Stocks Still Searching for a Catalyst

Charles Schwab: On the Market

Posted: 5/3/2017 4:15 PM ET

Stocks Still Searching for a Catalyst

U.S. equities were again mixed in today's session, showing little reaction to the expected Fed decision to keep monetary policy steady, while results on the earnings front varied. Treasury yields were mixed and the U.S. dollar gained modest ground following stronger-than-expected reads on the all-important services sector, while crude oil prices inched higher in the wake of a smaller-than-expected decline in the government's crude oil inventory report, and gold was lower.

The Dow Jones Industrial Average (DJIA) rose 8 points to 20,958, the S&P 500 Index declined 3 points (0.1%) to 2,388, and the Nasdaq Composite lost 23 points (0.4%) to 6,073. In moderately-heavy volume, 918 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq. WTI crude oil inched $0.16 higher to $47.82 per barrel and wholesale gasoline added $0.02 to $1.53 per gallon. Elsewhere, the Bloomberg gold spot price tumbled $16.85 to $1,239.91 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% higher at 99.30.

Dow member Apple Inc. (APPL $147) reported fiscal Q2 earnings-per-share (EPS) of $2.10, compared to the $2.02 FactSet estimate, as revenues rose 4.5% year-over-year (y/y) to $52.9 billion, versus the projected $53.0 billion. iPhone shipments came in below forecasts, while those for iPad and Mac came in roughly in line with estimates. AAPL issued Q3 revenue and gross margin guidance that had midpoints below expectations. Separately, the company announced a $50 billion boost to its capital return program, which includes a $35 billion bump in share repurchases, while announcing a 10.5% increase in its quarterly dividend to $0.63 per share. Shares finished modestly lower.

Yum Brands Inc. (YUM $68) posted Q1 EPS of $0.77, or $0.65 ex-items, above the projected $0.59, with revenues declining 2.0% y/y to $1.4 billion, roughly in line with forecasts. The company noted that same-store sales growth of 8% y/y at its Taco Bell franchise and profit growth at KFC partially offset weakness at Pizza Hut. Shares were nicely higher.

Time Warner Inc. (TWX $99) announced Q1 earnings of $1.80 per share, or $1.66 ex-items, compared to the estimated $1.45, as revenues grew 6.0% y/y to $7.7 billion, roughly in line with expectations. TWX was lower.

Delphi Automotive PLC. (DLPH $87) reported Q1 earnings of $1.24 per share, or $1.59 per share ex-items, topping the projected $1.46, as revenues rose 6.0% y/y to $4.3 billion, above the expected $4.1 billion. The company reaffirmed its full-year guidance. Separately, DLPH announced plans to spin-off its powertrain systems segment. Shares rallied.

Fed stands pat, services sector activity tops forecasts

As widely expected, the Federal Open Market Committee (FOMC) made no change to its monetary policy stance following its two-day meeting, noting in its accompanying policy statement that "the slowing in growth during the first quarter is likely to be transitory," and that "near-term risks to the economic outlook appear roughly balanced." In their unanimous decision, the Committee provided little direction of any change to its current outlook for future rate increases, which beforehand showed that members have penciled-in two additional rate hikes this year. No updated economic projections or post-meeting press conference by Chairwoman Janet Yellen were provided after the decision. Look for more insight into the Fed's decision later today from Senior Fixed Income Research Analyst, Collin Martin, CFA, on the Markets & Economy page at www.schwab.com.

The April Institute for Supply Management (ISM) non-Manufacturing Index (chart) improved more than expected to 57.5 from March's unrevised 55.2 level, and compared to the Bloomberg forecast of a gain to 55.8. A reading above 50 denotes expansion. New orders and business activity both rose month-over-month (m/m) to levels north of 60, while employment dipped but continued to signal growth. Prices rose 4.1 points to 57.6. The ISM said comments from respondents were mostly positive about business conditions and the overall economy.

The final Markit U.S. Services PMI Index was revised to 53.1 in April from the preliminary 52.5 level, where it was expected to remain, and compared to the 52.8 figure posted in March. The release is independent and differs from ISM's report, as it has less historic value and Markit weights its index components differently.

