Stocks See Solid Gains Following Jobs Report

Charles Schwab: On the Market

Posted: 7/8/2016 4:15 PM ET

Stocks See Solid Gains Following Jobs Report

U.S. stocks rallied early and never looked back in the wake of the June labor report which showed a solid improvement in monthly job creation, though the unemployment rate ticked higher and growth in average hourly earnings was shy of forecasts. Treasuries were mixed following the jobs report, while in the final hour of trading consumer credit was shown to have expanded more than expected. Crude oil prices edged lower, the U.S. dollar was nearly unchanged and gold was slightly higher.

The Dow Jones Industrial Average (DJIA) rallied 251 points (1.4%) to 18,147, the S&P 500 Index surged 32 points (1.5%) to 2,130, and the Nasdaq Composite jumped 80 points (1.6%) to 4,957. In moderately heavy volume, 920 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil was $0.27 higher at $45.41 per barrel, wholesale gasoline added $0.01 to $1.37 per gallon and the Bloomberg gold spot price increased $5.89 to $1,366.34 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 96.25. Markets were higher for the week, as the DJIA gained 1.1%, the S&P 500 Index increased 1.3% and the Nasdaq Composite rallied 1.9%.

Gap Inc. (GPS $23) reported that net sales for the five-week period ended July 2, 2016 rose by 2% to $1.57 billion, compared to a 1% decline a year ago, with growth from its Old Navy segment driving the results for the clothing retailer. Shares of GPS finished nicely higher.

Polycom Inc. (PLCM $12) announced that it has agreed to be acquired by privately-held Siris Capital Group LLC for a price of $12.50 per share in cash. The offer is subject to PLCM's termination of its existing merger agreement with Mitel Networks Corp. (MITL $7). The transaction is valued at roughly $2.0 billion, including debt, a 13.6% premium over its previous offer from MITL. Shares of both companies closed sharply higher.

U.S. jobs jump, but unemployment ticks higher, while consumer credit tops estimates

Nonfarm payrolls (chart) rose by 287,000 jobs month-over-month (m/m) in June, compared to the Bloomberg forecast of a 180,000 increase. The disappointing rise of 38,000 seen in May was downwardly revised to a gain of 11,000 jobs. The total downward revision to job gains in May and April was 6,000. Excluding government hiring and firing, private sector payrolls increased by 265,000, versus the forecasted gain of 170,000, after declining by 6,000 in May, negatively revised from the 25,000 rise that was initially reported. Gains were seen in professional & business services with an increase of 38,000 jobs, telecommunications, with a 28,000 rise following the 32,000 decline registered in May due primarily to the Verizon strike, while manufacturing jumped 14,000.

The unemployment rate rose to 4.9% from 4.7%, compared to expectations of an increase to 4.8%, while average hourly earnings grew by 0.1% m/m, below projections of a 0.2% increase, and May's 0.2% rise was unadjusted. Finally, average weekly hours remained at May's unrevised 34.4 hours level, matching projections.

Consumer credit, released in the final hour of trading, showed consumer borrowing expanded by $18.6 billion during May, topping the $16.0 billion forecast of economists polled by Bloomberg, while April's figure remained near a level of $13.4 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, rose $16.2 billion, while revolving debt, which includes credit cards, rose by $2.4 billion.

Treasuries were mixed, with the yield on the 2-year note increasing 2 basis points (bps) to 0.61%, while the yield on the 10-year note decreased 3 bps to 1.36%, and the 30-year bond rate declined 4 bps to 2.10%. Bond yields have seen pressure lately, falling to record lows, as the global markets continue to grapple with the impact of the U.K. Brexit vote, and Schwab's Chief Fixed Income Strategist, Kathy Jones offers analysis in her recent article titled, Brexit: What Does It Mean for the Bond Market?, at www.schwab.com/marketinsight. Follow Kathy on Twitter: @kathyjones. Also, for more on the Brexit fallout with a focus on sectors, see the latest Schwab Sector Views: Sector Impact of Brexit from Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, at www.schwab.com/marktetinsight, while you can also follow Schwab on Twitter: @schwabresearch.

European markets get a boost from U.S. labor report, Asia mostly lower

European equities finished the week on a high note, notching solid gains following an upbeat U.S. labor report. The British pound continued to slowly recover from its rout that pushed it to a 31-year low versus the U.S. dollar this week in the wake of the Brexit vote, while a one-off special consumer confidence survey in the U.K. to measure sentiment following the Brexit vote showed a drop to a reading of -9 from the -1 posted in an earlier, regularly-scheduled monthly release. For deeper analysis of the impact of the Brexit vote, see the Schwab Center for Financial Research's recent article, Brexit: What Investors Should Know, at www.schwab.com/marketinsight and be sure to check out the video from Schwab's Managing Director of Trading and Derivatives, Randy Frederick and Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, titled Brexit Aftershock: When Will the Markets Calm Down?, at www.schwab.com/insights. Follow Randy and Jeff on Twitter: @randyafrederick and @jeffreykleintop. Additional economic news in the region was mixed, as trade data out of Germany and the U.K. were mostly in line with forecasts, while industrial production in France fell short of expectations. The euro lost ground versus the U.S. dollar, while bond yield in the region were lower.

Stocks in Asia finished mostly lower, as the post-Brexit rally lost steam amid global growth concerns, ahead of the release of Friday's U.S. employment report. Flight-to-safety continued to boost the yen, pushing Japanese equities lower, while some attention may have shifted to the country's upper house elections, to be held this weekend. Australian securities ticked higher despite a sharp cut in the forecast for iron ore prices from the nation's Department of Industry, Innovation and Science, and following the credit outlook downgrade from Standard & Poor's on Thursday. Chinese stocks were lower amid rising worries over the country's banking sector, after a report showed non-performing loans exceeded $299.2 billion in May, upping banks' bad-loan ratio to 2.15%. Meanwhile, South Korean equites fell and Indian listings also lost ground.

Jobs report gives boost to stocks

Despite a sluggish start, U.S. stocks were higher for the holiday-shortened week as equities rallied on Friday, shaking off some of the post Brexit hangover, with the Dow topping 18,000 and the S&P 500 closing above 2,100. Gains for stocks transpired on the heels of the June labor report, which showed a solid improvement from May's disappointing figures for jobs created during the month. Our experts note in the recent Schwab Market Perspective: Looking Beyond Britain, that healthy job growth and the possible support to inflation from higher wages lead us to wonder if market expectations around Fed policy may have gone too far. The futures market indicates roughly no chance of a hike for the balance of the year; while rate cut expectations have come back in play. Read more at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch.

In addition to the jobs data, some other positive domestic economic reports included a decline in weekly jobless claims and a jump in mortgage applications, while the Institute for Supply Management (ISM) non-Manufacturing Index showed growth accelerated more than expected, rising to 56.5 in June, the highest since November 2015. However, factory orders declined and durable goods orders were revised to a 2.3% drop, slightly lower than the initial estimate.

Unofficial start to 2Q earnings season next week

Next week's economic docket will heat back up, with key releases of retail sales, the Consumer Price Index (CPI), the Producer Price Index (PPI), the Fed's Beige Book, industrial production and capacity utilization, along with the preliminary University of Michigan Consumer Sentiment Index for July.

2Q earnings season will also unofficially kick-off next week as Alcoa Inc. (AA $11) is expected to report results after the close on Monday. As noted in the recent Schwab Market Perspective, some questions have come to light recently regarding what consequences the uncertainty in Europe and a potential strengthening of the U.S. dollar may have. We'll start to get an initial view on those questions in the next few weeks as second quarter earnings season ramps up. Read the whole article at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch.

International reports slated for next week include: Japan—machine and machine tool orders, PPI, industrial production and capacity utilization and the Tertiary Industry Index. China—foreign direct investment, trade data, industrial production, retail sales and 2Q GDP. India—car sales, CPI, industrial production and trade data. U.K.—construction output and the Bank of England will announce its rate decision. Germany—Wholesale Price Index and CPI. Eurozone—industrial production, trade balance and CPI.

