax reform bill at the same time. As a result, we continue to believe that tax reform won't get resolved until the first part of 2018. Read more on the Insights & Ideas page at www.schwab.com and follow us on Twitter: @schwabresearch.

Finally, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, adds 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 and follow Jeff on Twitter: @jeffreykleintop.

Tomorrow, investors will get their first look at inflation data for the month of August with the release of the Producer Price Index (PPI), with the measure of prices at the wholesale level expected to have increased 0.3% m/m, while excluding food and energy, the core rate is forecasted to have risen 0.2% m/m. MBA Mortgage Applications will also be released.

Europe mostly higher as concerns recede but U.K. lags after inflation data

Most European equity markets extended a recent run, with bond yields in the region moving higher to bolster the financial sector and tech stocks heading to the upside ahead of today's expected iPhone unveiling later today. Global sentiment was aided by North Korean tensions continuing to fade, and estimates of the economic cost impact on the U.S. of Hurricane Irma being less than feared. The euro ticked higher versus the U.S. dollar, and the British pound rallied versus the greenback. Bank of England rate hike uncertainty flared-up ahead of this week's monetary policy decision as the nation reported hotter-than-expected August inflation figures. Brexit negotiations also remained in focus as U.K. Prime Minister Theresa May's plan passed a parliamentary hurdle. 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 Vice President of Trading and Derivatives, Randy Frederick, Is An Optimistic Outlook for Global Equities Warranted?, on the Insights & Ideas page. Follow Randy on Twitter: @randyafrederick. And for a look at Brexit talks, see our article, Brexit Begins: What's Next for the U.K.? on the Insights & Ideas page.

Asia extends yesterday's gains

Stocks in Asia tacked onto yesterday's gains, with global sentiment continuing to rebound as geopolitical concerns toward North Korea remained tempered despite the UN voting to increase sanctions against the nation. Also, early indications suggesting the U.S. economic impact of Hurricane Irma will likely be less than projected continued to aid the markets. Technology issues were also higher ahead of today's expected new iPhone launch by Apple. Japanese equities gained solid ground, as the yen extended its retreat from a recent rally, and stocks in Australia advanced, despite a decline in the nation's business confidence for August. Securities listed in India also increased ahead of reads on consumer price inflation and industrial production after the closing bell. India's CPI came in a bit hotter than expected for last month and the nation's industrial production rose by a smaller amount than anticipated in August. Meanwhile, markets in mainland China, Hong Kong and South Korea all rose. For analysis of the global markets, see 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.

Tomorrow's international economic calendar will offer South Korea's unemployment rate, consumer prices and retail sales from Japan, India's trade balance, CPI from Germany and Spain, employment figures from the U.K. and industrial production from the Eurozone.

Stocks Off Lows, but Finish Session Mixed

Cgarkes Schwab: On the Market

Posted: 7/11/2017 4:15 PM ET

Stocks Off Lows, but Finish Session Mixed

Well off the lows of the day, U.S. stocks finished mixed amid flared-up geopolitical uncertainty after Donald Trump Jr. released emails he exchanged during the Presidential campaign with a Russian lawyer. The street also appeared a bit cautious ahead of tomorrow's Congressional testimony from Fed Chair Yellen and as the unofficial beginning of Q2 earnings season looms. Treasury yields and the U.S. dollar were lower, while gold and crude oil prices were higher. In equity news, PepsiCo traded lower despite topping earnings forecasts and Arena Pharmaceuticals surged on the heels of some positive drug trial results.

The Dow Jones Industrial Average (DJIA) gained 1 point to 21,409, the S&P 500 Index shed 2 points (0.1%) to 2,426, and the Nasdaq Composite increased 17 points (0.3%) to 6,193. In moderate volume, 784 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil gained $0.64 to $45.04 per barrel and wholesale gasoline was $0.02 higher at $1.52 per gallon. Elsewhere, the Bloomberg gold spot price gained $2.09 to $1,216.45 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% lower at 95.75.

