Stocks Fade to a Flat Finish

Charles Schwab: On the Market

Posted: 6/22/2017 4:15 PM ET

Stocks Fade to a Flat Finish

U.S. equities closed the regular trading session mostly flat as markets were unable to hold gains that followed an afternoon surge in healthcare stocks on the heels of the Senate unveiling its bill to replace the Affordable Care Act. Treasuries were higher following economic reports that showed weekly jobless claims increased, leading indicators matched expectations and regional manufacturing activity was better than expected. Gold and crude oil prices moved higher and the U.S. dollar was flat.

The Dow Jones Industrial Average (DJIA) declined 13 points (0.1%) to 21,397, the S&P 500 Index decreased 1 point to 2,435, and the Nasdaq Composite gained 3 points to 6,237. In moderately-heavy volume, 841 million shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq. WTI crude oil gained $0.21 to $42.74 per barrel and wholesale gasoline ticked $0.02 higher to $1.43 per gallon. Elsewhere, the Bloomberg gold spot price increased $3.53 to $1,250.01 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 97.55.

Accenture Plc (ACN $122) reported Q3 diluted earnings-per-share (EPS) of $1.05 or $1.52 ex-items, compared to the $1.52 FactSet estimate, while revenues increased 5.0% year-over-year (y/y) in U.S. dollars and 7.0% in local currency to $8.9 billion. The diluted EPS of $1.05 includes the impact of a previously disclosed settlement charge of $510 million in regard to the termination of its U.S. pension plan. Shares of ACN traded sharply lower.

After the closing bell yesterday, Oracle Corp. (ORCL $50) announced fiscal 2017 Q4 EPS of $0.76 or $0.89 ex-items versus the $0.78 FactSet estimate, while revenues topped estimates, increasing 2.8% y/y to $10.9 billion. CEO, Mark Hurd said the company is experiencing rapid adoption of the Oracle Cloud and is expecting EPS growth to accelerate in fiscal 2018. ORCL rallied.

Carnival Corp. (CCL $66) reported Q2 GAAP EPS of $0.52, compared to the FactSet estimate of $0.47, while revenues rose 5.4% y/y to $3.9 billion, mostly in line with expectations. The company also forecasted that changes in fuel prices and currency exchange rates are expected to decrease earnings by $0.35 per share for full-year 2017. EPS guidance for the current fiscal year was updated to be in the range of $3.60 to $3.70 compared to March guidance of $3.50 to $3.70. CCL ticked slightly to the downside.

Jobless claims higher than expected and leading indicators match projections

Weekly initial jobless claims (chart) increased by 3,000 to 241,000 last week, above the Bloomberg forecast of 240,000, with the prior week’s figure upwardly revised at 238,000. The four-week moving average increased by 1,500 to 244,750, while continuing claims increased by 9,000 to 1,944,000, north of estimates of 1,928,000.

The Conference Board's Index of Leading Economic Indicators (LEI) (chart) for May rose 0.3% month-over-month (m/m), matching projections and compared to last month's downwardly adjusted 0.2% increase. The biggest positive contributor to the index was interest rate spread, while the largest negative contributor was building permits.

The Kansas City Fed Manufacturing Activity Index for June increased to 11, from May's 8 reading, topping forecasts of a rise to 9, with a level north of zero depicting expansion.

Treasuries finished slightly higher with the yields on the 2-year note and the 30-year bond declining 1 basis point (bp) to 1.34% and 2.72%, respectively and the yield on the 10-year note decreasing 2 bps to 2.15%. In the Bond Market Mid-Year Outlook: Redefining the Borders of 'Lower for Longer', Schwab's Chief Fixed Income Strategist, Kathy Jones informs us that the bond market continues to confound the experts. Each year since the end of the recession in 2009, consensus expectations have called for higher bond yields and the death of the 35-year bond bull market. Yet 10-year Treasury yields are now nearly 200 basis points lower than in 2010. For Schwab's viewpoint on the second half of 2017 be sure to read the whole article on the Fixed Income page at www.schwab.com and follow Kathy on Twitter: @kathyjones.