The ADP Employment Change Report showed private sector payrolls rose by 177,000 jobs in April, slightly above forecasts of a 175,000 gain, while March's increase of 263,000 jobs was revised to a gain of 255,000. Today’s ADP data, which does not include government hiring and firing, comes ahead of Friday's broader April nonfarm payroll report, expected to show an increase of 190,000 jobs to the headline rate and to private sector payrolls. The unemployment rate is forecasted to tick higher to 4.6% from 4.5%, and average hourly earnings are projected to rise 0.3% month-over-month (m/m).

The MBA Mortgage Application Index dipped 0.1% last week, following the previous week's 2.7% increase. The slip came as a 4.7% drop for the Refinance Index was met with a 4.2% increase for the Purchase Index. The average 30-year mortgage rate rose 3 basis points (bps) to 4.23%.

Treasuries finished mixed, as the yield on the 2-year note rose 3 bps to 1.29%, the yield on the 10-year note moved 4 bps higher to 2.32%, while the 30-year bond rate declined 1 bp to 2.96%. For more on the bond markets, see Schwab's Chief Fixed Income Strategist, Kathy Jones' article, Three Reasons to Own Bonds When the Fed is Raising Interest Rates on the Markets & Economy page at www.schwab.com, as well as our latest article, Mixed Signals: What Does Recent Economic Data Mean for Bonds?, on the Insights & Ideas page at www.schwab.com. Follow Kathy on Twitter: @kathyjones.

Finally, the U.S. political front continues to command attention, and Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, discusses What the Coming Tax Cuts Mean for the Stock Market on the Markets & Economy page at www.schwab.com. Follow Jeff on Twitter: @jeffreykleintop. Moreover, Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend and Randy Frederick offer the article, Trump's First 100 Days: Key Observations, on the Insights & Ideas page at www.schwab.com.

Europe mixed, Asia lower ahead of U.S. monetary policy decision

European equities finished mixed, with basic materials and industrials leading to the downside amid weakness in metals prices and the recent soft economic data out of the U.S. and China, while the markets appeared cautious ahead of today's monetary policy decision from the U.S. Federal Reserve. Meanwhile, U.K. Brexit negotiations continued to foster political uncertainty as the nation heads for a June vote, while a German election looms and France's second round of its Presidential election is set for this weekend. For analysis of the political uncertainty on both sides of the pond, see Schwab's Jeffrey Kleintop's, CFA, and Vice President of Trading and Derivatives Randy Frederick's video, Political Risk: How Should Investors Respond? on the Insights & Ideas page at www.schwab.com, where you can also find our article, Brexit Begins: What's Next for the U.K?, while Director of International Research, Michelle Gibley CFA, offers her article, Europe Votes: Could More Countries Reject the EU? on the International Investing page at www.schwab.com. Preliminary eurozone Q1 GDP growth came in at a 0.5% quarter-over-quarter pace, matching expectations and Q4's expansion. The euro and British pound dipped versus the U.S. dollar, while bond yields were mostly lower.

Stocks in Asia finished lower, with the markets grappling with festering political and geopolitical uncertainty, along with mixed results from Apple in the U.S., while awaiting today's monetary policy decision by the U.S. Federal Reserve. However, volume was lighter than usual with markets in Japan, Hong Kong and South Korea closed for holidays. Mainland Chinese equities declined in the wake of recent soft readings on the nation's manufacturing and services sector activity, while securities in India also dipped. Markets in Australia fell sharply, with financials leading to the downside amid some continued disappointing earnings reports from the banking sector. For analysis of the global landscape, see Schwab's Jeffrey Kleintop's, CFA, article, Missiles and Markets: An investor guide to geopolitical risks on the Markets & Economy page at www.schwab.com, as well as his article, Top Five Trade Issues Investors Should Be Watching on the International Investing page at www.schwab.com.

Tomorrow's international economic calendar will offer the Services PMI Indexes from abroad, as well as trade data from Australia, employment data from Spain, and retail sales from the Eurozone.

Unexpected Rally Ensues after Election Ends

Charles Schwab: On the Market

Posted: 11/9/2016 4:15 PM ET

Unexpected Rally Ensues after Election Ends

Despite a dramatic decline in capital markets across the globe on the heels of the U.S. Presidential election victory for Donald Trump, U.S. stocks shrugged off morning weakness and rallied, with the Dow nearing record-high levels. Financials and healthcare stocks added the most to gains, while consumer staples underperformed and Treasury yields surged on the mid-to-long end of the curve. The U.S. dollar and crude oil prices were higher, while gold ticked lower.