PepsiCo Inc. (PEP $114) reported Q2 earnings-per-share (EPS) of $1.46, or $1.50 ex-items, versus the $1.40 FactSet estimate, as revenues rose 2.0% year-over-year (y/y) to $15.7 billion, above the projected $15.6 billion. However, PEP's North American beverage unit reported softer-than-expected organic revenue growth. The company said its quarterly results were very much in line with its expectations and noted that it remains on track to meet its 2017 financial goals. PEP added that it expected foreign exchange to negatively impact earnings by a smaller amount than initially expected. Shares traded lower.

Arena Pharmaceuticals Inc. (ARNA $26) rallied over 40% after announcing positive phase 2 trial results for its treatment for pulmonary arterial hypertension.

With the stock markets remaining near record highs, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, notes in his latest article, Where's the Next Bubble?, that bubbles typically bring risks for all investors, even those that don't own the inflating asset, because they represent a broader market and economy that has become out of balance and dependent upon a flawed outlook. Jeff discusses the four most popular candidates for bubbles based on the questions he gets from investors: cryptocurrencies, (low) volatility, internet retailers, and central bank assets. However, he points out that remarkably, none of these seem to fit the classic profile of a potentially damaging bubble, but that doesn’t mean they don't carry risks for investors. Read more on the Markets & Economy page at www.schwab.com, and be sure to follow Jeff on Twitter: @jeffreykleintop.

Job openings fall from record highs

The Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, dropped to a level of 5.67 million jobs available to be filled in May, from April's downwardly revised 5.97 million level, which was a record high. The Bloomberg forecast called for a decline to 5.95 million. The hiring rate rose to 3.7% from April's 3.5% pace, while the separation rate increased to 3.6% from 3.4%.

The National Federation of Independent Business (NFIB) Small Business Optimism Index for June declined to 103.6 from May's unrevised 104.5 level, versus expectations of a decrease to 104.4.

Wholesale inventories (chart) were revised higher to a 0.4% month-over-month (m/m) gain for May, versus forecasts of an unrevised preliminary 0.3% increase, and following April's unadjusted 0.4% decline. Sales were 0.5% lower m/m, after April's favorably revised 0.3% decline. The inventory-to-sales ratio—the amount of time it would take to deplete inventories at the current sales pace—rose to 1.29 months from April's 1.28 pace.

Treasuries were higher, with the yields on the 2-year note and the 30-year bond dipping 1 basis point (bp) to 1.37% and 2.92%, respectively, while the yield on the 10-year note declined 2 bps to 2.36%. Bond yields have rebounded from depressed levels hit in mid-June and the U.S. dollar has stabilized to close out the first half of 2017 from mid-June lows. 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. On the eve of the two-day Congressional monetary policy testimony by Fed Chairwoman Janet Yellen the markets appear cautious as they grapple with what path the Fed's monetary policy normalization will take. Kathy notes that we believe the Federal Reserve to continue to tighten monetary policy and reduce its balance sheet gradually, assuming inflation doesn't slip further. 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.

The political front continues to garner attention, with the Senate healthcare bill remaining uncertain, and 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, ambitious plans for sweeping policy changes—health care reform, an overhaul of the tax code, infrastructure spending and deregulation, among other things—were announced and the markets reacted positively. But midway through 2017, Republicans have few major policy accomplishments. 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 and follow us on Twitter: @schwabresearch.

Tomorrow's economic calendar will be light, offering the Federal Reserve's Beige Book, as well as weekly MBA mortgage applications.