Stocks Disagree on Direction Ahead of Jobs Data

Charles Schwab: On the Market

Posted: 7/7/2016 4:15 PM ET

Stocks Disagree on Direction Ahead of Jobs Data

U.S. stocks closed the trading session mixed with some modest early gains fading as investors may have been exercising some caution ahead of tomorrow's June labor report release. Crude oil prices reversed solidly lower on the heels of a weekly report that showed stockpiles fell less than forecasted, while weekly jobless claims declined and ADP reported a better-than-expected increase for private sector jobs. Treasuries and gold were lower and the U.S. dollar was higher.

The Dow Jones Industrial Average (DJIA) declined 23 points (0.1%) to 17,896, the S&P 500 Index decreased 2 points (0.1%) to 2,098, and the Nasdaq Composite added 18 points (0.4%) to 4,877. In moderate volume, 864 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil was $2.29 lower at $45.14 per barrel, wholesale gasoline dropped $0.07 to $1.36 per gallon and the Bloomberg gold spot price decreased $3.76 to $1,360.02 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% lower at 96.27.

PepsiCo Inc. (PEP $107) reported core 2Q EPS of $1.35, above the $1.29 FactSet estimate, on revenues of $15.4 billion that matched expectations. The snack and soft drink maker credited strength in the U.S. market and its cost-cutting initiatives that were able to overcome weaker sales abroad. PEP also raised its full-year forecasts. Shares of PEP closed nicely higher.

Danone SA (DANOY $14) has agreed to buy WhiteWave Foods Co. (WWAV $56) for $10 billion, in a move to add the Denver-based company's popular Silk soy milk brand to its expanding organic food segment. WWAV shareholders will receive $56.25 per share in cash for each share owned, a 19% premium to Wednesday's closing price. Danone's Chief Executive Officer Faber said the acquisition will "allow us to double the size of our U.S. business and become the world leader in organic." DANOY finished slightly higher, while WWAV rallied.

Jobs data highlights economic calendar

Weekly initial jobless claims (chart) declined by 16,000 to 254,000 last week, versus the Bloomberg estimate of 270,000. The prior week's figure of 270,000 was downwardly revised to 268,000. The four-week moving average declined by 2,500 to 264,750, while continuing claims fell 44,000 to 2,124,000, north of the estimated level of 2,123,000.

The ADP Employment Change Report showed private sector payrolls rose by 172,000 jobs in June, above forecasts of 151,000, while May's gain of 173,000 jobs was revised lower to a 168,000 rise. Today’s ADP data, which does not include government hiring and firing, comes ahead of tomorrow's broader June nonfarm payroll report, expected to show an increase of 180,000 jobs, while private sector payrolls are expected to rise 170,000 (economic calendar). The unemployment rate is forecasted to tick higher to 4.8% from 4.7% and average hourly earnings are projected to rise 0.2% month-over-month (m/m).

In the final hour of trading tomorrow, we will also receive the latest consumer credit report, which is expected to show consumer borrowing for the month of May expanded by a level of $16.0 billion, after increasing by $13.4 billion in April.

Treasuries were mostly lower, with the yield on the 2-year note increasing 1 basis point (bp) to .059% and the yield on the 10-year note gaining 2 bps to 1.39%, while the yield on the 30-year bond was nearly unchanged at 2.14%. Bond yields have come under pressure as of late, falling to record lows as the global markets continue to grapple with the impact of the U.K. Brexit vote, and Schwab's Chief Fixed Income Strategist, Kathy Jones offers analysis in her recent article titled, Brexit: What Does It Mean for the Bond Market?, at www.schwab.com/marketinsight. Follow Kathy on Twitter: @kathyjones. Also, for more on the Brexit fallout, see the latest Schwab Sector Views: Sector Impact of Brexitfrom Schwab Director of Market and Sector Analysis, Brad Sorensen, CFA, at www.schwab.com/marktetinsight, and follow Schwab on Twitter: @schwabresearch.

Europe rebounds from three-day fall, Asia mixed 

European equities finished higher, rebounding from a three-day drop, as optimism re-surfaced that central banks will be supportive in the wake of the U.K. Brexit vote, which has fueled risk aversion and global growth concerns, and after yesterday's minutes from the Fed's June meeting showed continued dovishness. Also, anxiety toward the Italian banking sector softened amid increased hopes that a resolution to aid the battered sector can be achieved. Moreover, the British pound recovered somewhat after falling to a 31-year low versus the U.S. dollar. For deeper analysis of the impact of the Brexit vote, see the Schwab Center for Financial Research's recent article, Brexit: What Investors Should Know, at www.schwab.com/marketinsight and be sure to check out the video from Schwab's Managing Director of Trading and Derivatives, Randy Frederick and Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, titled Brexit Aftershock: When Will the Markets Calm Down?, at www.schwab.com/insights. Follow Randy and Jeff on Twitter: @randyafrederick and @jeffreykleintop.

Economic news in the region was mixed, with a better-than-expected read on U.K. industrial production being somewhat overshadowed by a surprising decline in production out of Germany, while France's trade deficit narrowed and housing prices in the U.K. rose above forecasts. The euro was lower versus the U.S. dollar, while bond yields in the region were higher.

Stocks in Asia finished mixed, with the angst surrounding the U.K. Brexit vote fallout easing somewhat, but the global growth concerns remained. The flight-to-safety continued to boost the yen, which fostered a decline for Japanese equities. Elsewhere, Australian securities managed gains despite Standard & Poor's lowering the nation's AAA-credit rating outlook to negative from stable, saying "the government's fiscal stance may no longer be compatible with the country's high level of indebtedness." The move follows last weekend's general elections that rendered inconclusive results. Mainland Chinese stocks were mostly flat, but securities trading in Hong Kong gained ground for the sixth-straight day. Meanwhile, South Korean stocks rose and Indian equities inched higher following yesterday's holiday.

The international economic docket for tomorrow will yield trade data from Japan and Germany, industrial and manufacturing production from France and labor costs and the trade balance from the U.K.

Gains Continue

Charles Schwab: On the Market

Posted: 6/21/2016 4:15 PM ET

Gains Continue

U.S. equities slightly added to yesterday's rally, with technology issues leading the way, while energy stocks were resilient amid a modest decline in crude oil prices. Brexit uncertainty continued to swirl around the market ahead of Friday's vote, and Fed Chair Yellen offered little new information in her first day of testimony before Congress. Treasuries were nearly unchanged and the U.S. dollar was higher, while gold lost ground.

The Dow Jones Industrial Average (DJIA) rose 24 points (0.1%) to 17,830, the S&P 500 Index added 6 points (0.3%) to 2,089, and the Nasdaq Composite finished 7 points (0.1%) higher at 4,844. In moderate volume, 836 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil lost $0.11 to $49.85 per barrel and wholesale gasoline added $0.01 to $1.59 per gallon, while the Bloomberg gold spot price tumbled $24.23 to $1,265.67 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was up 0.5% at 94.05.

Lennar Corp. (LEN $46) reported fiscal 2Q earnings-per-share (EPS) of $0.95, above the $0.87 FactSet estimate, as revenues rose 14.8% year-over-year (y/y) to $2.7 billion, exceeding the projected $2.6 billion. The company said the homebuilding market continued its slow and steady recovery sustained by low interest rates, modest wage growth, positive consumer confidence and low unemployment levels combined with tight inventory levels. LEN gave up an early gain and finished lower.

Werner Enterprises Inc. (WERN $22) issued softer-than-expected 2Q EPS guidance, noting sluggish freight market conditions, the cost of driver pay increases, and a soft used truck market. WERN added that to address the challenging market conditions, it continues to focus on various cost management initiatives. Shares of WERN fell.

CarMax Inc. (KMX $48) posted 1Q profits of $0.90 per share, two cents shy of estimates, with revenues increasing 2.8% y/y to $4.1 billion, below the forecasted $4.2 billion. Shares were solidly lower. 

Canadian Pacific Railway Ltd. (CP $124) issued a 2Q revenue and profit warning, due to lower-than-anticipated volumes in bulk commodities, the wildfires in northern Alberta and a strengthening Canadian dollar. CP said given the transitory nature of these impacts, coupled with an anticipated improvement in commodity volumes, it remains confident toward meeting its full-year guidance. Shares were lower.

