Tech Earnings Power Market Gains

Charles Schwab: On the Market

Posted: 10/27/2017 4:15 PM EDT

Tech Earnings Power Market Gains

 

U.S. equities finished out the week higher, as technology issues jumped on a number of favorable earnings reports, including Google's parent Alphabet and Dow members Microsoft and Intel. Meanwhile, the consumer discretionary sector got a boost from Amazon's strong report. Treasury yields were lower, with Fed leadership uncertainty overshadowing favorable reads on Q3 GDP and consumer sentiment. Crude oil and gold prices were higher, and the U.S. dollar added to its recent run. 

The Dow Jones Industrial Average (DJIA) rose 33 points (0.1%) to 23,434, the S&P 500 Index increased 21 points (0.8%) to 2,581, while the Nasdaq Composite soared 145 points (2.2%) to 6,701. In moderate-to-heavy volume, 892 million shares were traded on the NYSE and 2.4 billion shares changed hands on the Nasdaq. WTI crude oil jumped $1.26 to $53.90 per barrel and wholesale gasoline gained $0.02 to $1.72 per gallon. Elsewhere, the Bloomberg gold spot price rose $5.98 to $1,272.97 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% higher at 94.87. Markets were nicely higher for the week, as the DJIA increased 0.5%, the S&P 500 Index gained 0.2% and the Nasdaq Composite advanced 1.1%.

Amazon.com Inc. (AMZN $1,101) reported Q3 earnings-per-share (EPS) of $0.52, well above the $0.07 FactSet estimate, as revenues rose 34.0% year-over-year (y/y) to $43.7 billion, topping the expected $41.6 billion. The results included the contribution from its recent acquisition of Whole Foods. AMZN issued Q4 revenue guidance with a midpoint below expectations. Shares rallied.

Google parent Alphabet Inc. (GOOGL $1,034) posted Q3 EPS of $9.57, exceeding the projected $8.35, with revenues excluding traffic acquisition costs (TAC) growing 21.9% y/y to $22.3 billion, north of the forecasted $21.9 billion. Shares were decisively higher.

Dow member Microsoft Corp. (MSFT $84) announced fiscal Q1 earnings of $0.84 per share, versus the expected $0.71, as revenues rose 12.0% y/y to $24.5 billion, above the projected $23.5 billion. Shares were solidly higher.

Dow component Intel Corp. (INTC $44) reported Q3 EPS of $0.94, or $1.01 ex-items, compared to the forecasted $0.80, with revenues rising 2.0% y/y to $16.1 billion, topping the expected $15.7 billion. INTC issued Q4 guidance that bested estimates, while it raised its full-year outlook. INTC moved solidly higher.

With the flurry of key earnings reports from the tech sector, Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, offers timely analysis of our outperform rating we have held for some time on the group in his latest, Schwab Sector Views: Technology Trick or Treat?. Brad notes that the technology sector’s strong run could continue, with improving global growth prospects and continued high consumer confidence providing support. But risks for the sector have risen and investors should be careful not to get overly concentrated in the tech sector.

Dow member Merck & Co. Inc. (MRK $58) posted a Q3 loss of $0.02 per share, or a profit of $1.11 per share ex-items, compared to the estimated $1.03, as revenues declined 2.0% y/y to $10.3 billion, below the forecasted $10.5 billion. MRK increased its full-year guidance. Shares of MRK came under heavy pressure.

Dow component Exxon Mobil Corp. (XOM $84) announced Q3 EPS of $0.93, north of the expected $0.86, on revenues of $66.2 billion, versus the projected $62.8 billion. Shares are ticked higher.

Dow member Chevron Corp. (CVX $114) achieved Q3 earnings of $1.03 per share, while excluding one-time items reflecting asset sales and write offs, EPS was $0.85, but it is unclear if it is comparable to the anticipated $0.98. Revenues were $36.2 billion, versus the forecasted $34.5 billion. Shares were lower.

