Stocks Close Lower Amid Earnings and Economic Data

Charles Schwab: On the Market

Posted: 10/12/2017 4:15 PM EDT

Stocks Close Lower Amid Earnings and Economic Data

 

U.S. stocks finished lower with financial shares leading the decent despite mostly stronger-than-expected earnings results from Dow member JPMorgan Chase and Citigroup. The economic docket revealed a hotter-than-expected read on wholesale price inflation and a drop in weekly jobless claims that was larger than anticipated. Treasury yields and crude oil prices were lower, the U.S. dollar was flat and gold ticked higher. 

The Dow Jones Industrial Average (DJIA) decreased 32 points (0.1%) to 22,841, the S&P 500 Index shed 4 points (0.2%) to 2,551, and the Nasdaq Composite lost 12 points (0.2%) to 6,592. In moderate volume, 788 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq. WTI crude oil decreased $0.70 to $50.60 per barrel and wholesale gasoline was $0.03 lower at $1.61 per gallon. Elsewhere, the Bloomberg gold spot price was up $1.71 to $1,293.44 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 93.08.

Dow member JPMorgan Chase & Co. (JPM $96) reported Q3 earnings-per-share (EPS) of $1.76, versus the FactSet estimate of $1.65, with revenues rising 2.4% year-over-year (y/y) to $25.3 billion, above the projected $25.2 billion. Loan growth and net interest margin came in slightly above estimates, while trading revenues fell slightly more than it had projected last month as fixed income fell and equity trading was softer than expected. JPM's Chairman and Chief Executive Officer Jamie Dimon said the global economy continues to do well and the U.S. consumer remains healthy and it delivered solid results in a competitive environment. Shares of JPM traded lower.

Citigroup Inc. (C $72) posted Q3 EPS of $1.42, versus the forecasted $1.32, as revenues grew 2.0% y/y to $18.1 billion, compared to the estimated $17.9 billion. The company said it saw loan growth and increased revenue in many of its products, while tightly managing its expenses. Fixed income trading revenues fell but stock trading revenues rose. Net interest margin missed forecasts. C lost ground.

AT&T Inc. (T $36) reiterated its full-year earnings outlook, while noting that several devastating hurricanes, as well as earthquakes in Mexico, significantly impacted certain regions of its service during Q3. T also noted that total U.S. video subscribers in Q3 were down, driven by heightened competition in traditional pay TV markets and over-the-top services, hurricanes and its stricter credit standards. The company pointed out that it saw fewer y/y handset equipment upgrades in Q3, which will adversely impact wireless equipment revenue. Shares finished solidly lower.

Juniper Networks Inc. (JNPR $25) saw solid pressure after the company lowered its Q3 guidance, citing lower-than-expected cloud vertical revenue.

Producer price inflation rises, jobless claims fall

The Producer Price Index (PPI) (chart) showed prices at the wholesale level in September were up 0.4% month-over-month (m/m), matching the Bloomberg expectation, after August's unrevised 0.2% gain. The core rate, which excludes food and energy, rose 0.4%, compared to forecasts of a 0.2% advance and August's unrevised 0.1% rise. Y/Y, the headline rate was 2.6% higher, in line with projections, and the core PPI rose 2.2% last month, above estimates of a 2.0% gain. In August, producer prices were 2.4% higher and up 2.0% for the headline and core rates, respectively.

Tomorrow, the economic calendar will complete the September inflation picture with the release of the Consumer Price Index, forecasted to rise 0.6% m/m, after August's 0.4% gain, and the core rate to match the prior month's 0.2% increase. Y/Y, the headline rate is expected to accelerate to a 2.3% gain after being up 1.9% in August and the core rate to tick higher to a 1.8% increase from a 1.7% rise. The report has the potential to overshadow tomorrow's other releases, September retail sales and the preliminary October University of Michigan Consumer Sentiment Index. Retail sales are expected to rebound m/m, with the control group figure—used to help calculate GDP—expected to rise 0.4% after dipping 0.2% in August. Consumer sentiment is projected to be little changed at 95.0. Business inventories will round out the day, forecasted to increase 0.7% m/m in August after rising 0.2% in July.

Inflation has garnered more attention by the markets as signs of an uptick have joined the positive global economic growth backdrop. This has bolstered recent gains in bond yields and the U.S. dollar, along with elevated December Fed rate hike expectations and the Central Bank's planned start of trimming its behemoth $4.5 trillion balance sheet. Moreover, leadership uncertainty at the Fed has flared-up as Fed Chair Janet Yellen's term nears the end.

As such, Schwab's Chief Investment Strategist Liz Ann Sonders notes that with wage growth picking up and the labor market even tighter, it’s time to put even traditional measures of inflation back on the radar screen in her article, The Waiting: Wage Growth and Inflation Finally Getting in Gear?. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, points out in his commentary, Inflation May Be The Biggest Question For Investors In 2018, that central banks are behaving as if wages and inflation will revive in the year ahead. If they don’t, and central banks don’t alter their policy path, the global stock markets could be in for a rough 2018.

Jeff also discusses, How the Shift by Central Banks May Affect the Stock Market, noting that despite the coming shift by central banks towards trimming/tapering their balance sheets, we don’t believe the bull market is at risk, while Schwab's Chief Fixed Income Strategist, Kathy Jones, and Vice President of Trading and Derivatives, Randy Frederick, discuss in the video, Should a Change in Fed Leadership Matter to Investors?.

Read these articles and video on the Market Commentary page at www.schwab.com. Follow Schwab and our experts on Twitter: @schwabresearch, @lizannsonders, @jeffreykleintop, @kathyjones and @randyafrederick.

Weekly initial jobless claims (chart) fell by 15,000 to 243,000 last week, below forecasts of a decline to 250,000, with the prior week’s figure being revised lower by 2,000 to 258,000. The four-week moving average dropped by 9,500 to 257,500, while continuing claims fell 32,000 to 1,889,000, south of estimates of 1,930,000.

Treasuries traded higher, with the yield on the 2-year note dipping 1 basis point (bp) to 1.51%, the yield on the 10-year note declining 3 bps to 2.32% and the 30-year bond rate decreasing 4 bps to 2.85%.

Europe mixed, Asia mostly higher 

European equity markets finished mixed, with global economic optimism continuing and appearing to counter heightened expectations of another rate hike in December out of the U.S., which remained elevated after yesterday's minutes from the Fed's September meeting. The British pound fell during the session to help the U.K. markets, as Brexit negotiations were said by the European Union's (EU) chief negotiator Barnier to have hit an impasse over the bill the U.K. has to pay when it exits. The agreement on what it will have to pay is said to be needed before the EU will start trade talks, per Bloomberg. Political uncertainty remained as Spain seeks clarity from Catalonia on whether it declared independence or not, while some attention was on confidence votes in Italy ahead of next year's election. For analysis, see Schwab's Jeffrey Kleintop's, CFA, and Randy Frederick's video, Political Risk: How Should Investors Respond?, and our article, Brexit Begins: What's Next for the U.K?, on the Market Commentary page at www.schwab.com. The euro dipped despite a stronger-than-expected read on eurozone industrial production, while bond yields in the region traded mostly lower. Financials were in focus, dipping as the markets scrutinized earnings reports from heavyweights in the U.S. banking sector, while energy issues lost ground as crude oil prices slipped.
Stocks in Asia finished mostly higher as U.S. stocks continued to register record highs and Japanese markets added to yesterday's gains that took the markets to levels not seen in over two decades. Schwab's Jeffrey Kleintop, CFA, and Randy Frederick discuss in the video, Are Investors Underestimating the Stock Market Rally?, on the Market Commentary page at www.schwab.com.

Global economic optimism has buoyed sentiment, likely helping ease concerns about the impact of the highly expected December rate hike in the U.S., which appeared to be preserved by yesterday's look at the Fed's September meeting. Japanese equities rose, with the yen holding onto some of yesterday's losses, while political uncertainty eased on reports that suggested Prime Minister Abe looks set for a victory in the election later this month. Mainland Chinese stocks dipped and shares in Hong Kong advanced, with developers in focus after falling yesterday as a speech by the government appeared to disappoint. South Korean and Australian securities gained ground. Indian equities rallied ahead of data on inflation and industrial production after the close, which showed the former come in cooler than expected and the latter top forecasts.

The international economic tomorrow will be limited to CPI reports from Germany and Italy.