The Dow Jones Industrial Average (DJIA) rallied 257 points (1.4%) to 18,590, the S&P 500 Index jumped 24 points (1.1%) to 2,163 and the Nasdaq Composite added 58 points (1.1%) to 5,251. In heavy volume, 1.4 billion shares were traded on the NYSE and 2.8 billion shares changed hands on the Nasdaq. WTI crude oil gained $0.29 to $45.27 per barrel, wholesale gasoline was $0.01 lower at $1.36 per gallon and the Bloomberg gold spot price ticked $0.31 lower to $1,275.37 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.7% higher at 98.58.

Dish Network Corp. (DISH $58) reported 3Q earnings-per-share (EPS) of $0.64, below the $0.67 FactSet estimate, as revenues ticked 0.5% higher year-over-year (y/y) to $3.8 billion, compared to the projected $3.7 billion. Net Pay-TV subscribers declined by a smaller-than-expected amount, while its broadband net subscribers unexpectedly decreased. Shares traded higher.

Viacom Inc. (VIAB $38) posted 3Q profits ex-items of $0.69 per share, above the projected $0.66, as revenues fell 15.0% y/y to $3.2 billion, below the expected $3.3 billion. The company said its ratings stabilized at several of its key networks and Paramount has begun to rebuild a full, dynamic slate of films. Shares overcame early losses and finished higher.

Wholesale inventories tick higher, mortgage applications decline

Wholesale inventories (chart) rose 0.1% month-over-month (m/m) in September, following the 0.1% dip in August, and compared to the Bloomberg forecast calling for a 0.2% increase. Sales were up 0.2% m/m, versus the expected 0.5% increase and the inventory-to-sales ratio—the amount of time it would take to deplete inventories at the current sales pace—remained at August's 1.33 months level.

The MBA Mortgage Application Index decreased 1.2% last week, matching the previous week's decline. The drop came as the Refinance Index fell 2.7%, more than offsetting a 1.4% gain for the Purchase Index. The average 30-year mortgage rate increased 2 basis points (bps) to 3.77%.

Treasuries were sharply lower, as yields on the mid-to-long end of the curve rallied in the wake of the results from yesterday's election, with Donald Trump being elected the 45th U.S. President and the Republicans maintaining control of the House and Senate. The yield on the 2-year note gained 5 bps to 0.90%, the yield on the 10-year note jumped 22 bps to 2.07% and the 30-year bond rate surged 25 bps to 2.87%.

For analysis of the election results, see Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend's latest article, Trump Pulls Off an Upset, as part of our election 2016 commentary at www.schwab.com/insights/category/election-2016. Michael notes that market volatility is likely to remain highly elevated amid uncertainty about Trump's presidency. Moreover, he points out that many of Trump's policy proposals will take considerable time to work their way through Congress once he takes office in January. For example, while Trump and Republicans on Capitol Hill have championed tax cuts, the details of tax reform legislation will be complex and are unlikely to be resolved quickly.

Amid the backdrop of heightened global market volatility and uncertainty, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, reminds investors, Three Reasons Why Now is Not the Time to Retreat from Global Diversification and why Your portfolio may be less diversified than you think at www.schwab.com/oninternational, and follow Jeff on Twitter: @jeffreykleintop.

Tomorrow, the U.S. economic calendar will be light, offering weekly initial jobless claims, which are expected to have declined to a level of 260,000 from the previous week's 265,000.

Europe turns mostly higher, Asia falls

European equities overcame early pressure and finished mostly higher, with the global markets appearing to come to grips with last night's upset victory for Donald Trump in the U.S. Presidential Election. Healthcare issues rallied to boost U.K. and Swiss stock markets and financials gained ground as bond yields moved higher, though utilities and consumer-related stocks saw pressure. The euro was lower and the British pound traded to the upside versus the U.S. dollar, while the European Central Bank suggested vigilance in its policy in the wake of the surprising U.S. election results. In economic news, French business sentiment was unchanged in October from September's upwardly revised level to match forecasts, while the U.K. trade deficit widened in September. Schwab's Jeffrey Kleintop, CFA, discusses central bank decisions and the recent movement in the global yield curve in his latest article, Recession Odds Pass Key Threshold at www.schwab.com/oninternational. Jeff notes that the yield spread rose for many countries in October, a key indicator that the risk of global recession and an accompanying bear market in the coming year diminished during the month.