First read on Q3 GDP tops forecasts, consumer sentiment remains at 13-year high

The first look (of three) at Q3 Gross Domestic Product (chart), the broadest measure of economic output, showed a quarter-over-quarter (q/q) annualized rate of expansion of 3.0%, after the unrevised 3.1% expansion in Q2, and above the 2.6% growth forecasted by Bloomberg. Personal consumption gained 2.4%, topping forecasts of a 2.1% rise and following the unadjusted 3.3% increase recorded in Q2.

Private inventory investment, nonresidential fixed investment, exports and federal government spending joined personal consumption to contribute to the stronger-than-expected growth, and more than offset negative contributions from residential fixed investment, as well as state and local government spending.

On inflation, the GDP Price Index came in at a 2.2% rise, well above expectations of a 1.7% gain and the unrevised 1.0% increase seen in Q2, while the core PCE Index, which excludes food and energy, moved 1.3% higher, matching expectations, and following the unadjusted 0.9% advance in Q2.

The GDP report suggests that business capital spending (capex) continues to gain steam and Schwab's Chief Investment Strategist Liz Ann Sonders notes in her latest article, Takin Care of Business: Several Important Kickers for a Strong Capex Cycle, that an even sharper recovery could be in the cards for 2018, while tax reform—if we get it—would be an additional kicker. She adds that the pick-up in capex is a relatively new bright spot for the U.S. economy; and in 2018 it will likely be a shining characteristic of the latter innings of an economic expansion.

The final October University of Michigan Consumer Sentiment Index (chart) was revised lower to 100.7, matching forecasts, from the preliminary level of 101.1. The index was up solidly versus September's level of 95.1 and sits at a level not seen since January 2004. Compared to last month, the expectations and current conditions components of the survey both improved decisively. The 1-year inflation outlook fell to 2.4% from September's 2.7% rate, and the 5-10 year forecast remained at 2.5%.

Treasuries were higher as the data was met with Fed leadership speculation, as the yield on the 2-year note dropped 3 basis points (bps) to 1.60%, while the yields on the 10-year note and the 30-year bond fell 4 bps to 2.42% and 2.93%, respectively.

The U.S dollar continues to climb, bolstered by global economic and earnings optimism, along with the euro's extended drop following yesterday monetary policy decision by the European Central Bank and relative optimism of U.S. tax reform as it appears to be nudging down the long road to fruition.
Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend and Vice President of Trading and Derivatives, Randy Frederick, discuss tax reform in the video, Where Does Tax Reform Stand?, while Chief Fixed Income Strategist, Kathy Jones delivers the video with Randy about Should a Change in Fed Leadership Matter to Investors?.

Europe mixed on data and Spanish political turmoil, Asia higher

European equity markets finished mixed, with global earnings optimism rising in the wake of the host of upbeat results from U.S. tech sector heavyweights. Also, a positive global economic backdrop was bolstered by the stronger-than-expected U.S. Q3 GDP growth. The euro added to yesterday's drop that came courtesy of the European Central Bank's monetary policy decision to cut and extend its stimulus measures, which appeared to foster a dovish takeaway. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers analysis of the global monetary policy front in his article, How the Shift by Central Banks May Affect the Stock Market, and talks with Randy Frederick in the video about Is An Optimistic Outlook for Global Equities Warranted?. The British pound also saw some pressure as Brexit uncertainty lingered, while bond yields in the region traded mixed. Spanish stocks fell amid ramped up political uncertainty as tensions with Catalonia remain elevated, with the Catalan parliament declaring independence from Spain.

Stocks in Asia finished mostly higher following the flood of upbeat earnings reports out of the U.S. tech sector after yesterday's close, while the markets continued to digest the dovish takeaway from the European Central Bank's monetary policy decision to trim and extend its stimulus measures. Japanese equities rallied to extend their recent run to highs not seen since 1996, with the yen losing ground and a report showing the nation's consumer price inflation rose in September. Improved global earnings sentiment helped lift mainland stocks in China and Hong Kong, while those traded in South Korea also gained solid ground. However, markets in Australia declined amid flared-up political uncertainty after Prime Minister Turnbull lost his parliamentary majority, and securities in India finished flat. Schwab's Liz Ann Sonders discusses with Randy Frederick in the video, Tracking Sentiment: Are Investors Too Optimistic About Stocks?.