Stocks Trade Higher, Finish Q3 with Solid Gains

Charles Schwab: On the Market

Posted: 9/29/2017 4:15 PM EDT

Stocks Trade Higher, Finish Q3 with Solid Gains

 

U.S. stocks closed the last trading day of Q3 higher as shares added to weekly, monthly and quarterly advances. In economic developments, personal income and spending matched forecasts though the PCE deflator—a measure of consumer price inflation—was cooler-than-expected, and the Chicago Purchasing Managers Index unexpectedly jumped further into expansion territory. In equity news, KB Home topped earnings estimates and mostly matched revenue forecasts, while Tyson Foods increased its earnings outlook for the current year. Treasury yields diverged and the U.S. dollar was lower. Crude oil prices were mixed and gold traded lower.

The Dow Jones Industrial Average (DJIA) increased 24 points (0.1%) to 22,405, the S&P 500 Index was 9 points (0.4%) higher at 2,519, and the Nasdaq Composite advanced 43 points (0.7%) to 6,496. In moderate-to-heavy volume, 929 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq.

WTI crude oil added $0.11 to $51.57 per barrel and wholesale gasoline was $0.02 lower at $1.59 per gallon. Elsewhere, the Bloomberg gold spot price declined $6.66 to $1,280.64 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% lower at 93.06.

Markets were higher for the week, as the DJIA gained 0.3%, the S&P 500 Index added 0.7% higher and the Nasdaq Composite increased 1.1%.

KB Home (KBH $24) reported Q3 earnings-per-share (EPS) of $0.51, above the $0.46 FactSet estimate, as revenues rose 25.0% year-over-year (y/y) to $1.1 billion, roughly in line with forecasts. The homebuilder said deliveries, average selling price, net order value and operating margin all grew. KBH said it believes it is well positioned heading into the closing months of the year, with a backlog value of more than $2.0 billion and positive conditions in most of its served markets. Shares traded solidly higher.

Tyson Foods Inc. (TSN $70) raised its earnings outlook for the current year, due primarily to much better-than-expected profits in its beef segment. The protein producer also said all its segments will perform well in 2018. Shares jumped.

The consumer staples sector is the focus of Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, latest Schwab Sector Views: Consumer Staples: More than Meets the Eye, on the Market Commentary page at www.schwab.com. Brad notes that the consumer staples sector is broader than most investors likely think it is and is often perceived as boring. But the group has had some real action lately, although not all of it positive. The staples group can be an important part of a portfolio, but without deteriorating economic conditions, a market weighting is the most we can justify. Follow us on Twitter: @schwabresearch.

Personal income and spending match forecasts, regional manufacturing activity jumps

Personal income (chart) was 0.2% higher month-over-month (m/m) in August, in line with the Bloomberg forecast, and compared to July's downwardly revised 0.3% increase. Personal spending ticked 0.1% higher last month, matching expectations, and versus July's unrevised 0.3% gain. The

August savings rate as a percentage of disposable income was 3.6%. The PCE Deflator was 0.2% higher, below expectations of a 0.3% gain and versus the prior month's unrevised 0.1% rise. Compared to last year, the deflator was 1.4% higher, south of estimates of a 1.5% increase and in line with July's unrevised rise. Excluding food and energy, the PCE Core Index was 0.1% higher m/m, below expectations of a 0.2% gain, and the index was up 1.3% y/y, versus estimates calling for it to match July's unrevised 1.4% increase.

The final September University of Michigan Consumer Sentiment Index (chart) was revised lower to 95.1 from the preliminary level of 95.3, where it was expected to remain. The index was down versus August's level of 96.8. Compared to last month, the expectations component of the report improved, though the current conditions portion slipped. The 1-year inflation outlook ticked higher to 2.7% from August's 2.6% rate, and the 5-10 year forecast remained at 2.5%.

The Chicago Purchasing Managers Index (chart) unexpectedly jumped further into expansion territory (above 50) for September, after rising to 65.2 from August's unrevised 58.9 level, and versus expectations calling for a dip to 58.7. The index moved back to near June's three-year high of 65.7 as new orders and production continued to grow, while employment moved back into expansion territory and order backlogs hit a 29-year high. However, prices paid increased significantly to the highest since July 2011, bolstered by elevated commodity prices and the hurricane(s)-induced materials shortage.

Treasuries were mixed, but tilted to the downside following the regional manufacturing report, with the yields on the 2-year and 10-year notes rising 3 basis points (bps) to 1.48% and 2.34%, respectively, while the 30-year bond rate dipped 1 bp to 2.86%.

Treasury yields and the U.S. dollar have rallied recently, with the rate on the 10-year note hitting multi-month highs and the greenback moving to a level not seen in over a month. These moves have been bolstered by heightened December Fed rate hike expectations and apparent cautious optimism regarding fiscal policy as the markets scrutinize this week's release of tax reform details.

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, on the Market Commentary page at www.schwab.com. Also, Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend discusses the tax reform details his latest article, Tax Reform Framework Released, But The Road Ahead Is Long, on the Insights & Ideas page. Follow Jeff on Twitter: @jeffreykleintop.

The stock markets have shown some relative resiliency in the face of a plethora of things to worry about, as discussed by Schwab's Chief Investment Strategist Liz Ann Sonders in her article, Comfortably Numb? An Update on Investor Sentiment, on the Market Commentary page at www.schwab.com. Follow Liz Ann on Twitter: @lizannsonders.

Europe adds to weekly, monthly and quarterly gains, Asia mostly higher

European equity markets finished higher, adding to solid gains for the week, month and quarter, as a plethora of diverging economic data in the region was highlighted by an upbeat read on German unemployment and U.K. consumer data. The euro gained ground on the U.S. dollar but pared an upside move as the greenback found some support from a jump in regional manufacturing activity.

The British pound saw some pressure to help bolster the U.K. markets. The eurozone consumer price inflation estimate came in a bit cooler than expected for this month, while German retail sales unexpectedly declined last month. U.K. Q2 GDP growth was unrevised at a 0.3% quarter-over-quarter pace, but the 1.5% y/y expansion came in below estimates. Economists are pointing to the savings and income component of the GDP report, which showed the former rose and the latter outpaced inflation for the first time in a year to boost optimism regarding the health of the U.K. consumer, per Bloomberg. French consumer spending surprisingly declined last month, though Germany's unemployment fell more than forecasted for this month. In other economic news, U.K. business investment for Q2 and September home prices came in above estimates. Bond yields in the region moved to the downside. For a look at the global markets, see Schwab's Jeffrey Kleintop's, CFA, article, U.S. vs International: What Do Earnings Tell Us About What May Be Ahead?, on the Market Commentary page at www.schwab.com.

Stocks in Asia tilted to the upside to close out a mixed month, though conviction may have been held in check ahead of next week's plethora of holidays, notably in China where the markets will experience an extended break. Also, the markets digested a host of Japanese economic data. Japan's consumer price inflation rose mostly in line with forecasts in August, but a read on consumer inflation in Tokyo for September a bit cooler than expected. Also, the nation's household spending and retail sales for last month missed forecasts but its preliminary read on industrial production rose more than expected. Japanese equities finished flat, with the yen paring a recent drop that has fueled solid gains for the stock markets this month. Shares trading in mainland China and Hong Kong rose ahead of next week's holidays and tonight's reads on manufacturing and services sector activity.

Australian securities gained ground and South Korean stocks advanced, while Indian equities finished little changed. As the quarter comes to a close, Schwab's Jeffrey Kleintop, CFA, and Vice President of Trading and Derivatives, Randy Frederick offer the video, Is An Optimistic Outlook for Global Equities Warranted?, on the Insights & Ideas page at www.schwab.com. Follow Randy on Twitter: @randyafrederick.

Stocks nudge higher on week to tack onto solid Q3 gains

U.S. stocks capped off a Q3 rally with a modest weekly advance. The business spending component of the August durable goods orders report posted a back-to-back monthly jump and Q2 GDP growth was unexpectedly revised higher to 3.1%, adding to an upbeat economic backdrop. This may have helped the markets shrug off elevated December Fed rate hike expectations, which were preserved by continued hawkish rhetoric from the Fed, headlined by Chairwoman Janet Yellen's speech. Financials were one of the best performers as Treasury yields extended a rally, along with the U.S. dollar. Energy issues continued their quarterly rally as crude oil prices remained in recovery mode. The release of the framework for tax reform also appeared to underpin sentiment even as the timing and potential areas of contention were highly scrutinized. Technology issues gained slightly, adding to their decisive quarterly outperformance. However, utilities finished lower on the week amid the upside move in interest rates and healthcare stocks saw some pressure as the sector continued to face regulatory uncertainty and fiscal policy concerns. The consumer staples sector, the worst quarterly performer, nudged higher on the week, along with consumer discretionary issues, despite Dow member Nike Inc's (NKE $52) disappointing outlook.