Europe declines, Asia mostly higher

European equities finished lower with strength in basic materials issues being met with market caution ahead of tomorrow's monetary policy testimony out of the U.S., along with this week's start of earnings season. Also, a brief flare-up in geopolitical uncertainty in the U.S. regarding President Trump's campaign actions during the election caused the markets to slip in the final hour of trading. The euro was higher and the British pound declined versus the U.S. dollar, while bond yields in the region mostly gained ground. In economic news, Italian industrial production rose more than expected. For a look at the global markets, see Schwab's Jeffrey Kleintop's, CFA, article, 2017 Mid-year Global Market Outlook: Broader Growth, Narrower Risks as we reach the halfway point of 2017on the International Investing page at www.schwab.com, where you can also find his 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 Randy on Twitter: @randyafrederick.

Stocks in Asia finished mostly to the upside, with technology issues stabilizing after a recent bout of volatility, while the markets awaited tomorrow's beginning of the two-day Congressional testimony from Fed Chair Janet Yellen, looking for clues to the future path of the Central Bank's monetary policy. Japanese equities rose, with the yen losing ground in late-day action. Mainland Chinese listings declined on continued weakness in small-cap stocks, while banking issues helped boost shares trading in Hong Kong. Australian securities ticked to the upside, with basic materials leading the advance, and South Korean stocks gained ground. Indian equities nudged higher, notching another record. For a look at 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 Markets & Economy page at www.schwab.com.

The international economic docket for tomorrow will include PPI and the Tertiary Industry Index from Japan, consumer confidence from Australia, CPI and industrial production from India, industrial production from the eurozone, the Wholesale Price Index from Germany and jobs data from the U.K.

Stocks Add to Losses Amid Continued Uncertainty

Charles Schwab: On the Market

Posted: 6/6/2017 4:15 PM ET

Stocks Add to Losses Amid Continued Uncertainty

U.S. equities added to yesterday's losses, as uncertainty continued to plague investors ahead of this week's U.K. election and monetary policy decision in Europe, while also contending with gnawing geopolitical uncertainty. However, technology issues continued their rally and energy stocks got a boost amid a rise in crude oil prices. Meanwhile, Treasury yields fell and the U.S. dollar was lower, but gold was higher.

The Dow Jones Industrial Average (DJIA) declined 48 points (0.2%) to 21,136, the S&P 500 Index decreased 7 points (0.3%) to 2,429, and the Nasdaq Composite lost 21 points (0.3%) to 6,275. In moderate volume, 832 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.79 to $48.19 per barrel and wholesale gasoline was $0.01 higher at $1.55 per gallon. Elsewhere, the Bloomberg gold spot price increased $13.59 to $1,293.39 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% lower at 96.62.

Microchip Technology Inc. (MCHP $85) raised its Q1 revenue outlook and narrowed its earnings-per-share (EPS) guidance, which came in slightly above the FactSet estimate. The analog and Flash-IP solutions provider said its business for the first two months of the quarter is tracking higher and the increased guidance reflects the strength of its business that it is experiencing. Shares were higher. 

Casey's General Stores Inc. (CASY $107) reported fiscal Q4 EPS of $0.76, versus the projected $0.84, as revenues increased 16.6% year-over-year (y/y) to $1.9 billion, roughly in line with estimates. CASY increased its current year same-store sales outlook. Separately, the company announced an 8.3% increase of its quarterly dividend to $0.26 per share. Shares were solidly lower.

Thor Industries Inc. (THO $104) posted fiscal Q3 profits of $2.11 per share, above the forecasted $1.87, with revenues jumping 56.9% y/y to $2.0 billion, including results from last year's acquisition of Jayco, roughly in line with expectations. The company said it has seen a significant increase in demand for its recreational vehicle (RV) products, amid surging popularity in the general RV lifestyle. Shares rallied nearly 10%.

HD Supply Holdings Inc. (HDS $34) announced Q1 EPS of $0.42, or $0.63 ex-items, below the forecasted $0.65, as revenues rose 5.2% y/y to $1.9 billion, roughly in line with forecasts. Gross margins and operating profit came in south of expectations. Separately, the company announced the sale of its Waterworks business to Clayton, Dubilier & Rice for about $2.5 billion in cash and the authorization of up to $500 million in share repurchases. Shares fell sharply.