Stocks grind out another positive week

Stocks managed to squeak out a seventh-straight weekly gain, with upbeat Q3 GDP, durable goods, new home sales, and business activity reports preserving global economic optimism, though action was choppy as a ramped-up earnings season fostered mixed responses. The technology sector was a standout winner, buoying the markets amid a glut of positive earnings reports from heavyweights in the group, while telecommunications and healthcare issues fell solidly, bogged down by AT&T Inc's (T $34) results and guidance from Celgene Corp. (CELG $97). Energy stocks dipped as Dow member Chevron's results appeared to fail to live up to lofty expectations for the sector and offset the continued climb in crude oil prices. With earnings season more than half way done, of the 273 S&P 500 companies that have reported, 68% have topped revenue forecasts and 79% have bested profit projections, per data compiled by Bloomberg. Treasury yields climbed to support financials amid the improved economic sentiment, which also helped the U.S. dollar extend a rally, along with the euro tumbling in the wake of a seemingly dovish takeaway from the European Central Bank's monetary policy decision.

Next week, earnings season will remain robust, but a fully-loaded economic calendar will likely go a long way in shaping market direction, headlined by the midweek Federal Open Market Committee (FOMC) monetary policy decision, the ISM Manufacturing and non-Manufacturing Indexes, monthly auto sales, and the nonfarm payroll report. Other releases that deserve a mention include: personal income and spending, Consumer Confidence, Q3 nonfarm productivity and labor costs, the trade balance, and factory orders.

As noted in the latest Schwab Market Perspective: Stocks Aren't so Spooky, along with new records being set by stocks, investor sentiment measures are showing widespread optimism; yet households’ exposure to equities is not at an extreme. We believe the bull market will continue, and suggest investors remain at their target allocations, but worry a bit about complacency. Third quarter earnings season has been solid so far and economic growth has picked up. But the pick of the next Fed chair could cause an uptick in volatility. Globally earnings have been strong as well and are helping to support stocks, but geopolitical and trade issues could cause some consternation.

International reports due out next week to keep an eye on include: Australia—trade balance, building approvals and retail sales. China—Manufacturing and non-Manufacturing PMIs. India—Manufacturing and Services PMIs. Japan—retail sales, household spending, industrial production, and the Bank of Japan monetary policy decision. Eurozone—Q3 GDP and consumer price inflation, along with German unemployment change. U.K.—Bank of England monetary policy decision.

Afternoon Surprise Sparks Brief Market Shock Wave

Charles Schwab: On the Market

Posted: 10/28/2016 4:15 PM ET

Afternoon Surprise Sparks Brief Market Shock Wave

U.S. stocks finished the regular session lower amid some divergent earnings reports and the first look at 3Q GDP, which topped growth forecasts. However, capital markets were noticeably rattled in the wake of the afternoon announcement that the FBI has uncovered and is reviewing new evidence in connection with its investigation of the Democratic presidential candidate. The U.S. dollar, crude oil prices and Treasuries were mostly lower and gold was higher.

The Dow Jones Industrial Average (DJIA) decreased 8 points (0.1%) to 18,161, the S&P 500 Index was 7 points (0.3%) lower at 2,126 and the Nasdaq Composite lost 26 points (0.5%) to 5,190. In moderate volume, 954 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil decreased $1.02 to $48.70 per barrel, wholesale gasoline ticked $0.03 lower to $1.45 per gallon and the Bloomberg gold spot price advanced $6.66 to $1,275.06 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—declined 0.6% to 98.32. Markets were mixed for the week, as the DJIA gained 0.1%, the S&P 500 Index decreased 0.7% and the Nasdaq Composite was 1.3% lower.