As Q4 begins next week, the economic calendar will be robust, beginning with the ISM Manufacturing Index, Markit's Manufacturing PMI Index and September auto sales. The ISM non-Manufacturing Index and Markit's Services PMI Index will follow, along with the trade balance and factory orders. However, the docket will culminate with Friday's September nonfarm payroll report, with the wage component likely poised to garner the heaviest attention.

As noted in the latest Schwab Market Perspective: Fourth Quarter Fun…or Folly?, the resiliency of stocks continues but risks of a pullback exist with signs of investor complacency and heightened political and geopolitical uncertainties. U.S. economic data will likely be skewed by the hurricanes' impact but the underlying trend should remain positive. Earnings reporting season will begin with elevated expectations, so the ability to hurdle the bar is getting tougher, but if surprises are biased to the upside, stocks should perform well. Non-U.S. stocks are about to hit multiple milestones, which typically shouldn't concern investors as underlying fundamentals continue to appear solid. Read more on the Market Commentary page at www.schwab.com.

International reports due out next week that deserve a mention include: Australia—the Reserve Bank of Australia monetary policy decision, building approvals and trade balance. China—Manufacturing and non-Manufacturing PMIs. India—Reserve Bank of India monetary policy decision and PMIs. Japan—Q3 Tankan Large Manufacturing Index and labor earnings. Eurozone—unemployment rate, Markit's business activity reports, retail sales, and the minutes from the European Central Bank's September meeting, as well as German factory orders. U.K.—Markit's business activity reports and new car registrations.

Geopolitics Pressure Stocks

Charles Schwab: On the Market

Posted: 9/25/2017 4:15 PM EDT

Geopolitics Pressure Stocks

 

U.S. equities finished lower, as a fresh threat from North Korea exacerbated already-downtrodden sentiment that followed results from Germany's national election over the weekend that looks to complicate government coalition negotiations. Treasury yields were lower, despite a surprising jump in a regional manufacturing report, and the U.S. dollar was higher after the euro saw pressure following the election results, while gold and crude oil prices rallied.

The Dow Jones Industrial Average (DJIA) declined 54 points (0.2%) to 22,296, the S&P 500 Index lost 6 points (0.2%) to 2,497, and the Nasdaq Composite tumbled 56 points (0.9%) to 6,371. In moderate volume, 842 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq. WTI crude oil rose $1.56 to $52.22 per barrel and wholesale gasoline was $0.04 higher at $1.67 per gallon. Elsewhere, the Bloomberg gold spot price increased $13.80 to $1,311.10 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.5% higher at 92.67.

Dow member General Electric Co. (GE $25) announced that it has agreed to sell its GE Industrial Solutions business to Swiss engineering company, ABB Ltd. (ABB $25), for $2.6 billion. GE gained modest ground and shares of ABB dipped.

Genuine Parts Co. (GPC $94) announced an agreement to acquire European auto parts and tool distributor, Alliance Automotive Group, for a total purchase price of about $2.0 billion. GPC rallied on the deal.

Target Corp. (TGT $59) announced that it will raise its minimum hourly wage for all team members to $11 in October, along with a commitment to increase the minimum to $15 by the end of 2020. TGT also reiterated its most recent sales and EPS guidance for Q3 and full-year. Shares finished lower.

Treasury yields dip, U.S. dollar up, geopolitics and political uncertainty reign

Treasuries were higher, as the yield on the 2-year note dipped 1 basis point (bp) to 1.42%, the yield on the 10-year note declined 3 bps to 2.22%, and the 30-year bond rate decreased 2 bps to 2.77%.
Treasury yields have dipped after a recent rally and the U.S. dollar extended its bounce from multi-year lows hit earlier this month amid lingering global monetary policy uncertainty, while the euro saw pressure after a national election in Germany. Geopolitical concerns flared-up in late-morning action to exacerbate sentiment following reports that North Korea's foreign minister said President Trump's latest comments amount to a declaration of war. The markets continue to digest last week's monetary policy decision from the Fed, which expectedly signaled an October start for the reduction of the Central Bank's massive $4.5 trillion balance sheet, but resuscitated expectations for another rate hike in December. The Fed's decision is discussed by Schwab's Chief Investment Strategist Liz Ann Sonders in her commentary, The Fed's on the QT, on the Market Commentary page at www.schwab.com, where you can also find Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, analysis of the global monetary policy front in his article, How the Shift by Central Banks May Affect the Stock Market. Follow Liz Ann and Jeff on Twitter: @lizannsonders and @jeffreykleintop.

The Dallas Fed Manufacturing Activity Index surprisingly jumped further into a level depicting expansion (a reading above zero). The index rose to 21.3 in September—the highest since February—from 17.0 in August, and versus the Bloomberg forecast of a decline 11.5.

The week's economic calendar will begin to heat up tomorrow with some housing data in the form of the S&P CoreLogic Case-Shiller Home Price Index, expected to show the 20-city composite increased 5.7% year-over-year for the month of July, matching that seen the month prior, as well as new home sales, with economists forecasting a 2.5% month-over-month rise in August to a level of 585,000 units following July's decline. Rounding out the day will be the Conference Board's Consumer Confidence Index, anticipated to indicate a slight downtick to a level of 120.0 for September, from the 122.9 posted in August. Other notable reports this week include: preliminary durable goods orders, personal income and spending, the final look at Q2 GDP, the Chicago PMI Index and the final September University of Michigan Consumer Sentiment Index. A host of Fedspeak is poised to garner attention, culminating with Fed Chairwoman Janet Yellen's speech on inflation, uncertainty and monetary policy, which will include a Q&A segment. As noted in the latest Schwab Market Perspective: A Cat and Mouse Fall, volatility has ramped up a bit in the traditionally-slow final weeks of summer, which could be a preview of a bumpy fall for investors. Solid economic data and strong corporate earnings should allow the bull market to continue, but fiscal and monetary uncertainties present risks. Read more on the Market Commentary page at www.schwab.com, and follow us on Twitter: @schwabresearch.

Europe dips as German election and geopolitics eyed, Asia mixed 

European equity markets finished mostly lower, with political uncertainty ensuing after the weekend's national election in Germany where Chancellor Angela Merkel won a fourth term but her margin of victory fostered concerns about the potential complex negotiations in forming a coalition government. For analysis of the political front, 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. Follow Jeff and Randy on Twitter: @jeffreykleintop and @randyafrederick.

Also, the markets were pressured late in the day as U.S. stocks fell on reports of North Korea's latest threat toward the U.S. The euro fell versus the U.S. dollar, with an unexpected decline in German business confidence for September likely adding to the pressure. The euro held onto losses after European Central Bank (ECB) President Mario Draghi noted today in a speech that the ECB will keep as much monetary policy support in place that the region needs to complete its transition to a new balanced growth trajectory characterized by sustained price stability.

The British pound dipped late in the session versus the greenback, while Brexit negotiations resume today on the heels of last week's speech by U.K. Prime Minister Theresa May, which appeared to disappoint as it lacked details on the path to leave the European Union. For a look at the Brexit process, see our article, Brexit Begins: What's Next for the U.K?, on the Insights & Ideas page at www.schwab.com. Financials saw some pressure and led to the downside as bond yields in the region were mostly lower and as the Bank of England called for banks to hold additional capital.

 Stocks in Asia finished mixed as the markets reacted to a national election in Germany, while anticipating a call for a snap election in Japan. For analysis of global investing amid this backdrop, see Schwab's Jeffrey Kleintop's, CFA, and Randy Frederick's video, Is An Optimistic Outlook for Global Equities Warranted?, on the Insights & Ideas page at www.schwab.com. The yen came under pressure to boost Japanese equities, along with some upbeat manufacturing data and reports that Prime Minister Abe will announce a new economic package. After the closing bell, Abe called for the snap election after saying he will dissolve the lower house of parliament this week, while announcing an $18 billion economic package. However, stocks in China and Hong Kong came under pressure amid increased measures to curb the housing market. Recent data showing China's property prices have been cooling had fostered some speculation that this could slowdown government measures to curb the housing market. Meanwhile, securities traded in South Korea and India lost ground, and markets in Australia finished flat.