Stocks in Asia fell broadly, led by a drop in Japan as the yen jumped amid a rise in risk aversion as the global markets reacted to Donald Trump's upset victory in the U.S. Presidential election, which sparked uncertainty. Equities trading in mainland China and Hong Kong fell, while Indian and South Korean stocks also finished lower. Australian securities dropped with technology and oil & gas issues leading a broad-based decline. In economic news, Japan's September trade surplus widened, and China's consumer price inflation rose in line with forecasts and the nation's producer price inflation came in hotter than expected for October. Schwab's Jeffrey Kleintop, CFA, offers a World Tour: An Around The World Look At the Economic Landscape, at www.schwab.com/oninternational.

The international economic docket for tomorrow will yield the release of machine and machine tool orders from Japan, local car sales from India and consumer inflation expectations, home loans and investment lending from Australia. European reports are expected to include non-farm payrolls, industrial and manufacturing production from France and industrial production from Italy.

Equities Jump on Election Eve

Charles Schwab: On the Market

Posted: 11/7/2016 1:15 PM ET

Equities Jump on Election Eve

U.S. stocks are rallying, and Europe jumped, with the global markets reacting positively to the FBI's conclusion that no charges will be brought against presidential candidate Clinton regarding her email usage ahead of tomorrow's election. Treasuries are lower and the U.S. dollar is rallying, amid elevated Fed rate hike expectations and a quiet economic front. MGM and Sysco are jumping on their earnings reports, while Biogen and Ionis Pharmaceuticals reported upbeat trial results. Gold is falling and crude oil prices are little changed after a recent tumble.

At 12:51 p.m. ET, the Dow Jones Industrial Average is rising 1.9%, the S&P 500 Index is gaining 2.0%, and the Nasdaq Composite is advancing 2.3%. WTI crude oil is increasing $0.26 to $44.33 per barrel and Brent crude oil is ticking $0.07 higher to $45.65 per barrel, while wholesale gasoline is off $0.02 at $1.36 per gallon. Elsewhere, gold is falling $23.65 to $1,281.42 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is up 0.8% at 97.86.

MGM Resorts International (MGM $27) announced 3Q earnings-per-share (EPS) of $0.93, including some large one-time items related to its Borgata acquisition and its NV Energy exit that may be impacting comparability to the $0.29 FactSet estimate. Revenues rose 10.3% year-over-year (y/y) to $2.5 billion, north of the projected $2.4 billion. MGM is trading nicely higher.

Sysco Corp. (SYY $53) posted adjusted 1Q profits of $0.67 per share, exceeding the expected $0.58, with revenues gaining 11.2% y/y to $14.0 billion, versus the projected $13.9 billion. Shares are rallying.

First Data Corp. (FDC $15) reported 3Q EPS ex-items of $0.34, in line with estimates, as revenues rose 1.0% y/y to $2.9 billion, below the projected $3.0 billion. Shares are rallying as unexpected growth in the company's North American global business solutions segment is fostering positive reactions from analysts.

Biogen Inc. (BIIB $295) is solidly higher and Ionis Pharmaceuticals Inc. (IONS $32) is surging after the companies announced favorable trial results for their treatment of spinal muscular atrophy. The companies said it is preparing for the potential launch of the treatment in the U.S. possibly as early as the end of 2016 or the first quarter of 2017.