Fed Chair Yellen takes to the Hill

Federal Reserve Chairwoman Janet Yellen kicked off her two-day semiannual monetary policy report to Congress, speaking to the Senate Banking Committee. In her prepared remarks, she noted that the economy has made further progress. "However, the pace of improvement in the labor market appears to have slowed more recently, suggesting that our cautious approach to adjusting monetary policy remains appropriate," she added. Yellen also stressed that the Central Bank believes the recent slowing in employment growth is "transitory" but it is watching the job market carefully. Moreover, she said a U.K. vote to exit the European Union (EU)—known as a Brexit—"could have significant economic repercussions." Yellen concluded by saying the path of the fed funds rate will depend on economic and financial developments. Traders are paying close attention to the Q&A session following her remarks. Yellen will conclude her testimony tomorrow in front of the House Financial Services Committee.

May's severely disappointing labor report and continued Brexit uncertainty have applied pressure on global bond yields. Schwab's Chief Fixed Income Strategist Kathy Jones provides analysis in her latest article, Global Bonds: A World Without Yield, and she teams up with Schwab's Managing Director of Trading and Derivatives, Randy Frederick, in the video titled Fed on Pause: Watching and Waiting to Raise Rates, for further analysis in the Fed and the bond markets at www.schwab.com/insights.

Moreover, Schwab's Chief Investment Strategist, Liz Ann Sonders notes in her latest article, Beast of Burden (No More): Households Choosing Savings over Debt, regardless of the efforts of the Federal Reserve, it’s unlikely a major new expansion of private sector debt is coming. The debt supercycle, lasting over three decades, allowed demand growth to exceed underlying income growth. That era has seemingly died and continued sluggish growth for the U.S. economy will likely continue to be a byproduct of that potential death. Read both articles at www.schwab.com/marketinsight, and follow Kathy, Liz Ann and Randy on Twitter: @kathyjones, @lizannsonders and @randyafrederick.

Treasuries were little changed, while the U.S. economic calendar was dormant today. The yields on the 2-year and 10-year notes were flat at 0.76% and 1.69%, respectively, while the 30-year bond rate dipped by 1 basis point to 2.49%.

Tomorrow, the economic front will awaken with the release of existing home sales, projected to rise 1.8% month-over-month (m/m) to an annual rate of 5.55 million units in May. As noted in the Schwab Market Perspective: Summer of Discontent?, investors should remain patient as positive signs are emerging. For the frustration in the stock market to end, we believe businesses need to pick up their capital spending but for now a relatively healthy consumer and housing are keeping the U.S. economy afloat. Read more at www.schwab.com/marketinsight.

Europe modestly adds to recent rally, Asia mixed

European equities finished modestly higher, coming off a strong two-day rally, with financials continuing to move upward and oil & gas issues showing some resiliency in the face of a retreat in crude oil prices from their run the past two days. European stocks have rallied as of late, fueled by eased concerns about a U.K. Brexit after polls over the weekend suggested the June 23 vote could favor the nation remaining in the EU. For our latest analysis on the Brexit issue ahead of Thursday's key vote read our article, Will the UK Stay or Go? Markets Wait for Brexit Vote at www.schwab.com/insights. However, the newest Brexit polls fostered some uncertainty and the markets focused on today's monetary policy testimony on Capitol Hill from U.S. Fed Chair Yellen, where she warned of possible "significant economic repercussions." The euro and British pound lost ground versus the U.S. dollar, while bond yields in the region mostly ticked higher. A favorable read on German investor confidence may have helped sentiment, as the ZEW reported an unexpected jump in its expectations survey for June, which rose to the highest level since August 2015.

Stocks in Asia finished mixed as some caution ahead of today's testimony from U.S. Fed Chair Yellen met recently eased concerns about a U.K. Brexit, which fueled a global market rally yesterday. A weaker yen helped lift Japanese equities higher, mainland Chinese securities declined as volatility fell and data remained light, while stocks traded in Hong Kong advanced. Australia's markets gained ground, as traders digested the minutes from the June monetary policy meeting from the Reserve Bank of Australia (RBA), where it kept its policy stance unchanged. The RBA noted some positive signs of economic activity, notably in non-mining, while adding that inflation was expected to remain low for some time. Meanwhile, stocks in India traded lower on the heels of yesterday's announcement that Reserve Bank of India Governor Rajan will step down at the end of his term in September. Schwab's Director of International Research, Michelle Gibley, CFA, offers a look at the global political landscape in her article, Performing Reformers: How Political Change Can Affect Stocks, at www.schwab.com/oninternational, and be sure to follow Schwab on Twitter: @schwabresearch. Finally, South Korean equities ticked slightly higher.

Economic reports abroad will be very limited tomorrow, with the lone item of note being the Import Price Index from Germany.

Stocks Rally to Start Week

On the Market

Posted: 6/20/2016 4:15 PM ET

Stocks Rally to Start Week

U.S. stocks rallied on the heels of broad-based advances in Asia and Europe, with global risk aversion pulling back amid eased U.K. Brexit concerns following new polls over the weekend ahead of Thursday's vote. Financials and technology issues saw solid gains, while a jump in crude oil prices powered the energy sector. Treasuries, gold and the U.S. dollar were lower, while the domestic economic front was quiet today.

The Dow Jones Industrial Average (DJIA) rallied 130 points (0.7%) to 17,805, the S&P 500 Index jumped 12 points (0.6%) to 2,083, and the Nasdaq Composite finished 37 points (0.8%) higher at 4,837. In moderately-heavy volume, 892 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil increased $1.40 to $49.96 per barrel and wholesale gasoline added $0.07 to $1.58 per gallon, while the Bloomberg gold spot price decreased $8.98 to $1,289.67 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.6% lower at 93.67. 

Dow member Wal-Mart Stores Inc. (WMT $71) announced a strategic alliance with JD.com (JD $22), China's largest e-commerce company by revenue. The companies said the agreement includes a wide range of business initiatives, covering both online and offline retail. Shares of both companies traded higher.

Cigna Corp. (CI $128) and Anthem Inc. (ANTM $133) are in focus following a report from the Wall Street Journal suggesting their $44 billion merger agreement is raising antitrust concerns among U.S. regulators, per people familiar with the matter. None of the entities has commented on the report, while the companies have more meetings this week with top Justice Department officials. CI closed lower, while ANTM gained modest ground. 

Economic calendar dormant today

Treasuries were lower, while the U.S. economic calendar was void of any major releases today. The yield on the 2-year note rose 4 basis points (bps) to 0.73%, while the yields on the 10-year note and the 30-year bond gained 6 bps to 1.67% and 2.48%, respectively. Bond yields rebounded somewhat from their recent fall as the Fed suggested that it is still in a "wait-and-see" mode, remaining data dependent in the wake of May's severely disappointing labor report, while growth concerns and uncertainty regarding a U.K. exit from the European Union (EU), known as a Brexit, have also applied pressure.

Recent pressure on global bond yields has amplified the uneasy sentiment, with rates in Germany, Japan and the U.K. hitting record lows, while the U.S. 10-year Treasury yield touched to a four-year low. Schwab's Chief Fixed Income Strategist Kathy Jones provides analysis of this backdrop in her latest article, Global Bonds: A World Without Yield, at www.schwab.com/marketinsight. Follow Kathy on Twitter: @kathyjones.

This week's economic front will start slow but pick up steam tomorrow as Federal Reserve Chairwoman Janet Yellen will begin her two-day semiannual monetary policy report to Congress. Yellen's testimony will be accompanied by some key reads later this week on housing in the form of existing and new home sales reports, as well as manufacturing, with preliminary releases of durable goods orders and Markit's Manufacturing PMI Index. Other notable domestic reports due out this week include: the Leading Index and the final June University of Michigan Consumer Sentiment Index.

For our latest on the Fed and bond markets see the video by Schwab's Kathy Jones and Managing Director of Trading and Derivatives, Randy Frederick, titled Fed on Pause: Watching and Waiting to Raise Rates, at www.schwab.com/insights. Follow Randy on Twitter: @randyafrederick.

However, the focus of the global markets will likely be the looming June 23 U.K. Brexit vote and Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, discusses in his article, Brexit: 5 Things Investors Need to Know, no matter the outcome, the issue of a Brexit may not be put to rest entirely as EU member parliaments must also agree to the changes being proposed. Nevertheless, the British understand the key role trade has always played in their economy. The British may resent bailed-out banks and bureaucrats in Brussels, but we believe economic considerations will favor the U.K. remaining within the EU. Read more at www.schwab.com/marketinsight, and be sure to follow Jeff on Twitter: @jeffreykleintop.