Tomorrow, the U.S. economic calendar will bring a look at the housing sector in the form of the May new home sales report, with economists expecting a 3.7% month-over-month (m/m) increase to a rate of 590,000 units after dropping by 11.4% m/m to 569,000 units in April, as well as Markit's preliminary Manufacturing and Services PMIs for June with the manufacturing index forecasted to inch higher to 53.0 from 52.7 and the services index expected to tick lower to 53.5 from 53.6. Readings above 50 for both indexes denote expansion in activity.

Europe and Asia finish mixed

European stocks finished trading mixed as healthcare issues received a late-session boost after the U.S. Senate released details of its bill aimed at replacing the Affordable Care Act. Markets in the region were initially weighed down as the recent pressure that pushed oil prices into bear market territory, declines in commodity-linked issues and political uncertainty fostered some caution among market participants. Amid the pullback in oil and other commodities, investors have been vigilant of potential downward pressure on inflation and how that may impact central bank policies. In other developments in the region, the Bank of England's chief economist said that it may be prudent to withdraw some stimulus in the second half of the year and that he is likely to vote for a rate hike as long as the economic data justifies it, per Bloomberg. Also, U.K. Prime Minister Theresa May arrived in Brussels where she is expected to discuss Brexit details with European Union leaders as a two-day European Council meeting commenced. In light regional economic news, business confidence figures from France were better than expected, while a read on manufacturing confidence was just shy of forecasts. The euro and British pound moved slightly lower versus the U.S. dollar, while bond yields in the region were mostly lower.

Global trade will likely garner some attention in the near future as the latest Schwab Market Perspective: Goldilocks…or the Three Bears?, informs us that the end of the month brings the end of the 90-day trade review ordered by President Trump to identify trade abuses. Our experts explain that trade growth can have a meaningful impact on corporate revenue growth and, as a result, drive earnings and stock price performance. Fortunately, global trade growth looks set for the highest pace in a decade, with the exception of the snapback in 2010-11. This is indicated by the export orders component of the Eurozone purchasing managers' index (PMI), which has done a good job of forecasting global trade growth in the months ahead. Read more on the Markets & Economy page at www.schwab.com and follow Schwab on Twitter: @schwabresearch.

Stocks in Asia finished mixed following yesterday's dip in crude oil prices, while technology companies advanced on the heels of gains for the group in U.S. trading. Mainland Chinese shares dipped after gaining ground in the previous session following the announcement that MSCI will include its A-shares in the company's emerging markets indexes after rejecting its prior three attempts to join. Stocks trading in Hong Kong were also lower. Japanese equities realized losses for a second-straight day following the decline in crude oil prices, while volatility for the Japanese Nikkei 225 Index was near the lowest levels in over a decade and the yen strengthened versus the U.S. dollar. Indian listings finished flat, though on Wednesday the Securities and Exchange Board of India relaxed takeover and restructuring rules for companies with stressed assets, per Bloomberg. Finally, South Korean equities advanced and Australian securities were led higher by a recovery in some energy and materials stocks after selling off the previous session. For a deeper dive into the global market landscape, see the video from Schwab's Jeffrey Kleintop, CFA, What's the Current State of the Global Economy? on the Insights & Ideas page at www.schwab.com and be sure to follow Jeff on Twitter: @jeffreykleintop.

Major reports from the international economic docket for tomorrow will be limited to releases from across the pond with GDP from France and industrial orders from Italy, while we will also receive preliminary Markit Manufacturing and Services PMIs from the Eurozone, Germany and France.

Stocks Lower Amid Mixed Economic News

Charles Schwab: On the Market

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

Stocks Lower Amid Mixed Economic News

While off the worst levels of the day, U.S. equities finished lower after the domestic economic calendar offered a host of mixed reports. Homebuilder sentiment cooled, industrial production and capacity utilization came in just shy of estimates, while weekly jobless claims fell and regional manufacturing activity continued to be upbeat. Treasuries were lower, as was gold, while the U.S. dollar was nearly flat.