For tomorrow, the international economic calendar will hold consumer price inflation from Japan, consumer sentiment from South Korea, import prices from Germany, and sentiment data from France.

North Korea Tensions Rattle Markets

Charles Schwab: On the Market

Posted: 9/5/2017 4:15 PM ET

North Korea Tensions Rattle Markets

U.S. equities began the holiday-shortened week solidly lower, as risk appetites were severely limited following this weekend's claim that North Korea detonated a hydrogen bomb and reports that it may be preparing another ICBM launch. Treasury yields fell sharply on the uneasiness and the U.S. dollar lost ground, while gold rose and crude oil prices were mixed.

The Dow Jones Industrial Average (DJIA) tumbled 234 points (1.1%) to 21,753, the S&P 500 Index lost 19 points (0.8%) to 2,457, and the Nasdaq Composite declined 60 points (0.9%) to 6,376 In moderately heavy volume, 909 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil rose $1.37 to $48.66 per barrel and wholesale gasoline lost $0.05 to $1.70 per gallon. Elsewhere, the Bloomberg gold spot price was $8.10 higher at $1,341.97 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—declined 0.5% to 92.21.

Dow member United Technologies Corp. (UTX $111) announced an agreement to acquire Rockwell Collins Inc. (COL $131) for $140.00 per share in cash and UTX stock, for a total equity value of about $23.0 billion. Under the terms of the deal, each COL shareowner will receive $93.33 per share in cash and $46.67 in shares of UTX. United Technologies said the deal is expected to be accretive to its earnings after the first full year following closing. UTX finished lower and COL ticked higher as the stock had jumped recently on speculation of the deal.

Insmed Inc. (INSM $27) surged nearly 120% after the company announced positive results from a late-stage trial of its treatment for certain lung diseases and that it intends to seek accelerated approval and request a priority review.

Factory orders mixed to kick off the week

Factory orders (chart) fell 3.3% month-over-month (m/m) in July, matching the Bloomberg expectation, while June's figure was positively revised to a 3.2% increase. However, stripping out the volatile transportation component, orders rose 0.5% and June's 0.2% decline was upwardly revised to a 0.1% gain. July durable goods orders—preliminarily reported two weeks ago—were unrevised at a 6.8% drop versus forecasts of an adjustment to a 2.9% decrease. Nondefense aircraft and parts fell sharply after June's surge, while electrical equipment, along with computers and electronic products, rose solidly.

Today's report kicked off the holiday shortened week that will bring a flood of key reports for the markets to digest, including the July trade balance, August ISM non-Manufacturing and Markit Services PMI Indexes, the Fed's Beige Book, and final Q2 productivity and labor costs. Also, the international calendar will bring a plethora of trade reports, and monetary policy decision from the European Central Bank (ECB).

Today's report kicked off the shortened week's economic calendar that will culminate with tomorrow's releases of MBA mortgage applications, the trade balance and the Fed's Beige Book, a summary of business activity across the nation used as a tool to prepare for this month's two-day monetary policy meeting ending on the 20th. However, the headlining data could be the August ISM non-Manufacturing and final Markit's Services PMI Indexes, on the heels of today's upbeat services sector reports in China and eurozone. ISM's report is projected to improve to 55.5 from 53.9 in July and Markit's release is forecasted to be unrevised at the preliminary level of 56.9, and up from July's 54.7 figure. Readings above 50 for both reports denote expansion.

As noted in the latest Schwab Market Perspective: A Preview of Coming Attractions?, limited risk of an economic recession keeps us in the bull market camp, notwithstanding near-term risks of fiscal and monetary uncertainties. Read more on the Markets & Economy page at www.schwab.com.

Treasuries rallied, as the yield on the 2-year note decreased 6 basis points to 1.29%, the yield on the 10-year note fell 10 bps to 2.07%, and the 30-year bond rate was 9 bps lower at 2.69%. Risk aversion flared back up in the wake of claims that North Korea detonated a hydrogen bomb over the weekend, weighing on Treasury yields and the U.S. dollar. This continues to accompany lingering global monetary policy, trade and U.S. political uncertainties.

Schwab's Chief Fixed Income Strategist Kathy Jones notes in her article, What's the Bigger Risk: Bond Market Bubble or Complacency?, we think bond yields are likely to rise from current levels as the economy continues to improve and the Federal Reserve tightens policy, but we don’t see a bubble in the market. We suggest managing the duration in your bond portfolio to mitigate the risk of rising rates. We also suggest managing your exposure to the higher risk parts of the fixed income markets where yields are low and the risk premium offered versus Treasuries is low. Read more on the Fixed Income page at www.schwab.com, and for analysis of investing styles, see Schwab's Chief Investment Strategist Liz Ann Sonders' latest article, Radioactive II: Could the Tide Finally Be Turning for Active vs. Passive?, on the Markets & Economy page. Follow Kathy and Liz Ann on Twitter: @kathyjones and @lizannsonders.

For our latest analysis of the political front, see Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend's newest article, Congress Returns to Face Debt Ceiling, Government Shutdown Deadlines, on the Insights & Ideas page at www.schwab.com.

Europe declines, Asia mixed amid festering geopolitical concerns 

European equity markets finished mostly lower, with the euro and British pound gaining ground on the U.S. dollar, while the global markets remained skittish as tensions with North Korea continued to fester. Amid this backdrop, Schwab's Chief Investment Strategist Liz Ann Sonders offers her article, Twist and Shout: United States Takes on North Korea … Implications for Stocks on the Markets & Economy page at www.schwab.com and follow Liz Ann on Twitter: @lizannsonders. Bond yields in the region lost ground, even as China posted favorable services sector data and a report from Markit showed eurozone manufacturing and services sectors continued to expand for August. This comes ahead of this week's monetary policy decision by the ECB. However, a separate report showed eurozone retail sales declined in July. Bucking the trend, Swiss markets ticked higher as today's subdued consumer price inflation data followed yesterday's disappointing Q2 GDP report to appear to ease concerns about the Swiss National Bank normalizing monetary policy. Also, German markets moved higher with automakers getting a boost from positive comments about diesel technology from Chancellor Merkel and yesterday's solid gain in August car registrations, while the aforementioned Markit report showed the nation's business activity grew more than expected.

For a look at global stock investing, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, and Vice President of Trading and Derivatives, Randy Frederick's video, Is An Optimistic Outlook for Global Equities Warranted?, on the Insights & Ideas page. Follow Jeff and Randy on Twitter: @jeffreykleintop and @randyafrederick.

Stocks in Asia finished mixed as sentiment remained cautious after this weekend's claim that North Korea detonated a hydrogen bomb, while the markets digested a report that showed growth in China's key services sector activity accelerated. Japanese equities fell, with the yen extending gains, while those traded in South Korea gave up early gains and dipped, with media reports suggesting North Korea is preparing another intercontinental ballistic missile (ICBM) test. Schwab's Jeffrey Kleintop, CFA, notes in his article, Missiles and Markets: An investor guide to geopolitical risks investors should avoid overreacting to geopolitical developments and stick to their long-term financial plans. Read more on the International Investing page at www.schwab.com, as well as his 2017 Mid-year Global Market Outlook: Broader Growth, Narrower Risks. Markets in Australia ticked higher, with the Reserve Bank of Australia holding its monetary policy stance steady as expected. Stocks in mainland China and Hong Kong were little changed after the Caixin PMI Services Index increased to 52.7 for August, from 51.5 in July, with a reading above 50 denoting expansion. Finally, Indian equities advanced modestly.

For tomorrow, the international economic calendar will offer GDP from Australia, manufacturing orders from Germany, and retail sales from Italy.

Stocks Attempting to Block-Out Morning Losses

Charles Schwab: On the Market

Posted: 8/21/2017 4:15 PM ET

Stocks Attempting to Block-Out Morning Losses

U.S. stocks have overcome most morning losses with the Dow and S&P 500 currently in positive territory despite uneasy global sentiment and a blank economic docket. Additionally, this week's Federal Reserve symposium in Jackson Hole, WY may have traders exercising further caution. Treasuries have turned slightly higher in the face of an eclipsed economic calendar, while crude oil prices and the U.S. dollar are lower and gold is advancing. In M&A action, Sempra Energy acquired Energy Future Holdings, which includes an 80% ownership stake in Oncor Electric Delivery. Overseas, European shares traded mostly lower.