Europe and Asia gain ground as Brexit fears recede

European equities moved broadly higher, with global sentiment being soothed by eased concerns about a U.K. Brexit on the heels of new polls over the weekend suggesting the "remain" camp gained ground ahead of Thursday's vote. Financials rallied to lead the advance and higher crude oil prices lifted the energy sector, while the British pound surged versus the U.S. dollar. For more analysis on the Brexit issue read our article, Brexit: How Might Stocks Respond? at www.schwab.com/insights. The euro rose versus the U.S. dollar and bond yields in the region were mixed. In economic news, eurozone construction output declined in April.

Stocks in Asia finished broadly higher with global risk aversion waning as recent polls are easing concerns about a U.K. Brexit ahead of Thursday's vote. The yen gave back some of its recent rally to boost Japanese equities, despite a report showing the nation's exports fell more than expected in May. Chinese stocks battled back from some early weakness to finish higher, aided by an upbeat read on the country's May property prices. Australian securities advanced, led by strong gains in the heavy weight oil & gas, basic materials and financial sectors, while South Korean listings also rose. Indian stocks moved higher, with the announcement that Reserve Bank of India's Governor Rajan will step down at the end of his term in September being overshadowed by the eased Brexit concerns and the announcement that India's government relaxed foreign direct investment rules. Schwab's Director of International Research, Michelle Gibley, CFA, offers a look at the global political landscape in her article, Performing Reformers: How Political Change Can Affect Stocks, at www.schwab.com/oninternational, and be sure to follow Schwab on Twitter: @schwabresearch.

Tomorrow, the international economic docket will be light, offering CPI from Hong Kong, the Zew Economic Sentiment Survey from Germany and public sector net borrowing from the U.K.

Bears Take Upper Hand for the Week

Charles Schwab: On the Market

Posted: 6/17/2016 4:15 PM ET

Bears Take Upper Hand for the Week

U.S. equities closed out a disappointing week amid continued jitters about next week's looming U.K Brexit vote, and despite crude oil prices snapping a six-session losing streak. Healthcare issues were the biggest drag on the major indexes, while technology stocks sunk following Oracle's miss. Treasuries finished lower in the midst of a mixed housing report, while the U.S. dollar fell and gold was higher.

The Dow Jones Industrial Average (DJIA) fell 58 points (0.3%) to 17,675, the S&P 500 Index lost 7 points (0.3%) to 2,071, and the Nasdaq Composite finished 45 points (0.9%) lower at 4,800. In very heavy volume, as a result of quadruple witching—the simultaneous expiration of stock and index futures and options contracts—2.0 billion shares were traded on the NYSE and 2.5 billion shares changed hands on the Nasdaq. WTI crude oil increased $1.77 to $47.98 per barrel and wholesale gasoline added $0.04 to $1.51 per gallon, while the Bloomberg gold spot price increased $19.77 to $1,298.20 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% lower at 94.16. Markets were lower for the week, as the DJIA declined 1.1%, the S&P 500 Index decreased 1.2% and the Nasdaq Composite fell 1.9%.

Oracle Corp. (ORCL $40) reported fiscal 4Q earnings-per-share (EPS) ex-items of $0.81, one penny shy of the FactSet estimate, as revenues declined 1.0% year-over-year (y/y) to $10.6 billion, above the projected $10.5 billion. Shares gained ground as the earnings miss was overshadowed by its stronger-than-expected growth and upbeat guidance for its cloud software and platform services segment.

Viacom Inc. (VIAB $44) issued fiscal 3Q profit guidance that was well below expectations. The company said its 3Q results will be impacted by the theatrical underperformance of Teenage Mutant Ninja Turtles: Out of the Shadows as well as a delay in completing a significant subscription video on demand (SVOD) agreement. VIAB said that it expected to complete a significant SVOD agreement in the quarter, but the recent and highly public governance controversy negatively impacted the timing and its ability to achieve an optimal outcome with partners. VIAB added that it has a strong slate of theatrical releases in the months ahead. Shares were modestly lower amid choppy trading.

Finisar Corp. (FNSR $19) posted fiscal 4Q EPS ex-items of $0.29, north of the expected $0.25, as revenues dipped 0.4% y/y to $319 million, compared to the projected $318 million. The fiber optic communications technology company issued stronger-than-expected 1Q guidance. Shares were nicely higher.

Housing construction activity in May mixed

Housing starts (chart) for May declined 0.3% month-over-month (m/m) to an annual pace of 1,164,000 units, but the figure topped the Bloomberg forecast of a 1,150,000 unit rate. April's starts were downwardly revised to an annual pace of 1,167,000. Construction of single-family units ticked higher and was up for multi-family structures, while both were nicely higher compared to the same period a year ago. Building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, rose 0.7% m/m in May to an annual rate of 1,138,000, after April's upward revision to a 1,130,000 rate, but the rate missed the expected annual pace of 1,145,000 units. Single-family unit permits declined m/m but were up y/y, while permits for multi-family structures rose solidly m/m, though are down y/y.

Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, notes in his latest Schwab Sector Views: Summer Lovin', higher wages and a continued improving housing market would go a long way toward improving consumer confidence, and that's what we believe we're seeing. A robust consumer would likely aid the more cyclical sectors, such as technology and consumer discretionary, as well as helping the overall U.S. economy. Read more at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch.

Treasuries were lower, as the yield on the 2-year note was flat at 0.69%, while the yield on the 10-year note rose 3 bps to 1.61%, and the 30-year bond rate increased 2 bps to 2.42%. Bond yields rebounded modestly from their recent tumble exacerbated by this week's unchanged Fed monetary policy decision, where it preserved uncertainty regarding the timing of the next rate hike by suggesting that it is still in a "wait-and-see" mode, remaining data dependent in the wake of May's severely disappointing labor report, but still forecasting the possibility of two rate hikes this year. Bond yields have also seen pressure courtesy of rising growth concerns, and growing uncertainty regarding a U.K. exit from the European Union (EU), known as a Brexit.

For more on the bond markets in the wake of the Fed's decision see the video by Schwab's Chief Fixed Income Strategist, Kathy Jones and Managing Director of Trading and Derivatives, Randy Frederick, titled Fed on Pause: Watching and Waiting to Raise Rates, at www.schwab.com/insights. Follow Kathy and Randy on Twitter: @kathyjones and @randyafrederick.

The recent pressure on global bond yields has amplified the uneasy sentiment as of late, with rates in Germany, Japan and the U.K. hitting record lows, while the U.S. 10-year Treasury yield touched a four-year low during yesterday's trading session. Amid this backdrop, Schwab's Kathy Jones offers notes in her latest article, Global Bonds: A World Without Yield, near- or below-zero bond yields in major global markets are likely to persist into the second half of the year. However, we doubt the strong performance year to date can be repeated in the second half of the year, especially in the riskier areas of the fixed income market. With yields low and prices high, bonds are susceptible to setbacks. Investors with exposure to international and low-credit-quality bonds may want to re-examine the allocations within their fixed income portfolios, as risks are rising and the potential rewards are declining. Read more at www.schwab.com/marketinsight.

Europe trims weekly loss, Asia rebounds

European equities finished higher, with the Stoxx Europe 600 Index paring its more than 2.0% weekly drop, aided by a broad-based advance in Asia and following yesterday's upside reversal in the U.S. that snapped a string of five-straight losing sessions. Financials and oil & gas issues led the rebound as the recently battered sectors recovered from recent pressure. The sectors have been hampered by the flared-up global risk aversion amid the plethora of market headwinds, concerns about bad bank loans and capital positions, and the recent tumble in crude oil prices, which are rebounding today. Moreover, concerns about a U.K. Brexit eased as campaigning for the June 23 referendum was suspended for a second day in the wake of yesterday's murder of Labour Party lawmaker Jo Cox, who was in favor of the U.K. remaining in the EU. The British pound and the euro gained ground on the U.S. dollar, while bond yields in the region were mixed. For analysis on the Brexit issue read our article, Brexit: How Might Stocks Respond? at www.schwab.com/insights.