The Dow Jones Industrial Average (DJIA) fell 15 points (0.1%) to 21,356, the S&P 500 Index declined 5 points (0.2%) to 2,433, and the Nasdaq Composite lost 29 points (0.5%) to 6,166. In moderate volume, 881 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil declined $0.27 to $44.46 per barrel and wholesale gasoline was $0.01 higher at $1.44 per gallon. Elsewhere, the Bloomberg gold spot price decreased $6.53 to $1,254.33 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 97.47.

Kroger Co. (KR $25) announced Q1 net earnings of $0.32 per diluted share or $0.58 ex-items compared to the FactSet expectation of $0.58 per share, while revenues increased 4.9% year-over-year (y/y) to $36.3 billion, topping forecasts. The company also lowered its 2017 GAAP net earnings guidance. Shares of KR were down over 15%.

Product solutions company Jabil Inc. (JBL $29) reported Q3 earnings results that showed a loss of $0.14 per share or a positive $0.31 ex-items, compared to the $0.29 FactSet consensus estimate, while revenues rose 4.1% to approximately $4.5 billion, roughly matching expectations. JBL traded lower.

The Nasdaq was again decisively to the downside with the recent pressure on technology issues persisting. As a spotlight remains on tech, Schwab's Director of Market and Sector Analysis Brad Sorensen, CFA, addresses the situation in his recent Schwab Sector Views: Technology—Too Far or Room to Run?. Brad informs us that the technology sector has been on a remarkable run. It was the best-performing sector over the past three- and 12-month periods. After a run like that, it makes sense that investors are asking if tech may have gone too far. Could a retrenchment be in store? Read the whole article on the Markets & Economy page at www.schwab.com and follow Schwab on Twitter: @schwabresearch.

Heavy dose of economic data points

The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment this month declined to 67 from May's downwardly revised level of 69 and while it may be at a four-month low in June, remains near the highest levels in approximately 12 years. The 50 mark is the point of separation for good versus poor conditions. The NAHB said that although still quite strong, the figures might be hinting at an easing of optimism in an industry where more workers are desperately needed to break ground on new projects. And businesses might also be less confident since post-election buoyancy has given way to legislative gridlock.

Industrial production (chart) was unchanged month-over-month (m/m) in May, falling shy of estimates calling for a 0.2% increase, and following April's upwardly revised 1.1% rise, which was the strongest surge in nearly seven years. Manufacturing production declined, while mining and utilities output ticked higher. Capacity utilization ticked lower to 76.6%, compared to April's unrevised 76.7%, and shy of forecasts expecting a tick higher to 76.8%.

Weekly initial jobless claims (chart) declined by 8,000 to 237,000 last week, below the Bloomberg forecast of 241,000, with the prior week’s figure unrevised at 245,000. The four-week moving average decreased by 1,000 to 243,000, while continuing claims increased by 18,000 to 1,935,000, north of estimates of 1,920,000.

The Empire Manufacturing Index showed output from the New York region jumped further-than-expected into expansion territory (a reading above zero) for June. The index leaped to 19.8 from May's unrevised -1.0 level, with forecasts calling for a reading of 5.0.

The Philly Fed Manufacturing Index (chart) in June declined to 27.6 after rising to 38.8 in May, though a reading above zero indicates expansionary activity, and compared to estimates of a decline to 24.9.

The Import Price Index (chart) declined 0.3% month-over-month (m/m) for May, below the Bloomberg projection of a 0.1% decline, and compared to April's downwardly revised 0.2% increase. Compared to last year, prices were up by 2.1%, short of forecasts calling for 2.9% and following April's downwardly revised 3.6% increase.

Treasuries were lower, as the yields on the 2-year note and the 30-year bond increased 2 bps to 1.35% and 2.79%, respectively, while the yield on the 10-year note gained 3 bps to 2.16%. Yesterday, the U.S. Federal Reserve raised the target range for the federal funds rate by 25 bps. Schwab's Chief Fixed Income Strategist, Kathy Jones addresses the latest Fed decision in her recent article Fed Raises Rates, Sticks With Plans for One More Hike This Year. Read the whole article to find out what Kathy found surprising as well as detailed analysis on the Fixed Income page at www.schwab.com and follow Kathy on Twitter: @kathyjones.