Google parent, Alphabet Inc. (GOOGL $820) reported 3Q earnings-per-share (EPS) ex-items of $9.06, above the $8.62 FactSet estimate, as revenues excluding traffic acquisition costs (TAC) rose 20.9% year-over-year (y/y) to $18.3 billion, versus the expected $18.0 billion. The company noted that its mobile search and video are powering its core advertising business. Shares finished higher.

Amazon.com Inc. (AMZN $776) posted 3Q profits of $0.52 per share, below the projected $0.77, with revenues increasing 29.0% y/y to $32.7 billion, roughly in line with expectations. The shortfall came as the company's operating expenses jumped due mostly to investment on video programming and new warehouses, and AMZN noted that it will continue to invest in its business. The company issued 4Q revenue guidance with a midpoint just shy of forecasts. Shares fell.

Dow member Exxon Mobil Corp. (XOM $85) announced 3Q EPS of $0.63, above the projected $0.58, with revenues dropping 12.9% y/y to $58.7 billion, below the estimated $60.4 billion. The company's upstream earnings—exploration and production—missed expectations on lower commodity prices, while its downstream profits—refining—topped forecasts despite lower margins. XOM traded lower.

Dow component Chevron Corp. (CVX $104) reported 3Q earnings of $0.68 per share, above the estimated $0.40, with revenues falling 12.1% y/y to $29.0 billion, compared to the expected $29.1 billion. Both upstream and downstream earnings topped estimates. CVX traded solidly higher.

Amgen Inc. (AMGN $145) posted 3Q EPS ex-items of $3.02, north of the estimated $2.79, as revenues grew 2.0% y/y to $5.8 billion, versus the projected $5.7 billion. AMGN raised its full-year earnings guidance, while increasing the low end of its revenue forecast. However, softer-than-expected sales and concerns about pricing for its top-selling arthritis drug Enbrel caused some uneasiness among analysts. AMGN moved sharply lower. For analysis of the healthcare cost environment, see Schwab's Chief Investment Strategist Liz Ann Sonders' latest article, Vertigo: Effect of Spiking Healthcare Costs on Consumers, at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders.

First look at 3Q GDP expands more than expected

The first look (of three) at 3Q Gross Domestic Product (chart), the broadest measure of economic output, showed a quarter-over-quarter (q/q) annualized rate of expansion of 2.9%—the biggest rise in two years—from the unrevised 1.4% expansion in 2Q, and above the 2.6% growth forecasted by Bloomberg. Personal consumption came in below forecasts, rising 2.1%, following the unadjusted 4.3% increase recorded in 2Q, and versus the 2.6% gain that was projected. Exports contributed the most to GDP and inventories rebounded from a solid drop in 2Q. However, the softer-than-expected personal consumption figure is likely dampening some of the enthusiasm, along with a negative contribution from fixed investment, which was led by the fourth-straight quarterly drop in equipment spending and a solid decline in residential investment.

On inflation, the GDP Price Index came in at a 1.5% rise, north of expectations of a 1.4% increase, from an unrevised 2.3% gain seen in 2Q, while the core PCE Index, which excludes food and energy, increased 1.7%, topping forecasts of a 1.6% gain, and following the unrevised 1.8% growth in 2Q.

The final October University of Michigan Consumer Sentiment Index (chart) was revised to 87.2 from the preliminary level of 87.9, and compared to expectations of a slight rise to 88.2. The index was down compared to September's level of 91.2. The expectations and current conditions components were below the prior month's level. The 1-year inflation outlook remained at September's 2.4% rate, while the 5-10 year inflation projection declined to 2.4% from 2.6%.

Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, offers analysis of the consumer, which is the largest contributor to U.S. economic activity, in his latest Schwab Sector Views: The Most Wonderful Time of the Year…Already? Brad notes that consumer confidence is encouraging heading into the holidays, wages are ticking higher, and the labor market looks healthy, but there are questions whether American consumers' notorious propensity to spend has decreased following the financial crisis. Read more at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch.