At 12:54 p.m. ET, the Dow Jones Industrial Average and the S&P 500 Index are increasing 0.1%, while the Nasdaq Composite is decreasing 0.1%. WTI crude oil is declining $0.89 at $47.77 per barrel and Brent crude oil is dipping $0.98 to $51.74 per barrel, while wholesale gasoline is down $0.03 at $1.59 per gallon. The Bloomberg gold spot price is increasing $7.19 to $1,291.31 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is trading 0.4% lower to 93.10.

Sempra Energy (SRE $118) announced an agreement to acquire Energy Future Holdings Corp. and its 80% ownership in Oncor Electric Delivery Co. LLC, the operator of the largest electric transmission and distribution system in Texas, for $9.45 billion in cash. Shares of SRE gained ground.

Herbalife Ltd. (HLF $69) announced it has commenced a "modified Dutch auction" self-tender offer to purchase for cash up to an aggregate of $600 million of shares of its common stock at a per share price not less the $60.00 nor greater than $68.00. The company said it recently held discussions with an investor regarding a potential transaction that could have led to the company being taken private but these talks were formally terminated. As part of the tender offer, shareholders will also receive a non-transferable contractual contingent value right allowing participants in the tender offer to receive a contingent cash payment should Herbalife be acquired in a going-private transaction within two years of today's offer. HLF shares rallied.

Treasury yields mostly unchanged ahead of Fed's Jackson Hole symposium

Treasuries finished higher despite the economic calendar being void of any major releases today. The yields on the 2-year and 10-year notes and the 30-year bond increased 1 basis point (bp) to 1.30%, 2.18% and 2.76%, respectively.

Tomorrow, the docket will consist of the Richmond Fed Manufacturing Index, expected to have declined to 10 from 14, though a reading above zero denotes expansion in activity. The economic calendar will then heat up a bit on Wednesday with Markit's August business activity reports, which will join with some housing data in the form of new home sales and the weekly MBA mortgage applications report.

Volatility could remain this week as Federal Reserve Chairwoman Janet Yellen and European Central Bank (ECB) President Mario Draghi are set to speak Friday at the Fed's key symposium in Jackson Hole, Wyoming.

As noted in the latest  Schwab Market Perspective: Volatility Returns!, geopolitical, U.S. political and "bubble" concerns rose recently, putting a dent in the market's recent run. U.S. political turmoil is likely to keep market volatility elevated in the near term, along with the Fed's likely commencement of slowly unwinding its bloated balance sheet, but we believe the bull market still has legs. U.S. economic growth continues to be fairly healthy, and earnings season was positive for both bottom- and top-line growth; lending support to the bulls. But the storm in Washington is picking up velocity, especially as the upcoming debt ceiling fight looms large. Read more on the Markets & Economy page at www.schwab.com.

Europe mostly lower and Asia mixed as global caution

European equities closed mostly lower with declines accelerating a bit in late-afternoon action, as global sentiment remains skittish amid the exacerbated dysfunction in the White House and festering geopolitical concerns. Also, the markets are awaiting Friday's speeches by Fed Chair Yellen and ECB President Mario Draghi looking for clues to the direction of monetary policy, of which uncertainty has ramped up to hamstring conviction as of late. The euro and the British pound ticked higher versus the U.S. dollar, while bond yields in the region were mostly lower.

Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA points out in his article, What are fund flows telling us about trends and risks in the global stock market?, the trends in money flows this year show a change to a rising overall inflow of money as investors take note of better overall stock market performance and a preference for ETF that invest in non-U.S. markets. However, the rising inflow to ETFs does not appear to present the risk of a potentially destructive bubble. The underlying distribution of money flows appears to be driven by fundamentals or diversification, rather than purely by performance or geopolitical risk aversion, suggesting a trend that is more deeply rooted (although some markets may be vulnerable in the event of an escalation of geopolitical risk). Investors may want to consider these trends as they consider the global diversification in their own portfolio. Read more on the Markets & Economy page at www.schwab.com and follow Jeff on Twitter: @jeffreykleintop.

Stocks in Asia finished mixed with the global markets remaining cautious amid the continued shakeup in the White House, festering geopolitical concerns and as this week's Fed Jackson Hole symposium looms. Japanese equities declined, with the yen holding onto its recent gains. Australian securities also decreased joined by markets in India. South Korean stocks dipped amid simmering tensions between the U.S. and North Korea as the former begins its annual joint military drills with South Korea. For more on the geopolitical front, see Schwab's Jeffrey Kleintop, CFA, offers his articles, Missiles and Markets: An investor guide to geopolitical risks on the International Investing page at www.schwab.com, as well as Schwab's Chief Investment Strategist Liz Ann Sonders' latest article, Twist and Shout: United States Takes on North Korea … Implications for Stocks on the Markets & Economy page. Follow Liz Ann on Twitter: @lizannsonders. However, shares trading in mainland China and Hong Kong gained ground.

Tomorrow the international economic docket will yield consumer confidence from Australia and leading indicators from China will be reported after the close of local trading. Releases from across the pond will include public sector borrowing from the U.K. and the ZEW Economic Sentiment Survey from Germany.

Stocks Shake Lows, but Still Negative on Close

Charles Schwab: On the Market

Posted: 7/21/2017 4:15 PM ET

Stocks Shake Lows, but Still Negative on Close

U.S. stocks finished the regular trading session well off the lows, but still in negative fashion amid a blank economic calendar, mixed earnings releases and lingering political and monetary policy uncertainty. The Street welcomed some upbeat results from Dow member Visa and Honeywell, while earnings releases from Dow components Microsoft and GE received some scrutiny. Treasuries and gold were higher. The U.S. dollar and crude oil prices moved to the downside. Overseas, European equities traded lower as the euro extended its recent rally.

The Dow Jones Industrial Average (DJIA) lost 32 points (0.1%) to 21,580, the S&P 500 Index was 1 point lower at 2,473, and the Nasdaq Composite decreased 2 points to 6,388. In moderate volume, 834 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil declined $1.15 to $45.77 per barrel and wholesale gasoline was $0.05 lower at $1.56 per gallon. Elsewhere, the Bloomberg gold spot price increased $9.66 to $1,254.15 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% lower at 93.94. Markets were mixed for the week, as the DJIA decreased 0.3%, the S&P 500 Index advanced 0.5% and the Nasdaq Composite gained 1.2%.

Dow member Visa Inc. (V $100) reported fiscal Q3 earnings-per-share (EPS) of $0.86, above the $0.81 FactSet estimate, as revenues rose 26.0% year-over-year (y/y) to $4.6 billion, topping the projected $4.4 billion. The company said its results reflect strong growth in payments volume, cross-border volume, and processed transactions, which were powered by economic tailwinds in the U.S. and globally. Shares traded higher.

Dow component Microsoft Corp. (MSFT $74) posted fiscal Q4 EPS of $0.83, or $0.98 ex-items, versus the projected $0.71, with revenues increasing 9.1% y/y to $24.7 billion, above the expected $24.3 billion. The company said innovation across its cloud platforms drove strong results this quarter. MSFT finished lower.

Dow member General Electric Co. (GE $26) announced Q2 profits of $0.15 per share, or $0.28 ex-items, compared to the expected $0.25, as revenues declined 12.0% y/y to $29.6 billion, topping the forecasted $29.1 billion. GE issued full-year EPS guidance that had a midpoint above expectations. Shares saw pressure as analysts expressed some concern about the company's revenue decline and its lack of a 2018 outlook as it transitions to new Chief Executive Officer John Flannery in August. 

eBay Inc. (EBAY $37) reported Q2 profits of $0.02 per share, or $0.45 ex-items, versus the $0.45 estimate, as revenues grew 4.0% y/y to $2.3 billion, roughly matching expectations. EBAY issued mixed Q3 guidance and reaffirmed its full-year outlook. Additionally, the company approved a $3.0 billion addition to its share repurchase program. Shares closed lower.

Honeywell International Inc. (HON $136) posted Q2 EPS of $1.80, versus the projected $1.78, with revenues rising 1.0% y/y to $10.1 billion, exceeding the estimated $9.9 billion. HON raised the lower end of its full-year earnings outlook and increased its revenue forecast. Shares traded higher. 