Domestic economic calendar light as election takes center stage

Treasuries are lower in afternoon action, with the economic calendar void of any major reports before the final hour of the trading session, when we will get the release of consumer credit, expected to show consumer borrowing was $17.5 billion during September, down from the $25.9 billion posted the month prior. The yield on the 2-year note is rising 3 basis points (bps) to 0.82%, the yield on the 10-year note is gaining 5 bps to 1.82%, and the 30-year bond rate is advancing 4 bps to 2.60%. Bond yields are gaining ground after giving back some of a recent rally last week. Interest rates have been buoyed by elevated December Fed rate hike expectations, which were bolstered by last week's monetary policy decision from the Federal Open Market Committee (FOMC) as discussed in the video by Schwab's Fixed Income Director Collin Martin, CFA, and Senior Derivatives Analyst Nathan Peterson titled, Fed Holds Steady on Rates: Can We Expect a Rate Hike by Year-End?, at www.schwab.com/insights. Also, Schwab's Chief Fixed Income Strategist, Kathy Jones offers analysis of the interest rate environment in her article, Are Bond Yields About to Rise?, at www.schwab.com/onbonds. Follow Kathy on Twitter: @kathyjones.

This week, the NFIB Small Business Optimism Index, JOLTS Job Openings and the preliminary University of Michigan's Consumer Sentiment Index will headline a light U.S. economic docket, while earnings season downshifts. However, the political front will likely garner the most attention and volatility is set to remain as the results from Tuesday's election, including how the House and Senate races play out, are digested and scrutinized by the markets.

As noted in the Schwab Market Perspective: Looking Past the Election, given the polling numbers and betting markets, the stock market appears to be expecting a Clinton win and continued gridlock, with at least the House remaining in Republican hands. If the results are quite different than expectations, market volatility could surge, but we suggest investors hold tight. Much as we saw following the Brexit vote, reacting in a kneejerk fashion can be detrimental to longer term performance. Read more at www.schwab.com/marketinsight and be sure to follow Schwab on Twitter: @schwabresearch. For more analysis on the election, Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, Election Night: How to Watch the Returns, 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 gains ground

European equities finished broadly-higher, with traders reacting to the FBI's conclusion that no charges will be brought against U.S. presidential candidate Hillary Clinton as it recently reopened its probe into her private email usage while serving as Secretary of State. Financials rallied to lead the way, bolstered by a jump in shares of HSBC Holdings PLC. (HSBC $38) after Europe's largest bank, per Bloomberg, posted adjusted earnings that topped expectations. Ryanair Holdings PLC. (RYAAY $79) gained solid ground after the airline bested profit projections and announced a share repurchase program. In economic news, German factory orders unexpectedly dropped, while eurozone retail sales declined by a smaller amount than anticipated in September. The euro and British pound lost ground versus the U.S. dollar, while bond yields in the region traded mixed. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers analysis of the global economic landscape in his article, Recession Odds Pass Key Threshold, at www.schwab.com/oninternational, and follow Jeff on Twitter: @jeffreykleintop.

The U.K. FTSE 100 Index was up 1.7%, France's CAC-40 Index, Germany's DAX Index, and Switzerland's Swiss Market Index rose 1.9%, Spain's IBEX 35 Index gained 1.5%, and Italy's FTSE MIB Index rallied 2.6%.

Mild Morning Gains Fade by Friday Afternoon

Charles Schwab: On the Market

Posted: 11/4/2016 4:15 PM ET

Mild Morning Gains Fade by Friday Afternoon

U.S. stocks finished lower, though a steady October nonfarm payroll report that was highlighted by stronger-than-expected wage growth stirred a modest early advance. The morning gains for stocks faded as December Fed rate hike expectations remain elevated and political uncertainty continues to linger ahead of next week's Presidential election. Treasuries advanced, crude oil prices and the U.S. dollar were lower and gold was mildly higher.

The Dow Jones Industrial Average (DJIA) declined 42 points (0.2%) to 17,888, the S&P 500 Index decreased 3 points (0.2%) to 2,085 and the Nasdaq Composite lost 12 points (0.2%) to 5,046. In moderately-heavy volume, 899 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq. WTI crude oil declined by $0.59 to $44.07 per barrel, wholesale gasoline lost $0.04 to $1.38 per gallon and the Bloomberg gold spot price moved $2.31 higher to $1,305.12 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% lower at 96.95. Markets were lower for the week, as the DJIA lost 1.5%, the S&P 500 Index decreased 1.9% and the Nasdaq Composite was 2.8% lower.