The 3Q Employment Cost Index (chart) increased by 0.6% q/q, matching forecasts and the increase posted in 2Q.

Treasuries were mostly lower, with the yield on the 2-year note dipping 3 basis point to 0.86%, the yield on the 10-year note shed 1 bp to 1.85%, and the 30-year bond rate was flat at 2.62%. Bond yields took a breather following the recent rally that has come from some relatively upbeat economic data and elevated Fed rate hike expectations and Schwab's Chief Fixed Income Strategist, Kathy Jones notes in her article, Are Bond Yields About to Rise?, the shift to higher yields is likely to be slow, in our view, but markets don’t appear to be prepared for the change. We suggest investors prepare for a potential rise in bond yields by trimming exposure to bonds with either long durations or high credit risk. Read more at www.schwab.com/onbonds and follow Kathy on Twitter: @kathyjones.

With the looming November election continuing to garner attention and preserve political uncertainty, Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, Final Clinton-Trump Debate Sets Up a Sprint to the Finish Line, as part of our election 2016 commentary at www.schwab.com/insights/category/election-2016, where you can also find timely analysis of The Stock Market and Election Cycles.

Europe and Asia mixed

European equities finished mixed, with a plethora of divergent earnings reports garnering the lion's share of attention, and crude oil prices continuing to slump to weigh on the energy sector, while 3Q GDP in the U.S. topped estimates. For analysis of earnings and the stock markets, Schwab's Jeffrey Kleintop, CFA, offers an outlook for the stock markets and earnings growth his latest article, Three Reasons Stocks May Avoid Another Lost Decade, at www.schwab.com/oninternational and follow Jeff on Twitter: @jeffreykleintop. In October economic news, German consumer price inflation moved higher, while eurozone economic confidence surprisingly improved. The euro was higher and the British pound dipped versus the U.S. dollar. Bond yields extended a recent rally amid the increase in global interest rates that have started to gain attention of the world markets. Political uncertainty remains ahead of a vote in Spain over the weekend.

Stocks in Asia finished mixed, with the global markets continuing to digest earnings reports from around the world, while political and monetary policy uncertainty remained and focus rose on the recent rally in global bond yields. Japanese equities were standout winners, rising as the yen extended its weakness, while financials got a boost from some positive earnings results. Japanese economic data for September also garnered attention, with consumer price inflation declining, while household spending declined by a smaller-than-expected amount and the nation's jobless rate unexpectedly dipped. Schwab's Chief Global Investment Strategist 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. Australian and South Korean securities declined, while listings in mainland China and Hong Kong also dropped. Indian stocks ticked slightly higher.

Mixed week on uncertainty and plethora of data

U.S. stocks finished mixed on the week, capping off a solid October decline, with the global markets continuing to grapple with uncertainty toward the monetary policy and political landscapes, while the busiest earnings calendar of the season was mixed. Boeing Co's (BA $143) and Procter & Gamble Co's (PG $87) results stood out on the positive side to help buoy the Dow, while Apple Inc's (AAPL $115) guidance for the holiday quarter pressured its shares. M&A jumped back into focus, courtesy of AT&T Inc's (T $37) $85.4 billion agreement to acquire Time Warner Inc. (TWX $88), as well as Qualcomm Inc's (QCOM $69) $47.0 billion deal for NXP Semiconductors NV (NXPI $100). Upbeat preliminary October manufacturing and services reports, along with Friday's stronger-than-expected 3Q GDP growth further bolstered Fed rate hike expectations. As such, the U.S. dollar ticked higher, though Treasury yields continued to rally, boosting financials, but likely bogging down the real estate sector, along with a softer-than-expected new home sales report. Healthcare issues remained under pressure amid mixed earnings results and concerns toward a possible crackdown on drug pricing in the wake of November's Presidential election. Energy stocks finished flat despite a pullback in crude oil prices.