More housing data is in store on tomorrow’s economic calendar, with housing starts and building permits scheduled for release, with starts forecasted to have increased 0.4% m/m during May to an annual rate of 1,223,000 units and permits to have risen 0.2% m/m to an annual rate of 1,249,000 units, followed by the preliminary University of Michigan Consumer Sentiment Index, expected to remain at the prior month’s 97.1 level.

European and Asian shares saw pressure

European equities traded broadly lower with retailers and commodity producers leading the decent. The decline developed on the heels of yesterday's Fed decision and in the wake of the Bank of England (BoE) keeping its monetary policy unchanged as expected, though the number of officials at the BoE calling for a rate hike has now increased to three versus the five officials who voted to stay the current policy path. In other central bank action, the Swiss National Bank kept both its target range and the rate charged on sight deposits unchanged, as expected. In economic developments in the region, consumer price inflation reports out of France and Italy were mostly in line with projections, retail sales figures in the U.K. were well short of expectations and the trade balance for the Eurozone was narrower than anticipated.

The euro moved lower versus the U.S. dollar, while the British pound erased an early decline that ensued following the BoE decision and traded higher against the greenback. Bond yields in the region were mostly higher. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, discusses the recent action in the global bond markets and what it may be signaling in his latest article,Are bonds signaling a major stock market peak? on the Markets & Economy page at www.schwab.com and follow Jeff on Twitter: @jeffreykleintop.

Stocks in Asia traded mostly lower with energy issues leading the decline on the heels of yesterday's Fed decision to increase the target range for the federal funds rate by 25 basis points and as crude oil prices continued to slide. Mainland Chinese stocks ticked to the upside, as the People's Bank of China (PBoC) appears to be holding off on any immediate increases to borrowing costs. The PBoC raised money-market costs shortly following its U.S. counterpart tightening in March. However, securities in Hong Kong fell sharply, with property firms under heavy pressure after the city's monetary authority raised borrowing costs shortly following the U.S. Fed's monetary policy decision yesterday. Japanese equities slipped, with exporters underperforming as the yen advanced versus the U.S. dollar and held gains, while traders in the island nation await Friday's decision from the Bank of Japan when it concludes its latest monetary policy meeting. Markets in Australia also fell, despite a report showing the country's jobless rate declined to its lowest level in over four years with the strong jobs report also sending the Australian dollar higher versus all of its major peers. Finally, stocks in India declined.

For a more detailed picture of our current global economic landscape, see the latest video from Schwab's Jeffrey Kleintop, CFA, What's the Current State of the Global Economy? on the Insights & Ideas page at www.schwab.com.

In addition to the conclusion of the aforementioned Bank of Japan monetary policy meeting, tomorrow’s international economic calendar will hold Italy’s trade balance and CPI from the Eurozone.

Rangebound to Start the Week

Charles Schwab: On the Market

Posted: 4/10/2017 4:15 PM ET

Rangebound to Start the Week

U.S. stocks finished the first trading day of the holiday-shortened week nearly where they began, as news was sparse amid a dormant economic calendar and little in the way of political events. Treasury yields continued their slide, having little effect on financials, ahead of a host of earnings reports from major players in the space later this week. Energy stocks got a slight lift from the continued run in crude oil prices, while gold and the U.S. dollar were nearly unchanged.

The Dow Jones Industrial Average (DJIA) moved 2 points to the upside to 20,658, the S&P 500 Index added 2 points (0.1%) to 2,357, and the Nasdaq Composite ticked 3 points (0.1%) higher to 5,881. In moderate volume, 661 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.84 to $53.08 per barrel and wholesale gasoline was $0.01 higher at $1.76 per gallon. Elsewhere, the Bloomberg gold spot price inched $0.14 higher to $1,254.67 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was just a shade over 0.1% lower at 100.98.