Bond yields continue to slip

Treasuries finished higher and the economic calendar  was void of any major releases today. The yield on the 2-year note dipped 1 basis point (bp) to 1.34%, while the yields on the 10-year note and the 30-year bond declined 2 bps to 2.24% and 2.81%, respectively.

Bond yields and the U.S. dollar slipped this week amid heightened political uncertainty and mixed economic data, while the markets grappled with recent dovish commentary from Fed Chair Janet Yellen and some confusion toward the European Central Bank after it left its monetary policy stance unchanged.

As such, Schwab's Chief Fixed Income Strategist Kathy Jones notes in her Bond Market Mid-Year Outlook: Redefining the Borders of 'Lower for Longer'in the second half of 2017, we expect 10-year Treasury yields to remain in a 2% to 2.5% range, consistent with the eight-year "lower for longer" theme in the bond market. Read more on the Fixed Income page at www.schwab.com, where Kathy also discusses, Dollar Decline: Time to Shift to International Bonds? Maybe Not, on the Markets & Economy page. Follow Kathy on Twitter: @kathyjones.

Also, Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend discusses in his article, Washington Midyear Update: 4 Key Issues for Investors to Watch, dysfunction, drama and ethical issues in the White House have combined with Republican infighting on Capitol Hill to bog down the policy agenda. There's growing concern among congressional Republicans that the much-anticipated policy changes will need to be significantly scaled back—or that they may not happen at all. Read more on the Insights & Ideas page at www.schwab.com, and be sure to follow us on Twitter: @schwabresearch.

The stock market's major indexes were mixed this week but remain near record highs and the Nasdaq has posted a string of gains lasting two weeks with the technology sector regaining some of its market-leading prowess, while the energy sector slipped as crude oil prices gave back some of a recent run. Healthcare issues finished with a solid weekly gain in the wake of the failed Senate healthcare reform bid and the pullback in bond yields weighed on financials, along with Dow member Goldman Sachs Group Inc's(GS $221) disappointing earnings report and despite upbeat earnings results from Morgan Stanley(MS $46). Netflix Inc. (NFLX $185) was a standout winner after posting blowout results. Thus far, of the 96 companies in the S&P 500 that have reported profit results, about 77% have bested revenue forecasts and approximately 81% have exceeded earnings expectations, per data compiled by Bloomberg.

Schwab's Chief Investment Strategist Liz Ann Sonders and Vice President of Trading and Derivatives, Randy Frederick offer their video, Is the Recent Upside in Market Performance Justified?, on the Insights & Ideas page at www.schwab.com, where you can also find Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, latest Schwab Sector Views: One half down, one to go!on the Markets & Economy page. Follow Liz Ann and Randy on Twitter: @lizannsonders and @randyafrederick.

Next week's economic calendar  will continue to share the stage with ratcheted-up earnings season, but will deliver some key reports that may command attention. Existing and new home sales, Markit's business activity reports, and Consumer Confidence will precede the mid-week Fed monetary policy decision. However, with no updated economic projections and press conference, coupled with the recently perceived change in tone, the Central Bank is not expected to make any policy changes. The second half of the week will remain robust, with the first look (of three) at Q2 GDP, preliminary durable goods orders and the final University of Michigan Consumer Sentiment Index.

As noted in the latest Schwab Market Perspective: Are Danger Signs Rising…or Will the Bull Run Continue?, economic uncertainty has confounded the Fed, which may raise the risk of a policy mistake and/or bouts of market volatility, while putting the potential for another rate hike this year into greater doubt. We're sticking with our forecast for one more hike this year along with the start of a gradual reduction in their balance sheet, believing the latter could come before the former. The long running bull market continues to show remarkable resiliency and we expect that to continue. However, risks have risen and a pullback is likely but solid earnings growth should continue to support stocks. Read more on the Markets & Economy page at www.schwab.com.

Europe lower as euro extends rally after ECB decision, Asia mixed amid earnings

European equities finished lower in late-day action, with the euro adding to yesterday's rally that came as the European Central Bank (ECB) left its monetary policy unchanged and President Mario Draghi noted that talks of tapering its stimulus measures will begin in the fall. However, bond yields remained under pressure as Draghi also appeared to offer a more dovish tone than the markets had anticipated, fostering some confusion. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers his article, Are bonds signaling a major stock market peak? on the Markets & Economy page at www.schwab.com. Follow Jeff on Twitter: @jeffreykleintop. The markets also grappled with heightened political uncertainty in the U.S. and the mixed reaction to the start of earnings season. Jeff and Schwab's Randy Frederick offer the video, Political Risk: How Should Investors Respond?, on the Insights & Ideas page at www.schwab.com. Losses for the telecommunications sector were limited by Vodafone Group PLC. (stronger-than-expected revenues. The British pound was flat versus the greenback.

Stocks in Asia finished mixed as the markets grappled with heightened political uncertainty in the U.S., mixed earnings results and unchanged monetary policy decisions yesterday from the Bank of Japan and European Central Bank, with the latter fostering some confusion in its statement. Japanese equities declined as the yen gained ground and Australian securities fell amid some dovish comments from a Reserve Bank of Australia member and weakness in basic materials issues. Shares trading in Hong Kong and mainland China dipped as traders digested recent upbeat economic data and regulatory concerns persisted. However, Indian stocks rose, remaining near all-time highs, and South Korean equities extended a record high winning streak. For a look at the global markets, see Schwab's Jeffrey Kleintop's CFA, The Long Period of Underperformance for Emerging Market Stocks May Finally Be Over on the International Investing page at www.schwab.com, where you can also find his 2017 Mid-year Global Market Outlook: Broader Growth, Narrower Risks on the International Investing page.

International reports of note for next week include: Australia—CPI, PPI and trade data. Japan—Leading Index, jobless rate, household spending, CPI, PPI and retail sales. China—leading indicators and industrial profits. Eurozone—Markit Services and Manufacturing PMIs and consumer confidence and German CPI, import prices and Ifo business climate survey. U.K.—Q2 GDP, Index of Services and consumer confidence.

Stocks Nearly Flat, Flood of Earnings on Tap

Charles Schwab: On the Market

Posted: 7/17/2017 4:15 PM ET

Stocks Nearly Flat, Flood of Earnings on Tap

U.S. equities finished the first trading session of the week nearly where they started, as investors appeared to be in wait-and-see mode ahead of an acceleration in Q2 earnings season. Treasury yields dipped, along with crude oil prices, while the U.S. dollar was flat and gold ticked higher. News on the economic front was limited, with manufacturing in the New York region remaining in expansion territory, while data out of China was upbeat.

The Dow Jones Industrial Average (DJIA) ticked 6 points lower to 21,632, the S&P 500 Index was nearly unchanged at 2,459, and the Nasdaq Composite increased 2 points to 6,314. In light to moderate volume, 674 million shares were traded on the NYSE and 1.5 billion shares changed hands on the Nasdaq. WTI crude oil lost $0.52 to $46.02 per barrel and wholesale gasoline was unchanged at $1.56 per gallon. Elsewhere, the Bloomberg gold spot price gained $5.14 to $1,233.84 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 95.11.

BlackRock Inc. (BLK $425) reported Q2 earnings-per-share (EPS) of $5.22, or $5.24 ex-items, versus the $5.40 FactSet estimate, as revenues rose 6.0% year-over-year (y/y) to $3.0 billion, roughly in line with expectations. The investment management company said while significant cash remains on the sidelines, investors have begun to put more of their assets to work. Shares traded lower.

J.B. Hunt Transport Services Inc. (JBHT $94) posted Q2 EPS of $0.88, below the Street's $0.91 estimate, with revenues increasing 7.0% year-over-year (y/y) to $1.7 billion. The company said benefits of volume growth and increases in revenue producing truck counts were substantially offset by lower customer rates and higher costs, including rail and over the road transportation costs and higher driver wages and recruiting costs. Shares overcame early pressure and were higher.

Shares of FedEx Corp. (FDX $215) came under pressure after the company disclosed in a regulatory filing that the impact of the June cyberattack at its TNT unit is still being evaluated but is likely material, citing loss of revenue due to decreased volumes and remediation/contingency costs.