Stocks in Asia finished higher to close out a negative week, aided by yesterday's upside reversal in the U.S., while eased concerns about a U.K. Brexit underpinned sentiment. Japanese equities rose to trim a sharp weekly decline, supported by the yen pausing from its recent surge that has been fueled by risk aversion on heightened global growth and Brexit concerns, and exacerbated by this week's decision by the Bank of Japan to hold off on adding further stimulus measures. Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, discusses What investors need to know about helicopter money, while offering Five ways investors can make the most of slower growth, at www.schwab.com/oninternational. Mainland Chinese stocks, as well as those in Hong Kong gained ground, paring their weekly drops, along with Australian listings, led by technology and financials issues. Finally, India's markets advanced for the week, and South Korea securities ticked higher to limit the solid decline seen this week.

Risk aversion festers to pressure global equities

The global stock markets finished solidly lower on a week filled with volatility fueled by elevated risk aversion. Heightened concerns about a Brexit and disappointing monetary policy decisions out of the U.S. and Japan were painted on a backdrop of festering global growth concerns. The yen continued its rally and crude oil prices posted a string of six-straight losing sessions. Treasury yields remained under pressure, contributing to the drop in global bond yields, which illustrated the flight to safety in the markets. The hampered global sentiment overshadowed Dow member Microsoft Corp's (MSFT $50) agreement to acquire LinkedIn Corp. (LNKD $191) for about $26.2 billion, as well as a second-straight solid monthly rise in retail sales.

As noted in the Schwab Market Perspective: Summer of Discontent?, stocks moving nowhere for over a year, and a continued low yield environment is fueling investor frustration. There doesn’t appear to be a lot of impetus for that to change soon, but investors should remain patient as positive signs are emerging. Read more at www.schwab.com/marketinsight, and for our analysis of this week's Fed decision see our article, Fed Holds Steady on Rates at www.schwab.com/insights.

Economic calendar likely to yield to Brexit vote

Next week's economic calendar will start slow but pick up steam on Tuesday as Federal Reserve Chairwoman Janet Yellen will begin her two-day semiannual monetary policy report to Congress. Yellen's testimony will be accompanied by some key reads on housing in the form of existing and new home sales reports, as well as manufacturing, with preliminary releases of durable goods orders and Markit's Manufacturing PMI Index. Other notable domestic reports due out next week include: the Leading Index and the final June University of Michigan Consumer Sentiment Index.

However, the focus of the global markets will likely be the looming June 23 U.K. Brexit vote, which has been a major source of the volatility in the markets as of late with uncertainty regarding the outcome remaining. Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, discusses in his article, Brexit: 5 Things Investors Need to Know, no matter the outcome, the issue of a Brexit may not be put to rest entirely as EU member parliaments must also agree to the changes being proposed. Nevertheless, the British understand the key role trade has always played in their economy. The British may resent bailed-out banks and bureaucrats in Brussels, but we believe economic considerations will favor the U.K. remaining within the EU. Be sure to follow Jeff on Twitter: @jeffreykleintop.

Key international reports to look out for next week include: Australia—Reserve Bank of Australia meeting minutes. China—property prices. Japan—trade balance. Eurozone—Markit's business activity reports, along with German investor and business confidence data.

Stocks Stage Midday Turnaround

Charles Schwab: On the Market

Posted: 6/16/2016 4:15 PM ET

Stocks Stage Midday Turnaround

Seeing pressure early amid some uneasiness in the wake of monetary policy decisions from the Fed, Bank of England and Bank of Japan, continued global growth concerns, and Brexit worries, stocks were able to dig out of their hole to finish higher on the day. Treasuries were mixed following mixed reads on U.S. inflation, jobless claims and homebuilder sentiment, the U.S. dollar was flat while gold and crude oil prices tumbled.

The Dow Jones Industrial Average (DJIA) rose 93 points (0.5%) to 17,733, the S&P 500 Index increased 7 points (0.3%) to 2,078, and the Nasdaq Composite finished 10 points (0.2%) higher at 4,845. In moderate volume, 876 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil tumbled $1.80 to $46.21 per barrel and wholesale gasoline declined $0.03 to $1.47 per gallon, while the Bloomberg gold spot price decreased $11.30 to $1,280.45 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was unchanged at 94.61.

Rite Aid Corp. (RAD $8) reported 1Q earnings-per-share (EPS) ex-items of $0.01, below the $0.05 FactSet estimate, on revenues of $8.2 billion, which roughly matched forecasts. 1Q same-store sales grew 0.4% y/y. The company said its challenge was pharmacy reimbursement rate pressure, which it was unable to offset largely due to drug purchasing efficiencies that did not meet its expectations. Shares finished nearly unchanged.

Kroger Co. (KR $35) reported 1Q EPS of $0.70, one penny north of estimates, with revenues growing 4.7% year-over-year (y/y) to $34.6 billion, below the projected $34.9 billion. Same-store sales, excluding fuel, rose 2.4% y/y, just shy of the anticipated 2.5% increase. KR reaffirmed its full-year profit forecast. Shares were slightly lower.

Envision Healthcare Holdings Inc. (EVHC $26) and AMSURG Corp. (AMSG $78) announced a merger agreement in an all-stock transaction at a fixed exchange ratio of 0.334 AMSG shares per EVHC share, with an enterprise value of about $15.0 billion. Envision shareholders will own about 53.0% of the combined company and AMSURG shareholders will own approximately 47.0%. EVHC traded lower, while AMSG gained ground.

Headline consumer price inflation slightly misses forecasts, jobless claims jump

The Consumer Price Index (CPI) (chart) was up 0.2% month-over-month (m/m) in May, below forecasts of a 0.3% increase, while April's 0.4% rise was unrevised. The core rate, which strips out food and energy, gained 0.2% m/m, matching expectations and April's unrevised increase. Y/Y, prices were 1.0% higher for the headline rate, below forecasts of a 1.1% rise, while the core rate was up 2.2%, in line with projections. April y/y figures showed an unrevised 1.1% rise and an unadjusted 2.1% increase for the headline and core rates respectively.

Weekly initial jobless claims (chart) rose by 13,000 to 277,000 last week, versus estimates calling for claims to increase to 270,000, as the prior week's figure was unrevised at 264,000. The four-week moving average dipped by 250 to 269,250, while continuing claims rose by 45,000 to 2,157,000, north of the estimated level of 2,140,000.

The May National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment this month rose to 60—the highest since January 2016—from 58 in May, versus estimates calling for an improvement to 59. However, builder confidence remained above 50, which separates good and poor conditions, for the twenty-fourth straight month. The NAHB said builders in many markets across the nation are reporting higher traffic and more committed buyers at their job sites. The NAHB added, "However, our members are also relating ongoing concerns regarding the shortage of buildable lots and labor and noting pockets of softness in scattered markets."

Tomorrow, the lone report on the U.S. economic calendar will be a read on housing construction activity, in the form of May housing starts and building permits. Starts are expected to decline 1.9% m/m to an annual rate of 1,150,000 units, while permits are projected to rise 1.3% to a rate of 1,145,000 units. As noted in the Schwab Market Perspective: Summer of Discontent?, a more confident consumer should be supported by an improving housing market, which should also support business confidence and the economy more broadly. Read more at www.schwab.com/marketinsight.

The Philly Fed Manufacturing Index (chart) in June rose to a level depicting expansion (a reading above zero) increasing to 4.7 from -1.8 in May, and compared to estimates calling for an improvement to 1.0.

Treasuries were mixed, as the yield on the 2-year note rose 1 basis point (bp) to 0.67%, while the yield on the 10-year note was flat at 1.57% and the 30-year bond rate ticked 1 bp lower to 2.40%. Bond yields fell yesterday following the unchanged Fed monetary policy decision, where it preserved uncertainty regarding the timing of the next rate hike by suggesting that it is still in a "wait-and-see" mode, remaining data dependent in the wake of May's severely disappointing labor report, but still forecasting the possibility of two rate hikes this year. Bond yields have also been seeing pressure courtesy of rising growth concerns, and growing uncertainty regarding a U.K. exit from the European Union (EU), known as a Brexit. For analysis on the Fed's decision from Schwab experts see our article, Fed Holds Steady on Rates, at www.schwab.com/insights, as well as Schwab's Fixed Income Director Collin Martin's, CFA, article, Waiting for a Fed Rate Hike: Bond Investments That May Make Sense Now at www.schwab.com/marketinsight. Follow Schwab on Twitter: @schwabresearch.