The choppiness in the markets will likely continue next week, with the election looming, earnings season remaining in high gear, and the U.S. economic calendar bringing a plethora of key data, headlined by personal income and spending, the ISM Manufacturing and non-Manufacturing Indexes, factory orders, and the trade balance. However, Wednesday's monetary policy decision from the Federal Open Market Committee (FOMC) and Friday's October nonfarm payroll report are poised to command most of the attention, with traders looking to clear up uncertainty regarding a December rate hike.

As noted in the recent Schwab Market Perspective: Looking Past the Election, economic data continues to support a sluggish growth narrative, although there are glimmers of hope that we could see at least a modest acceleration in 2017. Barring a surprise move on Wednesday, which could jolt the market as odds of a hike at that meeting remain below 15%, the focus on the Fed will move back to the forefront following the election, with all eyes on the December meeting. Fed members have been preparing the market and investors for a hike, and we believe, after several false starts, it will actually follow through this time around. Perhaps equally as important will be the message the Fed sends around the next two meetings regarding what it may be looking to do into 2017. Read more at www.schwab.com/marketinsight.

Next week's international reports worth noting include: Australia—Reserve Bank of Australia monetary policy decision. China—Manufacturing and non-Manufacturing PMIs. India—Manufacturing and non-Manufacturing PMIs. Japan—Bank of Japan monetary policy decision, retail sales and industrial production. Eurozone—CPI, 3Q GDP and Markit's business activity reports. U.K.—Bank of England monetary policy decision and Markit's business activity reports.

U.S. Stocks Outdo Global Markets

Charles Schwab; On the Market

Posted: 8/29/2016 :15 PM ET

U.S. Stocks Outdo Global Markets

U.S. equities bucked the global trend to finish solidly in the green, showing some resiliency in the face of the continued pressure on crude oil prices, as well as weakness overseas on increased Fed rate hike expectations. Favorable economic data likely lent some support, despite the global markets treading cautiously ahead of Friday's key August nonfarm payroll report. Treasuries and gold were higher, while the U.S. dollar was flat.

The Dow Jones Industrial Average (DJIA) rose 108 points (0.6%) to 18,504, the S&P 500 Index gained 11 points (0.5%) to 2,180, and the Nasdaq Composite increased 13 points (0.3%) to 5,232. In light volume, 647 million shares were traded on the NYSE and 1.4 billion shares changed hands on the Nasdaq. WTI crude oil lost $0.66 to $46.98 per barrel, wholesale gasoline declined $0.03 to $1.40 per gallon and the Bloomberg gold spot price increased $2.35 to $1,323.53 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was unchanged at 95.58.

Mylan NV (MYL $43) announced that it will launch the first generic EpiPen Auto-Injector at a list price of $300 for a two-pack carton, representing a discount of more than 50% to its branded EpiPen. The drug maker came under scrutiny last week for its pricing of its branded EpiPen shots at $600, which it said today that it will continue to sell. Shares were higher.

Personal income and spending rise as expected

Personal income (chart) was 0.4% higher month-over-month (m/m) in July, matching the Bloomberg forecast and compared to June's upwardly revised 0.3% increase. Personal spending came in 0.3% higher m/m last month—the fourth-straight monthly gain—in line with expectations and versus June's favorably revised 0.5% rise. The July savings rate as a percentage of disposable income was 5.7%. The PCE Deflator came in flat, as expected. Compared to last year, the deflator was 0.8% higher, matching estimates. Excluding food and energy, the PCE Core Index ticked 0.1% higher m/m, in line with expectations, and the index was up 1.6% y/y, above estimates of a 1.5% rise.

The Dallas Fed Manufacturing Index fell to -6.2 for August from July's unrevised -1.3 level with economists forecasting a decrease to -3.9. A reading below zero denotes contraction in manufacturing activity.