Job openings jump to record high

The Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, rose to a record high level of 6.04 million jobs available to be filled in April, from March's upwardly revised 5.79 million level, and north of forecasts of 5.75 million. The hiring rate dipped to 3.5% from March's 3.6% pace, while the separation rate declined to 3.4% from 3.6%.

Schwab's Chief Investment Strategist Liz Ann Sonders notes in her latest article, Turn Down For What: Why is Job Growth Slowing?, that last Friday’s weak jobs report raised alarm bells about slowing job growth, but perhaps it's natural at this stage in the cycle. She concludes that the pace of job growth has slowed, but it's likely not because the economy is weakening. It may even be because the economy is strengthening. Read more on the Markets & Economy page at www.schwab.com.

Treasuries were higher, as the yield on the 2-year note declined 2 basis points (bps) to 1.29%, the yield on the 10-year note dropped 4 bps to 2.14%, and the 30-year bond rate fell 3 bps to 2.80%.

Bond yields have been seeing some pressure ahead of this week's U.K. election and monetary policy decision from the European Central Bank (ECB), while the markets continue to grapple with potential Fed policy changes. This comes as next week's Fed monetary policy decision looms and is highly expected to deliver a rate hike, while the potential beginning of the process of the Fed shrinking its bloated balance sheet later this year is also garnering attention.

Schwab's Chief Fixed Income Strategist, Kathy Jones discusses in her article, Will the Fed Reduce Its Balance Sheet? What Bond Investors Should Know on the Fixed Income page at www.schwab.com. Follow Kathy on Twitter: @kathyjones. Also, Schwab’s Liz Ann Sonders notes in her article, Gimme Three Steps … and a Stumble?, that reducing the gargantuan balance sheet is a form of tightening and the transition from quantitative easing (QE) to quantitative tightening (QT) begs the question whether we are heading into another period of heightened volatility. Read more on the Markets & Economy page at www.schwab.com and follow Liz Ann on Twitter: @lizannsonders.

Tomorrow's economic calendar will be light, with MBA Mortgage Applications expected before the opening bell, while in the final hour of trading, consumer credit will be reported.

Europe mostly lower, Asia mixed as the markets await events later in the week

European equities finished mostly lower, as markets in Germany and Switzerland returned to action following yesterday's holidays, while the global markets awaited this week's election in the U.K. and the ECB monetary policy decision. Polls continue to show a narrowing of the race in the U.K., fostering some uncertainty as Brexit negotiations roll on and votes loom in Germany and Italy later this year. For commentary on the political front check out Schwab's Chief Global Investment Strategist 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?. Moreover, for a look at the global economic front, see Jeff's video, What's the Current State of the Global Economy? on the Insights & Ideas page at www.schwab.com. In economic news, eurozone retail sales rose by a smaller amount than expected month-over-month, while economic sentiment improved. The euro ticked higher and the British pound was lower versus the U.S. dollar, and bond yields in the region traded mostly to the downside.

Stocks in Asia finished mixed following the slight declines in the U.S. and Europe yesterday as the global markets await this week's U.K. election and monetary policy decision from the ECB, while the Fed is expected to come next week. Geopolitics remained in focus after several countries in the Middle East cut ties with Qatar. 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. Japanese equities fell, despite a relatively upbeat read on the nation's wage growth, with the yen gaining ground, while markets in Australia dropped in the wake of the expected unchanged monetary policy decision by the Reserve Bank of Australia. Indian securities declined, pulling back from record high territory, but mainland Chinese stocks and those traded in Hong Kong advanced amid improved sentiment in the region, and as the People's Bank of China injected more cash into the market to help alleviate liquidity concerns. Markets in South Korea were closed for a holiday.

For tomorrow, investors can expect the following economic reports from the international front: GDP from Australia, Japan's trade balance and Leading Index, manufacturing orders from Germany, industrial production from Spain, housing prices from the U.K., and retail sales from Italy. In central bank action, the Reserve Bank of India will meet, with no change to its monetary policy expected.