Europe resumes slide, Asia lower following Fed and BoJ decisions, Brexit worries

Although off the worst levels of the day, European equities fell back in the red, after the Stoxx Europe 600 Index rebounded yesterday from its worst five-day plunge since February, per Bloomberg. Industrials led to the downside, with the global markets stymied by festering global growth concerns and disappointment on the heels of unchanged monetary policy decisions from the U.S. and Japan. Financials saw pressure as worries toward bad debt resurfaced, exacerbated by a flare-up in uneasiness toward the sector's capital positions. Also, worries about a U.K. Brexit remained a drag on sentiment, with the Bank of England holding its monetary policy unchanged, reiterating growth and inflation would be materially impacted by a Brexit. The U.K. will hold a referendum on June 23 to determine if it will leave the European Union (EU) and for analysis on the issue read our article, Brexit: How Might Stocks Respond? at www.schwab.com/insights. The euro and British pound dropped versus the U.S. dollar, while bond yields in the region finished mixed. In other monetary policy news, the Swiss National Bank held its benchmark interest rate unchanged, as expected. In economic news, EU new car registrations jumped in May, while eurozone consumer price inflation came in slightly hotter than expected and U.K. retail sales rose more than anticipated for May.

Stocks in Asia finished mostly lower after the U.S. Fed did little to clear up uncertainty regarding the timing of the next rate hike, while the yen jumped after the Bank of Japan (BoJ) held off on adding further stimulus measures. Also, the global markets remained hamstrung by festering growth concerns and worries about a Brexit. Japanese equities tumbled, with the yen surging on the heels of the decision by the BoJ to keep its monetary policy stance unchanged. The BoJ noted that risks to the economic outlook include uncertainties in emerging and commodity-exporting economies, the impact of monetary policy response from the U.S. on global financial markets, the prospects regarding Europe's debt problem and economic activity, as well as geopolitical risks. Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, discusses What investors need to know about helicopter money. Mainland Chinese securities and those traded in Hong Kong fell on the U.S. and Japan monetary policy decisions and as economic growth concerns lingered. Schwab's Jeffrey Kleintop offers Five ways investors can make the most of slower growth. Read both articles at www.schwab.com/oninternational. Finally, Australian stocks finished flat with strength in basic materials being offset by weakness in oil & gas issues, while South Korean listings and those that changed hands in India moved lower.

The international economic calendar will be fairly light for tomorrow, with trade data expected from Italy and the Eurozone, wage figures from France and building permits from Germany.

Gains Fade Following Fed

Charles Schwab: On the Market

Posted: 6/15/2016 4:15 PM ET

Gains Fade Following Fed

U.S. stocks lost gains in the final hour of trading and closed lower on the heels of the conclusion of the Federal Reserve's two-day monetary policy meeting, where the Central Bank left rates unchanged and issued updated economic projections. Treasuries and gold were higher and the U.S. dollar and crude oil prices were lower. In domestic economic news, producer price inflation was hotter than expected, industrial production declined and manufacturing output from the New York region unexpectedly moved into expansion territory.

The Dow Jones Industrial Average (DJIA) lost 35 points (0.2%) to 17,640, the S&P 500 Index declined 4 points (0.2%) to 2,072, and the Nasdaq Composite finished 9 points (0.2%) lower at 4,835. In moderately-higher volume, 886 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil decreased $0.48 to $48.01 per barrel and wholesale gasoline declined $0.02 to $1.50 per gallon, while the Bloomberg gold spot price increased $8.02 to $1,293.73 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% lower at 94.66.

Whole Foods Market Inc. (WFM $31) saw some pressure, possibly due to the Food and Drug Administration (FDA) citing the company for several food safety violations at its manufacturing facility in Massachusetts in a June 8 letter that was revealed yesterday. Also, today WFM was downgraded to sell from neutral by Northcoast Research.

Bob Evans Farms Inc. (BOBE $41) reported fiscal 4Q earnings-per-share (EPS) ex-items of $0.48, above the $0.43 FactSet estimate, as revenues rose 4.0% year-over-year (y/y) to $346 million, roughly in line with forecasts. 4Q same-store sales fell 3.0% y/y, versus the expected 2.0% decline. BOBE issued current year EPS guidance that came in below forecasts. Shares closed sharply lower.

Wholesale price inflation hotter than expected, Fed maintains current policy

The Producer Price Index (PPI) (chart) showed prices at the wholesale level in May rose 0.4% month-over-month (m/m), versus the Bloomberg expectation of a 0.3% increase, and compared to April's unrevised 0.2% gain. The core rate, which excludes food and energy, grew 0.3% m/m, above forecasts of a 0.1% rise, and April's unadjusted 0.1% increase. Y/Y, the headline rate dipped 0.1%, matching projections, and the core PPI was up 1.2% last month, topping estimates of a 1.0% gain. In April, producer prices were flat and up 0.9% y/y for the headline and core rates, respectively.

Industrial production (chart) declined 0.4% m/m in May—the third decline in the past four months—versus estimates of a 0.2% decrease, and following April's downwardly revised 0.6% increase. Manufacturing production declined 0.4% and utilities output dropped 1.0%, while mining production ticked 0.2% higher. Capacity utilization declined to 74.9% from April's downwardly revised 75.3%, and compared to projections for a 75.2% rate. Capacity utilization is 5.1 percentage points below its long-run average.

The Empire Manufacturing Index showed output from the New York region unexpectedly moved into expansion territory (a reading above zero) for June. The index jumped to 6.0 from May's unrevised -9.0 level, with forecasts calling for a rise to -4.9.

The MBA Mortgage Application Index declined 2.4% last week, after jumping 9.3% in the previous week. The decrease came as a 0.7% decline for the Refinance Index was met with a 4.9% drop for the Purchase Index. The average 30-year mortgage rate fell 4 basis points (bps) to 3.79%.

At 2:00 p.m. ET, the Federal Open Market Committee (FOMC) concluded its two-day monetary policy meeting, where the Fed kept its policy stance unchanged at a targeted range of 0.25%-0.50% for the Fed funds rate. The Committee recognized that since its last meeting in April, the pace of improvement in the labor market has slowed, while growth in economic activity appears to have picked up. It was also noted that "the committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run." The Committee also released updated economic projections, slightly increasing their current year forecasts for inflation and mildly decreasing estimates for output for this year, while it held current year projections for the federal funds rate, but decreased estimates for the rate in 2017 and 2018. In her scheduled press conference after the statement, Chairwoman Janet Yellen reiterated the need to maintain the Fed's current policy, and also noted in the ensuing Q&A session that it was fair to say Brexit concern was one factor in the decision.

Look for analysis on the Fed's decision from Schwab experts later today at www.schwab.com/insights, and you can also follow us on Twitter: @schwabresearch.

Treasuries finished higher following the Fed statement, with the yield on the 2-year note declining 5 basis points (bps) to 0.67%, the yield on the 10-year note decreasing 3 bps to 1.58% and the 30-year bond rate dipping 1 bp to 2.42%. Bond yields have been mostly retreating as of late on rising growth concerns, growing uncertainty regarding a U.K. exit from the European Union (EU), known as a Brexit, and as the markets grapple with pushed out Fed rate hike expectations.

Tomorrow, the U.S. economic calendar will include the Consumer Price Index (CPI), forecasted to have increased 0.3% m/m during May, while excluding food and energy, the core rate is expected to have risen 0.2% m/m. We'll also receive the Philly Fed Manufacturing Index, forecasted to move back into expansion territory to 1 for June from -1.8 in May, where a level of zero represents the demarcation point between expansion and contraction in manufacturing activity. Finally, we will receive weekly initial jobless claims, forecasted to have increased to 270,000 from the prior week's 264,000 level.