AT&T Inc. (T $40) announced an agreement to acquire Straight Path Communications Inc. (STRP $92) for $95.63 per share in stock, in a transaction valued at $1.6 billion. Shares of T dipped, while STRP surged over 150%.

Lennar Corp. (LEN $52) warned that its 1Q earnings-per-share (EPS) will be lower than expected due to recent events which have translated in litigation from 2008 that will result in the company taking a one-time charge of $140 million. Shares traded higher despite the announcement.

Swift Transportation Co. (SWFT $25) and Knight Transportation Inc. (KNX $35) announced a merger agreement in an all-stock transaction with a combined enterprise value of $6.0 billion. Separately, KNX lowered its 1Q EPS outlook. Shares of both companies were nicely higher.

Data and earnings season set for the week

Treasuries finished higher, as the U.S. economic calendar was void of any major releases today, as the yield on the 2-year note declined 1 basis point (bp) to 1.28%, while the yields on the 10-year note and the 30-year bond are fell 2 bps to 2.36% and 2.99%, respectively.

The bond and currency markets have been choppy amid the flare-up in geopolitical concerns in the wake of last week's U.S. missile strikes in Syria, joining festering domestic and European political uncertainty. The markets are also continue to grapple with Friday's much softer-than-expected U.S. jobs report that followed minutes from the Fed's March meeting showing the Central Bank is discussing beginning to normalize its balance sheet this year in addition to rate hikes. Meanwhile, Federal Reserve Chairwoman Janet Yellen is expected to deliver a speech at the University of Michigan later today.

Amid this backdrop, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, article, Top Five Trade Issues Investors Should Be Watching at www.schwab.com/oninternational and follow Jeff on Twitter: @jeffreykleintop. Also check out our videos by Schwab's Vice President of Trading and Derivatives, Randy Frederick and Senior Fixed Income Research Analyst, Collin Martin, CFA, titled, Fed Hiked Interest Rates, So Why Are Bond Yields Still So Low?, and Randy's and Schwab's Chief Fixed Income Strategist, Kathy Jones' discussion, Three Fed Hikes Seen in 2017: How Should Bond Investors Respond?, at www.schwab.com/insights. Follow Randy and Kathy on Twitter: @randyafrederick and @kathyjones. Finally, for our recent commentary on the political front, see Schwab’s Chief Investment Strategist Liz Ann Sonders' and Randy Frederick's video, Is Tax Reform Still On the Table? at www.schwab.com/insights.

This week's economic docket will likely foster a delayed reaction as key data points, retail sales and the Consumer Price Index (CPI), will fall on Good Friday when the U.S. markets will be closed. Tomorrow, the calendar will deliver the NFIB Small Business Optimism Index, with economists forecasting a slight decline to a level of 104.7 for March from the 105.3 posted in February. Coming later in the week will be JOLTS Job Openings, the Producer Price Index (PPI) and the preliminary University of Michigan Consumer Sentiment Index. Finally, 1Q earnings season will begin with a heavy focus on the financial sector, likely garnering attention amid elevated expectations of earnings growth. Financials have been one of the best performing sectors amid the post-election rally and Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, offers analysis in his latest Schwab Sector Views: Financials—Opportunity or End of the Run?, at www.schwab.com/marketinsight. Follow Schwab on Twitter: @schwabresearch.

As noted in the latest Schwab Market Perspective: Working off the Froth, the recent pullback in stocks and failure of healthcare reform appears to have helped take some of the froth out of the market and correct some overly optimistic sentiment conditions. We believe this will prove to be healthy for the continuation of the bull market, with an improving economy and a still business-friendly administration supporting further gains. But potential political-induced volatility isn't limited to the United States, as the official Brexit process started. A UK recession doesn't appear to be in the cards at this point, but risks have risen; while U.S. recession risk remains quite low. Read more at www.schwab.com/marketinsight.