Financial Review

Makes You Want to Holler

Sinclair Noe — March 16, 2017

Podcast: Play in new window | Download (Duration: 13:16 — 7.6MB)

Subscribe: iTunes | Android | RSS

DOW – 15 = 20,934
SPX – 3 = 2381
NAS + 0.71 = 5900
RUT + 3 = 1386
10 Y + .01 = 2.52%
OIL – .07 = 48.79
GOLD + 6.10 = 1226.80

President Trump will ask the Congress for cuts to many federal programs, and more money to bulk up defense spending. Trump’s budget outline is a blueprint covering just “discretionary” spending for the 2018 fiscal year starting on October 1.

It boosts spending for defense, homeland security and veterans’ affairs; the Defense Department budget would increase by $54 billion, which will raise defense spending to $639 billion for fiscal year 2018.

The Environmental Protection Agency faces cuts of 31% and the Department of Agriculture would see funding cuts more than 20; State Department 28%; Health and Human Services would be cut 16%; Education faces cuts of 14%.

Trump’s budget proposes eliminating discretionary funding altogether for at least 19 agencies and 61 other programs. Plans for new NASA missions, climate change research, aid for low-income families, funding for commercial flights to rural airports, public broadcasting, and Meals on Wheels would all be on the chopping block.

The spending cuts that Trump proposes come from those agencies that fund education programs, social services, environmental protection, health research, housing and food assistance, national parks, land management, and countless other endeavors. As it is, spending on non-defense discretionary programs is already historically low.

As a share of the economy it’s at its lowest level since 1998 and is well below where it was 50 years ago, per data from the Congressional Budget Office. The net effect is no change in the national deficit. The budget proposal is the first volley in what is expected to be an intense battle over spending in coming months in Congress.

President Trump’s second travel ban was blocked by a federal court in Hawaii hours before it was to go into effect. A federal judge in Maryland also ruled against the ban on the day it was supposed to take effect. The administration has promised to appeal the rulings.

The speaker of the House, Paul Ryan, the Senate Intelligence Committee chairman and the ranking Democrat on the committee all said that they’ve seen no evidence of President Donald Trump’s accusation that he was wiretapped last year by his predecessor.

Senate Intelligence Committee chair Richard Burr and ranking member Mark Warner issued a statement, saying “based on the information available to us, we see no indications that Trump Tower was the subject of surveillance by any element of the United States government either before or after Election Day 2016.”

House Speaker Paul Ryan said that “no such wiretap existed,” citing intelligence reports to House leaders. “We don’t have any evidence,” says the top Republican on the House Intelligence Committee. “No evidence,” says his Democratic counterpart.

The statement from the leaders of the Senate Intelligence Committee marks the clearest and strongest refutation of Trump’s allegations since the President first made them two weeks ago. The senators statement also addresses Trump’s more recent statement that he was not merely speaking about wiretapping specifically.

The leaders of the House Intelligence Committee have said they have yet to see any evidence of wiretapping, but have yet to flatly rule out all surveillance. House Intelligence Chairman Devin Nunes said Wednesday that it was possible that Trump aides were surveilled via “incidental” collection.

Dutch Prime Minister Mark Rutte defeated far-rightist Geert Wilders in the first of a series of European elections this year in which populist insurgent parties are hoping to rock the establishment. The center-right prime minister had trailed in opinion polls for much of the campaign but emerged the clear victor of Wednesday’s election, albeit with fewer seats than before.

It’s rare for a Dutch election to attract international attention, but the performance of Wilders is being seen as a bellwether for the ascent of populism around Europe, particularly with the National Front’s Marine Le Pen set to reach the run-off in the French presidential election late next month. Germans will vote later in the year.