Starbucks Corp. (SBUX $53) reported fiscal 4Q earnings-per-share (EPS) of $0.56, one penny above the FactSet estimate, as revenues grew 16.0% year-over-year (y/y) to $5.7 billion, roughly in line with forecasts. 4Q same-store sales rose 4.0% y/y, below the expected 4.9% increase. SBUX issued full-year EPS guidance that came in below estimates. Separately, the coffee chain raised its quarterly dividend by 25.0% to $0.25 per share. Shares finished solidly higher.

Activision Blizzard Inc. (ATVI $42) posted 3Q EPS ex-items of $0.52, north of the expected $0.42, with revenues rising 58.4% y/y to $1.6 billion, matching expectations. ATVI issued 4Q guidance that missed forecasts, while raising its full-year outlook. Shares were solidly lower.

Kraft Heinz Co. (KHC $84) announced 3Q earnings ex-items of $0.83 per share, versus the expected $0.74, as revenues rose 2.4% y/y to $6.3 billion, due to the merger of Kraft and Heinz, roughly in line with forecasts. KHC traded lower.

CBS Corp. (CBS $57) reported 3Q EPS of $1.05, north of the projected $0.98, with revenues increasing 4.0% y/y to $3.4 billion, above the estimated $3.3 billion. Shares moved nicely higher.

Shares of Whole Foods Market Inc. (WFM $29) reversed solidly to the upside following a Bloomberg report, citing people familiar with the matter, that the company's largest shareholder has met with potential activist investors to discuss making sweeping changes to the upscale grocer, including replacing management and exploring a sale of the company. Per the report, a Whole Foods spokeswoman responded that it values the strong and open relationships it has with its shareholders, and as discussed on yesterday's earnings call, "we are focused on pursuing the right strategies to position the company to produce strong results and returns for our shareholders over the long term."

October job growth steady and wage gains top estimates

Nonfarm payrolls (chart) rose by 161,000 jobs month-over-month (m/m) in October, versus the Bloomberg forecast of a 173,000 increase. September's gain was upwardly revised to 191,000 jobs. The total upward revision to job gains in August and September was 44,000. Private sector payrolls increased by 142,000, versus the forecasted 170,000 rise, after increasing by an upwardly revised 188,000 in September. The Labor Department noted that employment continued to trend up in healthcare, professional and business services, and financial activities, while adding that Hurricane Matthew affected parts of the East Coast during the month.

The unemployment rate dipped to 4.9% from 5.0%, in line with estimates, while average hourly earnings grew by 0.4% m/m, topping projections of a 0.3% increase, and September's upwardly adjusted 0.3% gain. Wages are up 2.8% y/y/, the largest gain since June 2009. The labor force participation rate dipped to 62.8% from 62.9%, but was up from the 62.5% rate a year ago. Finally, average weekly hours remained at September's unrevised 34.4 hours level, matching forecasts.

The report preserved elevated December Fed rate hike expectations, while the stronger-than-expected wage growth figures are likely fostering optimism that the consumer, which makes up the lion's share of U.S. economic output, could be poised to support the impact of a rate increase from an abnormally low level. 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. The U.S. consumer appears to be gaining some confidence and wage growth has already shown signs of picking up as the economy approaches full employment. We believe, after several false starts, the Fed will actually follow through on a rate hike this time around. Perhaps equally as important will be the message the Fed sends regarding what it may be looking to do into 2017. Read more at www.schwab.com/marketinsight.

The trade balance (chart) showed that the deficit came in at $36.4 billion in September, compared to the $38.0 billion estimate. August's deficit was revised to $40.5 billion from the $40.7 billion posted earlier. Exports rose 0.6% m/m to $189.2 billion, while imports fell 1.3% to $225.6 billion.

Treasuries were higher, with the yield on the 2-year note declining 2 basis points (bps) to 0.78%, while the yields on the 10-year note and the 30-year bond fell 4 bps to 1.77% and 2.56%, respectively. Bond yields remain choppy in the wake of a recent rally that has come courtesy of some upbeat economic data that has bolstered the case for a December rate hike, which was also preserved with Wednesday's unchanged monetary policy decision from the Federal Open Market Committee (FOMC). Schwab's Chief Fixed Income Strategist, Kathy Jones offers analysis of the FOMC's decision in her article, The Fed Plays It Safe, December Hike Likely, at www.schwab.com/insights, while also offering her article, Are Bond Yields About to Rise?, at www.schwab.com/onbonds. Follow Kathy on Twitter: @kathyjones.