Europe lower amid lingering geopolitical uneasiness

European equities finished lower, with the global markets remaining on edge due to heightened geopolitical concerns, exacerbated by last week U.S. missile strikes in Syria, while uneasiness toward North Korea lingers. Oil & gas issues dipped despite the continued run in crude oil prices, while basic materials issues trimmed a recent jump. Also, political uncertainty in the region remained as discussed by Schwab's Jeffrey Kleintop, CFA, and Randy Frederick in the videos, "Brexit" Underway: How Can Investors Prep Now That Article 50 Has Been Triggered? and Why Should the French Presidential Election Be Important to Investors? at www.schwab.com/insights. Also, check out our article, Brexit Begins: What's Next for the U.K., at www.schwab.com/insights, while Director of International Research, Michelle Gibley CFA, offers her article, Europe Votes: Could More Countries Reject the EU? at www.schwab.com/oninternational. The euro ticked higher and the British pound advanced versus the U.S. dollar, while bond yields in the region finished mixed.

Stocks in Asia finished mixed following the resiliency in the face of Friday's much softer-than-expected U.S. employment report and ramped-up geopolitical concerns after last week's missile strikes in Syria by the U.S. and lingering concerns toward North Korea. As such, see Schwab's Jeffrey Kleintop's, CFA, article, Five Reasons to Stay Invested Despite Heightened Uncertainty at www.schwab.com/oninternational. Japanese equities gained ground, with the yen showing some weakness, while those traded in South Korea fell. Mainland Chinese stocks declined, while securities in Hong Kong finished flat. A rally in basic materials issues helped boost Australia's markets higher, and Indian listings decreased, as the nation's markets have trimmed a recent record run as of late that has led emerging markets higher, and Schwab's Michelle Gibley, CFA, offers her commentary, Emerging Markets: Why They Deserve a Place in Your Portfolio, while Schwab's Kathy Jones addresses the question, Emerging Market Bonds: Can the Hot Start In 2017 Continue?. Read all these commentaries at www.schwab.com/oninternational and www.schwab.com/marketinsight.

International reports set for release tomorrow include business confidence from Australia, CPI, PPI, the Retail Price Index and retail sales from the U.K., the Zew Economic Sentiment Survey from Germany, and industrial production from the Eurozone.

Charles Schwab: On the Market

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

Stocks Manage Small Advance

U.S. stocks closed the regular trading session mildly higher with financials leading the advance as Treasury yields ticked to the upside. Energy issues extended gains as crude oil prices continued to rise, while the U.S. dollar was higher and gold experienced a minor decline. In equity news, Bed Bath & Beyond, Constellation Brands and Costco Wholesale announced upbeat results that aided in lifting the consumer discretionary sector. Additionally, traders may have been exercising a bit of caution as some focus is being given to a two-day meeting between President Trump and Chinese President Xi.

The Dow Jones Industrial Average (DJIA) gained 15 points (0.1%) to 20,663, the S&P 500 Index moved 5 points (0.2%) higher to 2,357, and the Nasdaq Composite increased 14 points (0.2%) to 5,879. In moderate volume, 806 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.55 to $51.70 per barrel and wholesale gasoline was $0.01 higher at $1.73 per gallon. Elsewhere, the Bloomberg gold spot price decreased $3.71 to $1,252.05 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% higher at 100.69.

Bed Bath & Beyond Inc. (BBBY $39) reported 4Q earnings-per-share (EPS) of $1.84, versus the $1.77 FactSet estimate, as revenues rose 3.4% year-over-year (y/y) to $3.5 billion, roughly in line with forecasts. 4Q same-store sales rose 0.4% y/y, slightly above the expected 0.3% gain. BBBY issued current year earnings guidance that was roughly in line with the Street's estimates. Separately, the company announced a 20.0% increase of its quarterly dividend to $0.15 per share. Shares were solidly higher.

CarMax Inc. (KMX $58) announced 4Q EPS of $0.81, above the projected $0.79, with revenues increasing 9.3% y/y to $4.1 billion, north of the forecasted $3.9 billion. Same-store sales growth for used cars came in well above the Street's forecasts. Shares overcame early pressure that developed as analysts scrutinized the company's auto finance segment, and finished higher.