The Bank of Japan is sticking with its ultra-loose monetary policy even as the Federal Reserve tightens. Japan’s economy is recovering with the help of a weaker yen but growth and inflation remain low. The Bank of Japan to keep its target for 10-year Japanese government bond yields at around zero, a policy it calls “yield-curve control.” It left the short-term interest rate on some yen deposits held by commercial banks at minus 0.1%.

The Bank of England held interest rates at the record low level of 0.25 percent and maintained asset purchases at £435 billion. The UK economy has shown strength since last June’s Brexit referendum and the government revised its forecasts for domestic growth in 2017 sharply higher. That might be wishful thinking.

The UK has not yet felt the full impact of Brexit, but that doesn’t mean they won’t. The big question is whether London’s financial institutions will lose access to the single market of the Euro Union after the UK leaves the EU.

The main argument is as follows: since London plays a key financial role in Europe, any disruption would endanger the financing of the EU economy and would ultimately pose a threat to financial stability in the bloc.

My guess is that argument plays better in London than Brussels. That’s not just speculation. The number of new available jobs listed in the UK’s financial center fell 17% in February year-on-year to 6,945.  Or simply, Brexit is Brexit.

Yesterday, the Federal Open Market Committee voted to raise the range of the federal funds rate to 0.75% and 1.00%, citing progress in labor market growth, business fixed investment and inflation. The Fed indicated they are still looking at 2 more rate hikes in 2017, which matches the guidance they provided in December.

In a press conference yesterday, Fed Chair Janet Yellen said, “The simple message is, the economy is doing well. We have confidence in the robustness of the economy and its resilience to shocks.”

The labor market has been a strong part of the economic recovery. In the last monthly jobs report, the unemployment rate dropped to 4.7%, but one weak spot was wages, which have flatlined. Once again, adjusted for inflation, there has likely been no growth whatsoever in real wages YoY.

For wages to increase, workers need job mobility, the ability to take a new job for more pay. Each month the Labor Department publishes the JOLT survey, or Job Openings and Labor Turnover; and in January, the number of Americans quitting their jobs rose to a seasonally-adjusted total of 3.22 million, the highest number since February 2001. The quits rate rose in January to 2.2%.

People quitting their jobs in droves is a sign of confidence among workers, as folks are unlikely to quit a job unless they are confident they can get another one. Openings totaled 5.63 million in January, above the prior month’s reading of 5.5 million.

The Labor Department said initial claims for state unemployment benefits dropped 2,000 to a seasonally adjusted 241,000 for the week ended March 11. It was the 106th straight week that claims remained below 300,000, a threshold associated with a healthy labor market. That is the longest stretch since 1970, when the labor market was much smaller.

US home-building jumped in February as unseasonably warm weather helped boost the construction of single-family houses to near a 9-1/2-year high. Housing starts increased 3% to a seasonally adjusted annual rate of 1.29 million units last month.

Home-building was up 6.2 percent compared to February 2016. Single-family home-building, which accounts for the largest share of the residential housing market, surged 6.5%. Starts for the volatile multi-family housing segment fell 3.7%.

The Arizona Supreme Court has upheld the constitutionality of Arizona’s minimum wage increase to $10 an hour. Voters approved the increase in November, and the challenge was brought by the Arizona Chamber of Commerce and Industry and other business groups.

The state Supreme Court unanimously rejected the challenge. Proposition 206 raised the state’s minimum wage to $10 an hour in January 2017. Incremental increases continue until 2020, when it will increase to $12.

Four people have been indicted in a 2014 cyber-attack on Yahoo email accounts. The indictment charges two officers of the FSB, Russia’s Federal Security Service, and two hackers who allegedly worked together with them to crack 500 million Yahoo user accounts.

Cyber security specialists have long said the Kremlin employs criminal hackers for its geostrategic purposes. They say the arrangement offers deniability to Moscow and freedom from legal troubles for the hackers.