The stock markets are at record highs and Q2 earnings season is set to ramp up, projected to show a growth rate of 6.8%, with nine sectors reporting expansion, led by a sharp rebound in the energy sector, per data compiled by FactSet. For analysis, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, latest article,  Where's the Next Bubble?, and Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, latest Schwab Sector Views: Christmas in July! (Status of the Consumer) on the Markets & Economy page at www.schwab.com. Be sure to follow us and Jeff on Twitter: @schwabresearch and @jeffreykleintop.

Regional manufacturing activity remains in expansion territory, kicking off economic docket

The Empire Manufacturing Index showed output from the New York region slipped but remain in expansion territory (a reading above zero) for July. The index declined to 9.8 from June's unrevised 19.8 level, with the Bloomberg forecast calling for a reading of 15.0.

Today's report kicks off the economic week, which will likely share the spotlight with earnings season but bring updates on areas of the economy that have been bright spots. Housing will dominate the docket, beginning with tomorrow's release of the July NAHB Housing Market Index, with economist expecting the read of homebuilders' view of the housing market to remain at June's level of 67, with housing starts and building permits coming later in the week. Moreover, we are getting the first look at manufacturing activity for July, as the Empire Manufacturing Index will be followed by the Philly Fed Manufacturing Index. The week will culminate with the Index of Leading Economic Indicators, which is projected to continue to indicate further economic expansion. Tomorrow's docket will also include the Import Price Index.

Schwab's Chief Investment Strategist Liz Ann Sonders notes in her commentary, 2017 Mid-year US Equity Outlook: Rattle and Hum, stocks have had a remarkable—and recently drama-free—run over the past eight-plus years. We are likely in a more mature phase, which could be marked by bouts of volatility and/or pullbacks—possible driven by Fed policy. But liquidity remains ample, financial conditions loose and earnings growth healthy; which have underpinned this bull for much of its history. Those are the key things on which to keep an eye as we head into the year's second half. Read more on the Markets & Economy page at www.schwab.com and follow Liz Ann on Twitter: @lizannsonders.

Treasuries finished higher, as the yields on the 2-year and 10-year notes, as well as the 30-year bond, all declined 2 basis points (bps) to 1.35%, 2.31% and 2.90%, respectively.

Bond yields and the U.S. dollar slipped last week after rebounding recently, pressured by softer-than-expected inflation and retail sales reports, along with Fed Chair Janet Yellen's dovish semi-annual monetary policy testimony. Schwab's Chief Fixed Income Strategist Kathy Jones notes in her Bond Market Mid-Year Outlook: Redefining the Borders of 'Lower for Longer' in the second half of 2017, we expect 10-year Treasury yields to remain in a 2% to 2.5% range, consistent with the eight-year "lower for longer" theme in the bond market. Read more on the Fixed Income page at www.schwab.com, where Kathy also discusses, Dollar Decline: Time to Shift to International Bonds? Maybe Not, on the Markets & Economy page. Follow Kathy on Twitter: @kathyjones.

The political front remains in focus as the markets look to the highly scrutinized revised Senate healthcare bill, which faces a vote as the Republicans hold a slim majority. The vote has been delayed again due to Senator McCain's eye surgery. Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend discusses in his latest article, Washington Midyear Update: 4 Key Issues for Investors to Watch, dysfunction, drama and ethical issues in the White House have combined with Republican infighting on Capitol Hill to bog down the policy agenda. There's growing concern among congressional Republicans that the much-anticipated policy changes will need to be significantly scaled back—or that they may not happen at all. Read more on the Insights & Ideas page at www.schwab.com.

Europe and Asia mixed following China data and ahead of ECB decision

European equities finished mixed, with oil & gas and basic materials stocks gaining ground following a plethora of upbeat Chinese economic data, headlined by better-than-expected Q2 GDP growth. Financials dipped amid a decline in most global bond yields and technology stocks saw some pressure, while conviction may have been held in check by this week's upcoming monetary policy decision from the European Central Bank and as earnings season is set to ramp up. Also, the markets eyed the second round of U.K. Brexit negotiations. For analysis of the political front 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?. Follow Randy on Twitter: @randyafrederick. In economic news, eurozone consumer price inflation came in flat month-over-month in June, matching expectations. The euro was little changed and the British pound was lower versus the U.S. dollar.

Stocks in Asia finished mixed, despite some favorable Chinese economic data, though volume was lighter than usual as Japanese markets were closed for a holiday. Mainland Chinese shares fell sharply, despite the Asian nation posting y/y Q2 GDP growth of 6.9%, versus the projected 6.8% expansion, matching Q1's pace, while it also reported stronger-than-expected retail sales, fixed asset investment and industrial production for June. Sentiment appeared to be hampered by a flare-up in regulatory crackdown concerns in the wake of the country's National Financial Work Conference over the weekend. Stocks in Hong Kong, however, advanced. In the wake of the data, Schwab's Jeffrey Kleintop, CFA, offers his 2017 Mid-year Global Market Outlook: Broader Growth, Narrower Risks on the International Investing page at www.schwab.com. Telecommunication, healthcare and financial stocks pressured Australian equities, while markets in India and South Korea advanced, extending a run of record highs for the countries' indexes. For more on emerging markets, see Schwab's Jeffrey Kleintop's, CFA, article, The Long Period of Underperformance for Emerging Market Stocks May Finally Be Over on the International Investing page at www.schwab.com.

Tomorrow's international economic calendar will offer the minutes from the Reserve Bank of Australia's latest monetary policy meeting, CPI, PPI and the Retail Price Index from the U.K., as well as the Zew Economic Sentiment Survey from Germany.

Stocks Mixed in Final Trading Session of First Half of 2017

Charles Schwab: On the Market

Posted: 6/30/2017 4:15 PM ET

Stocks Mixed in Final Trading Session of First Half of 2017

U.S. stocks finished the last trading session of the first half of 2017 mixed as tech issues succumbed to some late-day pressure. The major equity indexes were lower for the week, with the Nasdaq outpacing its peers for the steepest decline. Some favorable earnings and economic data may have aided in today's advance as Dow member Nike's results were met with cheers and Chicago-area manufacturing activity unexpectedly jumped further into expansion territory. U.S. Treasuries were lower, joining a wave of global yield gains in the wake of some recent rhetoric from central bank officials. The U.S. dollar was nearly unchanged, crude oil prices were higher and gold saw a minor decline.

The Dow Jones Industrial Average (DJIA) increased 63 points (0.3%) to 21,350, the S&P 500 Index gained 4 points (0.2%) to 2,423, and the Nasdaq Composite declined 4 points (0.1%) to 6,140. In moderately-heavy volume, 952 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq. WTI crude oil gained $1.11 to $46.04 per barrel and wholesale gasoline was $0.03 higher at $1.51 per gallon. Elsewhere, the Bloomberg gold spot price decreased $4.29 to $1,241.22 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 95.69. Markets were lower for the week, as the DJIA was 0.2% lower, the S&P 500 Index declined 0.6% and the Nasdaq Composite tumbled 2.0%.

Dow member Nike Inc. (NKE $59) reported Q4 earnings-per-share (EPS) of $0.60, above the FactSet estimate of $0.50, as revenues rose 5.0% year-over-year (y/y) to $8.7 billion, north of the projected $8.6 billion. The company said it had double-digit revenue growth in Western Europe, Greater China, and the Emerging Markets, as well as strong growth in sportswear and running, helping offset continued sluggishness in North America. The company offered full-year guidance that appeared to please analysts, notably its forecast for a rebound in sales in North America, while announcing plans to sell products directly on Amazon.com (AMZN $968) and Facebook Inc's. (FB $151) Instagram. Shares of NKE traded nicely higher.

Micron Technology Inc. (MU $30) posted fiscal Q3 EPS of $1.40, or $1.62 ex-items, versus the projected $1.52, as revenues rose 20% quarter-over-quarter (q/q) to $5.6 billion, above the forecasted $5.4 billion. The chip maker said its results reflect solid execution of its cost reduction plans and ongoing favorable industry supply and demand dynamics as DRAM average selling prices rose double digits and NAND sales volumes jumped. MU issued Q4 guidance that exceeded the Street's forecasts. Shares gave up early gains and finished lower despite the results.

The tech sector has led the markets solidly lower for the week and yesterday's decisive decline, on heightened volatility as the group is facing scrutiny regarding valuations as discussed in our article, Tech's Rough Ride: Is There More Turmoil Ahead? on the Insights & Ideas page at www.schwab.com.