Treasuries finished higher, as the yield on the 2-year note declined 4 basis points (bps) to 0.81%, while the yields on the 10-year note and the 30-year bond dropped 7 bps to 1.57% and 2.22%, respectively. For analysis on the fixed income markets see the video from Schwab's Managing Director of Trading and Derivatives, Randy Frederick and Fixed Income Director Collin Martin, CFA, titled Tempered Expectations for Bond Returns: Why Hold Bonds? at www.schwab.com/insights and follow Randy on Twitter: @randyafrederick.

On the heels of last week's comments from Federal Reserve Chairwoman Janet Yellen and Vice Chair Stanley Fischer that suggested a September rate hike remains a possibility, this Friday's August nonfarm payroll report is poised to be a key focus for the global markets. The report will also be preceded by key reads on Manufacturing Purchasing Managers Indexes (PMIs) from ISM and Markit, the trade balance, Consumer Confidence, and August vehicle sales. Tomorrow will bring the Consumer Confidence Index, which economists expect to fall slightly to a level of 97.0 for August from July's 97.3, and the S&P CoreLogic Case-Shiller Home Price Index, forecasted to show prices in the 20-city composite rose 5.12% y/y in June, but ticked 0.1% lower m/m on a seasonally-adjusted basis  (economic calendar).

Schwab's Chief Fixed Income Strategist, Kathy Jones notes in her article, What Does Strong Job Growth Mean for Bond Investors?, recent strong job growth has improved the odds the Fed will raise short-term interest rates in the coming months and this has potentially negative implications for the U.S. bond market, which has put in a strong performance so far this year. The risk of higher rates appears greater than the potential for lower rates. We suggest investors keep the average duration of their portfolios within the short- to intermediate-term bond range to help reduce volatility, and consider holding Treasury Inflation-Protected Securities. Read more at www.schwab.com/onbonds and follow Kathy on Twitter: @kathyjones.

Europe lower on oil and Fed rate hike uneasiness, Asia mixed

European equities traded to the downside, amid lighter-than-usual volume as the U.K. markets were closed for a holiday. Fed rate hike expectations got a boost from Friday's comments from Federal Reserve Chairwoman Janet Yellen, which was followed by Fed Vice Chair Stanley Fischer's remarks that suggested rate hikes next month and in December could be possibilities. The euro and British pound finished lower versus the U.S. dollar, while bond yields in the region mostly dipped. Amid the elevated Fed rate hike expectations, utilities led to the downside, along with oil & gas issues, which saw pressure as crude oil prices declined on supply concerns and a stronger U.S. dollar. Political uncertainty lingered in the region as Spain's Prime Minister Rajoy is set to face a confidence vote tomorrow, per Bloomberg. For more on the global political landscape, see Schwab's Director of International Research, Michelle Gibley's, CFA, article, Performing Reformers: How Political Change Can Affect Stocks at www.schwab.com/oninternational, and be sure to follow Schwab on Twitter: @schwabresearch. Also, with global uncertainty remaining elevated to open the door for some possible increased volatility, Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, offers 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 both articles at www.schwab.com/oninternational and be sure to follow Jeff on Twitter: @jeffreykleintop.

Stocks in Asia finished mixed on the heels of Friday's comments from the Fed's Yellen and Fischer that kept the possibility of a September rate hike in play. Mainland Chinese equities finished flat and those traded in Hong Kong declined, while the nation reported a year-over-year (y/y) acceleration in July industrial profits. Australian securities dropped amid weakness in basic materials and oil & gas stocks, while South Korean listings also declined. However, India's markets advanced, and stocks in Japan rallied as the yen weakened amid a rise in the U.S. dollar on the aforementioned Fed comments, as well as Bank of Japan Governor Kuroda's reiterated pledge to deploy further stimulus measures if needed. For more on Japan's potential increased stimulus measures see Jeffrey Kleintop's, CFA, article, What investors need to know about helicopter money at www.schwab.com/oninternational.

A host of economic reports from Japan will dominate tomorrow's international economic calendar, including labor data, personal income and consumption, retail sales and trade figures. From across the pond will come Germany's Import Price Index, housing prices from the U.K., CPI from Spain, retail sales from Italy, and confidence gauges from the Eurozone.