3M said it would buy Johnson Controls’ safety gear business, Scott Safety, in deal valued at $2 billion. Scott Safety makes respiratory and protective equipment and other safety products for firefighters, industrial workers, police squads and the US military.

Oracle’s cloud business had a huge quarter. The business-software maker announced better-than-expected adjusted revenue and profit, helped by sales at its cloud business surging 62% to $1.19 billion

Adobe Systems stock jumped after the company delivered earnings and revenue that beat expectations.

Cold weather luxury apparel retailer Canada Goose’s stock rocketed 25 percent in its first day of trading. The stock trades under the ticker GOOS.

Amazon is ready to do to the local liquor store what it did to the local book store. It is rolling out free beer and wine 2-hour delivery and $7.99 1-hour delivery for Prime Now members, starting in Cincinnati and Columbus, Ohio.

Stocks Finish Mixed Following Minutes

Charles Schwab: On the Market

Posted: 10/12/2016 4:15 PM ET

Stocks Finish Mixed Following Minutes

U.S. equities lost some steam to finish mixed after the afternoon release of the Federal Reserve's September meeting minutes showed the decision of remaining steady was a close call. Disappointing reports on the earnings front to begin 3Q earnings season didn't help to foster any positive sentiment either, while energy stocks saw pressure on the extended drop in crude oil prices. Treasuries were lower, while the U.S. dollar and gold were higher

The Dow Jones Industrial Average (DJIA) rose 16 points (0.1%) to 18,144, the S&P 500 Index gained nearly 3 points (0.1%) to 2,139, while the Nasdaq Composite fell 8 points (0.2%) to 5,239. In moderate volume, 680 million shares were traded on the NYSE and 1.5 billion shares changed hands on the Nasdaq. WTI crude oil declined $0.61 to $50.18 per barrel, wholesale gasoline ticked $0.02 lower to $1.46 per gallon and the Bloomberg gold spot price gained $2.53 to $1,255.33 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% higher at 97.93.

Stanley Black & Decker Inc. (SWK $120) announced an agreement to acquire the tools business of Newell Brands Inc. (NWL $51) for $1.95 billion in cash. Shares of both companies were higher.

Fortinet Inc. (FTNT $31) lowered its 3Q earnings and revenue guidance as the cyber security services company noted that results were impacted by the lengthening of deal cycles as enterprises are becoming more strategic with their purchasing decisions and buying with less urgency than last year. Also, FTNT cited sales execution challenges in North America, as well as macro issues in Latin America and the U.K. Separately, the company announced a $100 million addition to its share repurchase program. Shares were sharply lower. 

Humana Inc. (HUM $168) saw some pressure following a report published by the Centers for Medicare and Medicaid Services (CMS) for the 2018 plan year that showed the percentage of the company's membership in 4-Star plans or higher fell 37% year-over-year. HUM said it believes that the Star quality ratings do not accurately reflect the company's actual performance and it intends to file for reconsideration of some ratings, while raising its 2016 profit outlook.

Fed minutes indicate close call on rate hike

The minutes from the Federal Open Market Committee's (FOMC) September meeting were released in afternoon action, describing last month's decision to hold its monetary policy steady a close call, as several members indicated that a rate hike was needed "relatively soon." However, the Committee decided, for the time being, to wait for further evidence of continued progress toward its objectives, noting "that a reasonable argument could be made either for an increase at this meeting or for waiting for some additional information on the labor market and inflation." As noted in the recent Schwab Market Perspective: Crunch Time, the September FOMC meeting boosted expectations that a rate hike is likely before the end of the year; contingent on economic data remaining decent in the coming months. More of the FOMC’s voting body is leaning toward raising rates, as there were three dissenting votes on the decision to hold rates steady—a relatively high number indicating growing discordance among members. Read more at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch.

The Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, declined to a level of 5.4 million jobs available to be filled in August, from July's downwardly revised 5.8 million level, where the Bloomberg forecast had called for it to remain. The hiring rate remained at 3.6% and the separation rate dipped to 3.4% from 3.5%.