Constellation Brands Inc. (STZ $172) posted 4Q profits of $2.26 per share, or $1.48 ex-items, versus the projected $1.36, as revenues rose 5.0% y/y to $1.6 billion, roughly in line with estimates. STZ issued current year EPS guidance that exceeded expectations. Separately, the alcoholic beverage company raised its quarterly dividend by 30.0%. STZ rallied.

Costco Wholesale Corp. (COST $170) reported same-store sales growth of 6.0% y/y, topping the projected 4.2% gain. COST moved nicely to the upside.

Jobless claims drop

Weekly initial jobless claims (chart) fell by 25,000 to 234,000 last week, below the Bloomberg forecast of 250,000, with the prior week’s figure being revised slightly higher to 259,000. The four-week moving average declined by 4,500 to 250,000, while continuing claims decreased by 24,000 to 2,028,000, south of estimates of 2,030,000.

Today's jobless claims data adds to yesterday's second-straight blowout number on employment growth from ADP and comes ahead of tomorrow's key March nonfarm payroll report (economic calendar). Job growth is projected at 180,000 after February's rise of 235,000, while private sector employment is expected to rise by 170,000 jobs after the prior month's 227,000 gain. The unemployment rate is forecasted to remain at 4.7% and average hourly earnings are anticipated to match February's 0.2% increase month-over-month and be up 2.7% y/y, down slightly from the 2.8% rise posted in February.

Employment has been solid and Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, notes in his latest Schwab Sector Views: Financials—Opportunity or End of the Run?, that a stronger labor market is helping lead to a more confident consumer and could push up willingness to increase borrowing. Brad concludes that for now, we continue to believe the future is brightening for the financials sector and the recent pullback represents an opportunity for investors that need, or want, to add to their financial position. Read more at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch.

Treasuries dipped, with the yields on the 2-year and 10-year notes ticking 1 basis point (bp) higher to 1.24% and 2.34%, respectively, while the yield on the 30-year bond was nearly unchanged at 2.99%.

The U.S. dollar and Treasury yields remained in focus as a two-day summit between China and the U.S. began. Also, these markets remain choppy following yesterday's reversals amid a flare up in tax reform uncertainty and the Fed's minutes from its March meeting that suggested the Central Bank was aiming to begin to normalize its balance sheet this year in addition to rate hikes.

Amid this backdrop, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, article, Top Five Trade Issues Investors Should Be Watching at www.schwab.com/oninternational and follow Jeff on Twitter: @jeffreykleintop. Also check out our videos by Schwab's Vice President of Trading and Derivatives, Randy Frederick and Senior Fixed Income Research Analyst, Collin Martin, CFA, titled, Fed Hiked Interest Rates, So Why Are Bond Yields Still So Low?, and Randy's and Schwab's Chief Fixed Income Strategist, Kathy Jones' discussion, Three Fed Hikes Seen in 2017: How Should Bond Investors Respond, at www.schwab.com/insights. Follow Randy and Kathy on Twitter: @randyafrederick and @kathyjones. Finally, for our recent commentary on the political front, see Schwab’s Chief Investment Strategist Liz Ann Sonders' and Randy Frederick's video, Is Tax Reform Still On the Table? at www.schwab.com/insights.

In addition to the aforementioned labor report, tomorrow's U.S. economic calendar will yield wholesale inventories, with economists expecting a 0.4% month-over-month increase in February, and the final hour of trading will bring the release of consumer credit, forecasted to show consumer borrowing advanced by $15.0 billion in February.