Europe rebounds ahead of Fed decision, Asia mostly higher despite festering uneasiness

European equities traded higher, with the Stoxx Europe 600 Index rebounding from its worst five-day plunge since February, per Bloomberg, as mining stocks led a broad-based advance. The rebound comes despite today's monetary policy decision in the U.S. and as uncertainty remains regarding the possibility of a U.K. Brexit. The U.K. will hold a referendum on June 23 to determine if it will leave the EU and for analysis on the issue read our article, Brexit: Will the UK Leave the EU? at www.schwab.com/insights. Also, Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, discusses, Brexit: 5 Things Investors Need to Know, at www.schwab.com/oninternational. Be sure to follow Jeff on Twitter: @jeffreykleintop.

The global markets appeared to catch their breath after the recent stock selloff and ensuing drop in global bond yields that preceded monetary policy meetings—including tomorrow's decisions out of the U.K. and Japan—and amid Brexit concerns and festering global growth worries. Schwab's Jeffrey Kleintop offers Five ways investors can make the most of slower growth at www.schwab.com/oninternational. The euro and British pound gained ground on the U.S. dollar, while bond yields in the region were mostly lower. In economic news, the U.K. unemployment rate dipped unexpectedly to 5.0% for April, while the eurozone trade surplus surprisingly widened in April.

Stocks in Asia finished mostly higher, despite likely caution ahead of today's monetary policy decision in the U.S., which will be followed by tomorrow's decisions out of Japan and the U.K. Stocks rebounded somewhat from a recent selloff in the global equity markets, courtesy of heightened growth concerns and festering uncertainty of a U.K. Brexit. Japanese equities advanced, with the yen retreating modestly from its recent rally that was spurred by elevated risk aversion as of late, ahead of the Bank of Japan's (BoJ) monetary policy decision. For analysis ahead of the BoJ's monetary policy decision, see Schwab's Jeffrey Kleintop's latest article, What investors need to know about helicopter money, at www.schwab.com/marketinsight.

Mainland Chinese listings rose, showing some resiliency in the face of the decision by MSCI Inc. to delay the inclusion of mainland stocks into its global benchmark indexes. Bloomberg noted that the decision may have sparked speculation that state-backed funds likely stepped in to support the markets. Securities trading in Hong Kong also advanced, while after the closing bell, China reported stronger-than-expected new yuan loans but an unexpected deceleration in aggregate financing—a gauge of total credit issued. Indian stocks gained ground with the reprieve from the global selloff helping the index snap a four-session losing streak. However, stocks in South Korea and Australia declined, with weakness in financials and basic materials issues weighing on the market.

In addition to the aforementioned decisions from the Bank of Japan and the Bank of England, tomorrow's international docket will yield the release of retail sales from the U.K. and CPI for the Eurozone.

Stocks Close Red as Focus Moves to Fed

Charles Schwab: On the Market

Posted: 6/14/2016 4:15 PM ET

Stocks Close Red as Focus Moves to Fed

U.S. stocks closed with losses, continuing their recent decline, as Brexit worries remained and investors await tomorrow's conclusion of the Fed's two-day monetary policy meeting, while the Bank of Japan and Bank of England will be delivering decisions on Thursday. Treasuries shed early gains as bond yields ticked higher in afternoon action, crude oil prices were lower and the U.S. dollar and gold advanced. In economic news, a better-than-expected read on advance retail sales headlined a relatively busy domestic docket.

The Dow Jones Industrial Average (DJIA) lost 58 points (0.3%) to 17,675, the S&P 500 Index shed 4 points (0.2%) to 2,075, and the Nasdaq Composite finished 5 points (0.1%) lower at 4,844. In moderately-higher volume, 892 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil decreased $0.39 to $48.49 per barrel and wholesale gasoline declined $0.02 to $1.54 per gallon, while the Bloomberg gold spot price increased $1.96 to $1,285.82 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.6% higher at 94.95.

Alibaba Group Holding Ltd. (BABA $78) gained solid ground after China's largest e-commerce company offered stronger-than-expected revenue growth guidance for the current year, while also offering upbeat longer-term outlooks for consumers on its site and transactions volume.

May retail sales solid for second-straight month, Fed begins its two-day meeting

Advance retail sales (chart) for May rose 0.5% month-over-month (m/m), versus the Bloomberg forecast of a 0.3% gain, and April's unadjusted 1.3% rise. Also, last month's sales ex-autos were up 0.4% m/m, matching expectations, and compared to the unrevised 0.8% rise in the previous month. Sales ex-autos and gas grew 0.3% m/m, in line with estimates, while April's 0.6% increase was unadjusted. Finally, the retail sales control group, a figure used to help calculate GDP, gained 0.4%, compared to the projected 0.3% rise, and the prior month's upwardly revised 1.0% increase. Most categories saw increased sales, paced by nonstore retailers—which includes online sales—sporting goods, clothing and food services & drinking places, while building materials fell.

Following a sluggish 1Q, the second-consecutive month of solid retail sales growth in 2Q adds credence to our view in the Schwab Market Perspective: Summer of Discontent?, that positive signs are emerging. The strength to-date in the job market may be leading to an acceleration in consumer spending. It’s much too early to call this a trend, but today's report and April's largest monthly increase since 2009 in personal spending are positive signs and what we have been expecting given the strength in the job market and the lagged impact of lower oil prices. A more confident consumer should be supported by an improving housing market, which should also support business confidence and the economy more broadly. Read more at www.schwab.com/marketinsight.

The Import Price Index (chart) increased 1.4% m/m for May, compared to projections of a 0.7% increase, and April's upwardly revised 0.7% gain. Y/Y, prices were down by 5.0%, versus the 5.9% forecasted drop, and following April's upwardly revised 5.3% fall.

The National Federation of Independent Business (NFIB) Small Business Optimism Index for May rose to 93.8 from April's 93.6 level, where economists had expected it to remain.

Business inventories (chart) ticked 0.1% higher m/m in April, below forecasts of a 0.2% rise, and versus March's downwardly revised 0.3% gain. Sales rose 0.9% m/m, and the inventory-to-sales ratio—the time it would take to deplete inventories at the current sales pace—dipped to 1.40 months from March's 1.41 pace.

Treasuries ticked lower, with the yields on the 2-year and 10-year notes, as well as the 30-year bond rate, all gaining 1 basis point to 0.72%, 1.62% and 2.43%, respectively. Bond yields have been mostly on the decline as uneasy global sentiment has ramped up as of late, amid rising growth concerns, growing uncertainty regarding a U.K. exit from the European Union (EU), known as a Brexit, and as the markets grapple with pushed out Fed rate hike expectations. The Federal Open Market Committee (FOMC) began its two-day monetary policy meeting today, which will culminate with tomorrow's statement.

As noted in our article,  Where Will the Fed Go from Here? the Fed's post-meeting statement may leave the door open to a rate hike in July, but given weak global economic growth, low or even negative interest rates abroad, and recent signs of weakness in the U.S. job market, it's unclear when the Fed will raise rates again. The markets will be watching for any time reference in the statement about the next rate hike, while also scrutinizing the Fed's updated economic projections and the press conference by Fed Chairwoman Janet Yellen released shortly after the statement. Read the rest of the article at www.schwab.com/insights. Also, check out Schwab's Fixed Income Director Collin Martin's, CFA, article, Waiting for a Fed Rate Hike: Bond Investments That May Make Sense Now at www.schwab.com/marketinsight. Be sure to follow Schwab on Twitter: @schwabresearch.

In addition to the aforementioned conclusion of the Fed's FOMC policy meeting, tomorrow, the U.S. economic calendar will commence with the Producer Price Index, expected to have increased 0.3% for May after rising 0.2% the month prior, and the Empire Manufacturing Index, which is anticipated to improve to -4.50 in June from the -9.02 level the month prior, with a reading below zero denoting contraction. Also, the Federal Reserve will release its industrial production and capacity utilization report for May, with production forecasted to decline 0.2% m/m after the prior month's 0.7% increase, and utilization is projected to dip to 75.2% from 75.4%.

Pressure persists for stocks in Europe and Asia

European equities traded lower, with the Stoxx Europe 600 Index posting its worst five-day plunge since February, per Bloomberg. Global sentiment remained hampered by growth concerns and caution ahead of monetary policy decisions out of the U.S., U.K., and Japan. For more on international investing amid this backdrop, see Schwab's Chief Global Investment Strategist, Jeffrey Kleintop's, CFA, article Five ways investors can make the most of slower growth, at www.schwab.com/oninternational, and be sure to follow Jeff on Twitter: @jeffreykleintop.