The MBA Mortgage Application Index fell 6.0% last week, after rising 2.9% in the previous week. The decline came as an 8.0% drop for the Refinance Index was met with a 2.6% decrease for the Purchase Index. The average 30-year mortgage rate rose 6 basis points (bps) to 3.68%.

Treasuries finished lower, as the yields on the 2-year and the 10-year notes, as well as the 30-year bond, ticked 1bp higher 0.84%, 1.78% and 2.51%, respectively. Bond yields have gained ground as of late, courtesy of some upbeat economic data, hawkish Fedspeak, and the rise in crude oil prices. Schwab's Chief Fixed Income Strategist, Kathy Jones discusses the interest rate environment in her latest article, Are Bond Yields About to Rise?, at www.schwab.com/onbonds and follow Kathy on Twitter: @kathyjones.

The markets continued to discuss the uncertain U.S. political landscape as the November election looms, exacerbated by signs of dissention in the Republican party, and Schwab's Vice President, Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, Where Do the Candidates Stand? Key Issues for Investors, as part of our election 2016 commentary at www.schwab.com/insights/category/election-2016. Also, Schwab's Chief Investment Strategist, Liz Ann Sonders discusses the dynamic of household deleveraging and still high federal government debt in her article, Your Time is Gonna Come: Households' Leverage Down, Government Leverage Up, at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders.

Tomorrow, the domestic economic calendar will offer investors a look at weekly initial jobless claims, forecasted to increase to a level of 253,000 from the prior week's 249,000, as well as the Import Price Index, expected to show a 0.1% month-over-month (m/m) increase during September following August's 0.2% decline.

Europe dips amid earnings, Fed, oil and Brexit concerns, Asia also sees losses

European equities dipped, with oil & gas issues giving up early gains as crude oil prices extended yesterday's decline. The global markets continued to grapple with heightened rate hike expectations in the U.S., ahead of today's release of the minutes from the Fed's September policy meeting. The British pound was in focus, rebounding solidly from a recent drop to a more than 30-year low versus the U.S. dollar that has come courtesy of "hard Brexit" concerns. The pound got a boost from Prime Minister Theresa May giving parliament an opportunity to weigh in on her Brexit plans. In economic news, eurozone industrial production rose more than expected in August. The euro lost ground on the greenback, while bond yields in the region moved to the upside.

With global market sentiment hamstrung and volatility potentially poised to gain steam, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, reminds investors, Three Reasons Why Now is Not the Time to Retreat from Global Diversification and why Your portfolio may be less diversified than you think. Read these articles, at www.schwab.com/oninternational, and follow Jeff on Twitter: @jeffreykleintop.

Stocks in Asia finished lower on the heels of the weakness in the U.S. and Europe yesterday, as global conviction was stymied by lower oil prices, along with lackluster earnings results and elevated Fed rate hike expectations in the U.S. Japanese equities fell sharply, as the yen modestly recovered some of a recent drop, while a report showed the nation's machine orders—a gauge of capital investment—declined by a smaller amount than anticipated in August. Mainland Chinese securities and those traded in Hong Kong declined amid the soured global sentiment and festering property market concerns in the country, ahead of this week's plethora of September Chinese economic data. Schwab's Jeffrey Kleintop, CFA, offers timely analysis of the global economic picture in his article, World Tour: An Around The World Look At the Economic Landscape, at www.schwab.com/oninternational.

Meanwhile, Australia's markets dipped slightly, as modest strength in financials was met with weakness in oil & gas, technology and basic materials issues, but South Korean equities ticked higher. Indian markets remained closed for a holiday.

Tomorrow's international economic calendar will produce consumer sentiment from Australia, India's trade balance, the Tertiary industry Index from Japan, and CPI from Germany. In central bank action, the Bank of England and the Bank Korea will conduct monetary policy meetings, with no change to either of their respective stances expected.