However, the tech sector remains one of the best performers over the past twelve months and Schwab's Chief Investment Strategist Liz Ann Sonders notes in her latest commentary, The Space Between … Tech Today Doesn't Resemble Tech Circa 2000, that tech companies' fundamentals and valuations look vastly dissimilar to the 2000 era. We think the latest pullback in tech is more likely to represent a pause that refreshes some excess optimistic sentiment than it is the start of something nastier. We are maintaining our outperform rating on the tech sector, see Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, latest Schwab Sector Views: From the Top Down for more, but as with any fast-growing segment of a portfolio’s holdings, we also remind investors of the power of diversification and periodic rebalancing. Read both articles on the Markets & Economy page at www.schwab.com and be sure to follow us and Liz Ann on Twitter: @schwabresearch and @lizannsonders.

Personal income and spending tick higher, Chicago PMI jumps 

Personal income (chart) was up 0.4% month-over-month (m/m) in May, above the Bloomberg forecast of a 0.3% gain, and compared to April's downwardly revised 0.3% increase. Personal spending ticked 0.1% higher last month, in line with expectations and versus April's unrevised 0.4% gain. The May savings rate as a percentage of disposable income was 5.5%. The PCE Deflator was down 0.1%, matching expectations, after the prior month's 0.2% rise. Compared to last year, the deflator was 1.4% higher, below estimates of a 1.5% gain. April's y/y figure was un revised at a 1.7% increase. Excluding food and energy, the PCE Core Index was up 0.1% m/m, in line wih expectations, and the index was 1.4% higher y/y, matching estimates. April's y/y figure was unrevised at a 1.5% increase.

The final May University of Michigan Consumer Sentiment Index (chart) was unexpectedly revised higher to 95.1 from the preliminary level of 94.5, where it was expected to remain. But the index is down versus May's level of 97.1. Compared to last month, the expectations component dipped, while the current conditions component jumped. The 1-year inflation outlook remained at May's 2.6% rate, while the 5-10 year forecast dipped to 2.5% from 2.6%.

The Chicago Purchasing Managers Index (chart) surprising surged further into a level depicting expansion (above 50), after jumping to 65.7 in June—the highest since May 2014—from 59.4 in May, and versus the expectations of a decrease to 58.0.

Treasuries dipped, with the yield on the 2-year note gaining 1 basis point (bp) to 1.38%, the yield on the 10-year note adding 3 bps to 2.30% and the 30-year bond rate ticking 2 bps higher to 2.83%. Bond yields have rebounded from depressed levels and Schwab's Chief Fixed Income Strategist Kathy Jones notes in her Bond Market Mid-Year Outlook: Redefining the Borders of 'Lower for Longer' in the second half of 2017, we expect 10-year Treasury yields to remain in a 2% to 2.5% range, consistent with the eight-year "lower for longer" theme in the bond market. We expect the Federal Reserve to continue to tighten monetary policy and reduce its balance sheet gradually, assuming inflation doesn't slip further. Read more, including how we feel investors should position themselves in this environment on the Fixed Income page at www.schwab.com and follow Kathy on Twitter: @kathyjones.

Finally, the political front remains in focus with uncertainty being exacerbated by this week's delayed Senate healthcare bill vote until after the July 4th holiday, while the debt ceiling debate continues and the markets are looking for any developments on tax and regulatory reforms, as well as other reflationary policy implementation. As such, Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, Washington Midyear Update: 4 Key Issues for Investors to Watch, on the Insights & Ideas page at www.schwab.com.

Europe dips and Asia mixed following recent tech slide

European equities turned lower on some possible quarter end posturing with the markets continuing to grapple with the recent rallies in the euro and British pound and bond yields in the region. These moves have come courtesy of commentary from European Central Bank (ECB) President Mario Draghi and Bank of England (BoE) Governor Mark Carney that have caused some uneasiness that global central banks may be turning more hawkish. Amid this backdrop, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers his article, Are bonds signaling a major stock market peak? on the Markets & Economy page at www.schwab.com. The euro and British pound pared recent gains but bond yields continued to move higher. Also, the recent tech rollover that has pressured the markets also remained in focus, with the group showing some modest signs of stabilization. In economic news, German retail sales topped forecasts and the eurozone consumer price inflation estimate came in a bit hotter than expected, while U.K. Q1 GDP growth was unrevised at a 0.2% q/q gain, as projected. The political front continued to garner attention ahead of key elections in the eurozone and as U.K. Brexit negotiations are set to ramp up. Jeff and Vice President of Trading and Derivatives, Randy Frederick offer the 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?. Follow Jeff and Randy on Twitter: @jeffreykleintop and @randyafrederick.

Stocks in Asia finished mixed on the heels of some upbeat Chinese business activity data, while technology issues weighed on the markets after leading U.S. equities solidly lower yesterday. Uneasiness amid the apparent shift among global central banks to a slightly-more-hawkish stance also hampered the markets. China's official Manufacturing PMI Index surprisingly improved to 51.7 in June from 51.2 in May, and compared to the 51.0 level that was forecasted, with a reading above 50 denoting expansion. Additionally, China's key services sector growth accelerated. Mainland Chinese shares ticked higher and those traded in Hong Kong declined. Japanese equities fell with the yen gaining ground, while the nation reported cooler-than-expected national consumer price inflation data for May, which was accompanied by an unexpected flat reading for consumer price inflation for Tokyo in June, versus expectations of a slight gain. Also, Japan's household spending declined by a smaller amount than expected and industrial production dropped more than forecasted in May. Australian and South Korean securities declined, while Indian stocks rose. For a look at the global landscape, see Schwab's Jeffrey Kleintop's, CFA, 2017 Mid-year Global Market Outlook: Broader Growth, Narrower Risks on the International Investing page at www.schwab.com.

Tech selloff, central banks and quarter-end conspire to pressure stocks

U.S. stocks finished the week lower amid some posturing to close out a strong quarter. The global equity markets felt pressure from the continued rollover in the tech sector, which had helped drive the markets higher for the past year. Also, the markets appeared slightly shaken by an apparent shift in tone to slightly more hawkish from global central banks. ECB President Draghi noted that "the threat of deflation is gone and reflationary forces are at play," while BoE Governor Carney said the discussion of beginning to remove stimulus will be on the docket in the months to come. The euro and British pound rallied versus the U.S. dollar, leading to a weekly pullback for the greenback, while Treasury yields bounced off recent lows amid a jump in global bond rates. The downward move for equities was limited by a rally in financials on the recovery in bond yields and bolstered by upbeat results from the Fed's latest banking sector stress tests, which opened the floodgates to a plethora of hiked dividends and share buybacks, headlined by Dow member JPMorgan Chase & Co. (JPM $91) and Citigroup Inc. (C $67). Energy issues also helped limit the damage as crude oil prices recovered from a recent tumble amid some resiliency in face of an unexpectedly bearish oil inventory data.

Next week, although the domestic markets will have an abbreviated session on Monday and be closed on Tuesday in observance of the Independence Day Holiday, the economic calendar will be robust possibly adding to the aforementioned central bank volatility. The week will commence with the release of the ISM Manufacturing PMI Index and monthly auto sales, while factory orders, the Fed's June meeting minutes, the ISM non-Manufacturing Index, and trade balance will come after the break. However, the headlining report will likely be Friday's June nonfarm payroll report, which is expected to show job growth remains steady at a 175,000 pace and average hourly earnings continue to creep higher, rising 0.3% m/m.

As noted in the Schwab Market Perspective: Shifting Sentiment?, technology stocks have hit a speed bump as investors may be questioning the durability of the U.S. bull market. Economic confusion may be contributing to investor skepticism, as the labor market continues to tighten and housing is in good shape, but inflation has been in retreat along with commodity prices. Meanwhile, for the first time in a while, the Fed sounded slightly more hawkish at its June meeting. However, we believe strong earnings growth and a solid economy will continue to support further gains, but more volatility should be expected. Read more on the Markets & Economy page at www.schwab.com.

International reports due out next that deserve mention include: Australia—building approvals, retail sales, trade balance and the Reserve Bank of Australia monetary policy decision. China—Caixin's manufacturing and services sector reports. India—manufacturing and services reports. Japan—Q2 Tankan Large Manufacturing Index. Eurozone—Markit's business activity reports, retail sales and ECB monetary policy meeting minutes, along with German factory orders and industrial production. U.K.—Markit's business activity reports, trade balance and industrial and manufacturing production.