More polls exacerbated concerns regarding the possibility of a U.K. Brexit, and the British pound fell versus the U.S. dollar. The U.K. will hold a referendum on June 23 to determine if it will leave the EU and for analysis on the issue read our article, Brexit: Will the UK Leave the EU? at www.schwab.com/insights. Also, Schwab's Jeffrey Kleintop, discusses in his article, Brexit: 5 Things Investors Need to Know, at www.schwab.com/oninternational.

The euro also lost solid ground to the U.S. dollar, while bond yields in the region were mixed. However, the recently ramped up flight-to-safety in the global markets took the German 10-year benchmark bond yield below zero for the first time ever to amplify the uneasy sentiment. Financials saw pressure as the recent drop in global bond yields continued to weigh on the sector, while energy issues fell to pace the broad-based decline. In economic news, U.K. consumer price inflation came in slightly below expectations for May, while eurozone industrial production for April rose more than expected.

Stocks in Asia finished mostly to the downside, with risk aversion festering to apply pressure on global bond yields, which is causing some concerns. The uneasy global sentiment is being fostered by lingering growth concerns being met with caution ahead of monetary policy decisions this week out of the U.S., U.K., and Japan, while uncertainty remains regarding next week's vote on a U.K. Brexit. For analysis ahead of the Bank of Japan's monetary policy decision, see Schwab's Jeffrey Kleintop's latest article, What investors need to know about helicopter money, at www.schwab.com/marketinsight.

Japanese equities declined as the yen continued to rise, while Australian stocks were also lower, after returning to action following yesterday's holiday, with financials, technology and oil & gas issues under pressure. Stocks trading in South Korea and Hong Kong also declined, while Indian listings finished flat amid choppy action. Bucking the trend, mainland Chinese equities rose as volatility ramped up ahead of tomorrow's decision by MSCI Inc. on whether to include mainland shares in its global benchmark indexes.

The international economic docket for tomorrow is expected to include the Leading Index from China and machine tool orders from Japan, while reports from across the pond are anticipated to include CPI from France, employment data from the U.K. and the trade balance for the Eurozone.

Stocks Close Near Lows

Charles Schwab: On the Market

Posted: 6/13/2016 4:15 PM ET

Stocks Close Near Lows

U.S. stocks began the trading week lower on the heels of broad-based drops in Asia and Europe as global sentiment remained stymied by festering growth concerns. Traders may have been exercising additional caution with several high profile central bank decisions scheduled for this week and a vote regarding whether the U.K. should leave the European Union fast approaching. Treasuries and gold were higher and the U.S. dollar and crude oil prices were lower. In equity news, Microsoft agreed to acquire LinkedIn.

The Dow Jones Industrial Average (DJIA) lost 133 points (0.7%) to 17,732, the S&P 500 Index shed 17 points (0.8%) to 2,079, and the Nasdaq Composite finished 46 points (0.9%) lower at 4,848. In moderate volume, 856 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil decreased $0.19 to $48.88 per barrel and wholesale gasoline declined $0.02 to $1.54 per gallon, while the Bloomberg gold spot price increased $10.12 to $1,284.36 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% lower at 94.37.

Dow member Microsoft Corp. (MSFT $50) announced an agreement to acquire LinkedIn Corp. (LNKD $192) for $196.00 per share in cash, in a transaction valued at about $26.2 billion. The companies said LinkedIn will retain its distinct brand, culture and independence. MSFT traded lower, while LNKD rallied over 45%.

Symantec Corp. (SYMC $18) announced an agreement to acquire web security software company, Blue Coat Systems, for about $4.65 billion in cash. As part of the transaction, Blue Coat Chief Executive Officer (CEO), Greg Clark, will become Symantec's CEO and join its board after the deal closes. SYMC traded nicely higher.

Economic calendar quiet before the storm

Treasuries were higher, while the U.S. economic calendar was void of any major releases today. The yield on the 2-year note declined 1 basis point (bp) to 0.71%, the yield on the 10-year note decreased 3 bps to 1.61%, and the 30-year bond rate dipped 2 bps to 2.43%. Bond yields have shown some downside volatility as of late with recent data and last week's speech from Fed Chairwoman Janet Yellen dampening summer rate hike expectations, along with the recent flare-up in global growth concerns. Schwab's Fixed Income Director Collin Martin, CFA, offers timely analysis of bond investing amid this backdrop in his article, Waiting for a Fed Rate Hike: Bond Investments That May Make Sense Now. Read more at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch.

This week's economic docket will heat back up, beginning with tomorrow's release of retail sales, as the headline figure is forecasted to increase 0.3% month-over-month (m/m) after rising 1.3% in April, while stripping out autos, sales are projected to rise 0.4% m/m after gaining 0.8% the month prior. Excluding autos and gas, sales are anticipated to grow 0.2%, following April's 0.6% advance. The Import Price Index and NFIB Small Business Optimism Index will also be reported tomorrow.

Additional notable reports on this week's economic calendar include the Consumer Price Index (CPI), the Producer Price Index (PPI), industrial production and capacity utilization, along with housing starts and building permits. However, the headlining event is poised to be Wednesday's monetary policy decision from the Federal Open Market Committee (FOMC). Although June rate hike expectations were taken off the table by the severely disappointing May labor report and last week's speech from Fed Chair Yellen, the markets will be paying close attention to the FOMC's updated economic projections and Yellen's press conference shortly after the decision. As noted in our article, Weak Jobs Report Complicates Fed Interest Rate Policy, the latest U.S. employment report, and some of its accompanying components that suggested some worrisome labor market trends, may well be another bump in the road toward higher rates. While an increase in July isn't off the table, the likelihood of a rate hike has been reduced. Read more at www.schwab.com/insights.

Europe and Asia lower amid continued global uneasiness ahead of key events

European equities finished broadly lower, as global growth concerns continued to fester, while the latest polls regarding whether the U.K. should leave the European Union (EU), known as a Brexit, fostered uncertainty and sparked volatility for the British pound. The pound overcame an early drop and traded little changed versus the U.S. dollar. The U.K. will hold a referendum on June 23 to determine if it will leave the EU and for analysis on the issue read our article, Brexit: Will the UK Leave the EU? at www.schwab.com/insights. Moreover, Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, discusses in his article, Brexit: 5 Things Investors Need to Know, at www.schwab.com/oninternational, and be sure to follow Jeff on Twitter: @jeffreykleintop.

Also, the global markets were likely cautious ahead of this week's monetary policy decisions in the U.S., U.K. and Japan. The euro ticked higher versus the U.S. dollar, while bond yields in the region were mixed. The uneasy global sentiment has pressured bond yields to exacerbate conviction toward equities, notably financials, as risk appetites appear to be shrinking amid the plethora of uncertainty in the markets.

Stocks in Asia fell broadly, with risk aversion continuing to flare-up ahead of this week's monetary policy decisions out of the U.S. and Japan, while the latest polls on a U.K. Brexit exacerbated the global mood. Also global growth concerns continued to fester and further dampen conviction toward equities. Schwab's Jeffrey Kleintop offers Five ways investors can make the most of slower growth, at www.schwab.com/oninternational. Japanese equities tumbled, with the yen rallying to weigh on the markets.

Stocks trading in mainland China and Hong Kong dropped following some mixed May economic data over the weekend and as caution prevailed ahead of this week's decision by MSCI Inc. on whether to include mainland shares in its global benchmark indexes. China's fixed asset investment missed economists' forecasts, while reads on the country's retail sales and industrial production both rose roughly in line with expectations. South Korean securities traded lower amid the soured global sentiment, while Indian listings finished to the downside, ahead of a report on the nation's consumer price inflation. After the closing bell India's Consumer Price Index rose more than expected for May. Markets in Australia were closed for a holiday.

The international economic docket for tomorrow will include manpower surveys from China and Japan, with the latter also set to release its industrial production and capacity utilization report. Across the pond, the U.K. will report CPI and PPI, Italy will deliver CPI and the Eurozone will give reports on industrial production and employment.