Europe and Asia lower as U.S. political uncertainty festers

European equities finished broadly lower, with the markets digesting the stable U.S. October labor report, while political uncertainty in the nation remained elevated with polls indicating a tight race ahead of next week's election. Financials saw pressure amid some lackluster earnings reports out of the sector. The British pound extended yesterday's rally versus the U.S. dollar that came amid eased "hard" Brexit concerns after a court ruled that the U.K. government would have to request parliamentary approval to trigger Article 50 and start official negotiations with the European Union (EU) regarding its vote to leave the EU, known as a Brexit. For more analysis of the Brexit fallout, Schwab's Director of International Research, Michelle Gibley, CFA, offers her latest article, Keep Calm and Carry On: The Brexit Shock That Wasn't. In economic news, the final Markit Eurozone Composite PMI Index—a gauge of business activity in both the services and manufacturing sectors—was revised lower to 53.3 in October, from the 53.7 preliminary report, where it was expected to remain, and up versus the 52.6 level recorded in September. The euro ticked higher versus the greenback, while bond yields in the region were mixed. 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. Read these articles at www.schwab.com/oninternational and be sure to follow Jeff on Twitter: @jeffreykleintop.

Stocks in Asia finished lower, with the looming U.S. Presidential election continuing to stymie global conviction and foster caution, while the extended selloff in crude oil prices remained a drag on the energy sector. Japanese equities fell, returning to action after yesterday's holiday break, with the yen continuing to strengthen on risk aversion bolstered by the heightened U.S. political risk. Australian securities dropped, with heavyweight financial, basic materials and oil & gas sectors all seeing pressure. Stocks trading in mainland China and Hong Kong dipped, reversing early gains amid the political uneasiness and some disappointing earnings reports weighing on sentiment. Indian equities traded lower with drugmakers falling on persistent uneasiness regarding to impact of the election on the U.S. healthcare sector, which overshadowed strength in consumer-related companies on continued optimism over the nation's recent tax reform measures. South Korean stocks ticked to the downside.

Amid the continued global market volatility, Schwab's 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 at www.schwab.com/oninternational.

Stocks fall as U.S. election nears

The equity markets fell solidly on the week, with an apparent tightening of the U.S. Presidential race bolstering political uncertainty and stymieing global conviction, with the healthcare sector continuing to get crushed. Crude oil prices extended a tumble to pressure the energy sector. Upbeat economic reads on personal spending and manufacturing activity, culminating with Friday's October labor report, along with the Federal Open Market Committee's (FOMC) monetary policy statement, preserved December rate hike forecasts. The real estate sector led a broad-based decline. The U.S. dollar slipped and Treasury yields modestly gave back some of a recent rally. Earnings season turned the corner to home stretch, and results were mixed, with Facebook Inc. (FB $121) disappointing with its warning of a meaningful revenue growth deceleration, while Electronic Arts Inc. (EA $81) topped profit projections and issued upbeat full-year earnings guidance. Thus far, of the 422 companies in the S&P 500 that have reported results, about 56.0% have exceeded sales expectations and approximately 76.0% have bested earnings estimates.

Next week, the NFIB Small Business Optimism Index, JOLTS Job Openings and the preliminary University of Michigan's Consumer Sentiment Index will headline a light U.S. economic docket, while earnings season downshifts. However, the political front will garner the most attention and volatility is set to remain as the results from Tuesday's Presidential election, including how the House and Senate races play out, are digested and scrutinized by the markets.

As noted in the Schwab Market Perspective, given the polling numbers and betting markets, the stock market appears to be expecting a Clinton win and continued gridlock, with at least the House remaining in Republican hands. If the results are quite different than expectations, market volatility could surge, but we suggest investors hold tight. Much as we saw following the Brexit vote, reacting in a kneejerk fashion can be detrimental to longer term performance. Read more at www.schwab.com/marketinsight. For more analysis on the election, Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, Election Night: How to Watch the Returns, 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.

International report due out next week that deserve a mention include: Australia—consumer confidence. China—trade balance, CPI and PPI, and lending statistics. Japan—machine orders. Eurozone—retail sales. U.K.—industrial and manufacturing production, and trade balance.