Europe up on oil, data, central banks and politics

European equities finished mostly higher, as energy issues extended recent gains on the continued upward momentum in crude oil prices, though the markets awaited today's meeting between the U.S. and China, which will likely garner heightened scrutiny. Traders also grappled with dovish commentary from European Central Bank President Mario Draghi and yesterday's Fed meeting minutes, which caused some volatility as it showed policymakers are discussing starting to normalize its bloated balance sheet this year. Moreover, political uncertainty remained as Brexit negotiations have started and the markets digested polls ahead of this month's key French Presidential election. For analysis of the European political front, see Schwab's Jeffrey Kleintop's, CFA, and Randy Frederick's videos, "Brexit" Underway: How Can Investors Prep Now That Article 50 Has Been Triggered? and Why Should the French Presidential Election Be Important to Investors? at www.schwab.com/insights. Also, check out our article, Brexit Begins: What's Next for the U.K., at www.schwab.com/insights, while Director of International Research, Michelle Gibley CFA, offers her article, Europe Votes: Could More Countries Reject the EU? at www.schwab.com/oninternational. The euro dipped and the British pound was little changed versus the U.S. dollar, while bond yields in the region finished mixed. In economic news, German factory orders rose by a smaller amount than expected for February.

Stocks in Asia finished mostly lower as the markets treaded cautiously ahead of today's highly-anticipated meeting between the U.S. and China, while yesterday's Fed meeting minutes that showed the Central Bank aims to begin to normalize its balance sheet this year and caused some downward pressure. The yen rallied after the Fed's report to weigh on Japanese equities. Australian securities declined with commodity and financial stocks seeing some pressure, while South Korean shares also decreased. Chinese markets were mixed, with stocks trading lower in Hong Kong on the aforementioned Fed report and data showing growth in the nation's key services sector slowed, while mainland Chinese listings advanced, finding support from continued optimism from yesterday's announced plans for a new economic zone near Beijing. Indian equities retreated modestly from record highs as the Reserve Bank of India unexpectedly decided to raise one of its interest rates. Emerging markets have enjoyed strong returns in 2017, led by Indian stocks, which have rebounded sharply after a brief post U.S. election slide. For more on emerging markets read Schwab's Michelle Gibley's, CFA, article, Emerging Markets: Why They Deserve a Place in Your Portfolio. Read all these commentaries at www.schwab.com/oninternational.

The international economic docket for tomorrow will include the Leading Index from Japan, industrial production and trade data from Germany and France, retail sales from Italy and industrial and manufacturing production, construction output and trade data from the U.K.

Stocks Settle Mostly Flat Amid Light Data and News

Charles Schwab: On the Market

Posted: 3/20/2017 4:15 PM ET

Stocks Settle Mostly Flat Amid Light Data and News

U.S. equities wavered on either side of the unchanged mark and ultimately closed mixed, though a catalyst for direction could possibly come later in the week when the economic calendar begins to heat up. Treasury yields and crude oil prices were lower, the U.S. dollar was little changed and gold was modestly higher. Equity news was light, while across the pond, the U.K. announced it will trigger Article 50 to formally start the Brexit process on March 29.

The Dow Jones Industrial Average (DJIA) decreased 9 points (0.1%) to 20,906 and the S&P 500 Index shed 5 points (0.2%) to 2,373, while the Nasdaq Composite was nearly 1 point higher at 5,902. In moderate volume, 752 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil traded $0.40 lower to $48.91 per barrel and wholesale gasoline ticked $0.01 higher to $1.61 per gallon. Elsewhere, the Bloomberg gold spot price gained $5.26 to $1,234.52 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 100.31.

Movado Group, Inc. (MOV $25) reported a fiscal 4Q profit of $0.22 per share, a penny short of the FactSet estimate, as sales declined 8.7% year-over-year (y/y) to $130.8 million, below expectations of $136.9 million. The luxury watch maker said it expects the retail segment to remain “difficult”, as a shift from “brick-and-mortar shopping” to ecommerce continues to challenge the high-end watch market. Despite the report, shares closed nicely higher.

For more insight into the U.S. equity markets, see Schwab’s Chief Investment Strategist Liz Ann Sonders’ latest article, Big Machine: Why Large Caps Are Likely to Outperform. Liz Ann notes that momentum, breadth, sentiment, earnings, valuation and macro conditions currently support a bias within the U.S. equity market toward large caps over small caps. Read why at www.schwab.com/marketinsight, where you can also find Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, latest Schwab Sector Views: How Should Investors Look at Health Care Now?. Follow Liz Ann and Schwab on Twitter: @lizannsonders and @schwabresearch.

Economic front quiet, calendar for rest of the week light

Treasuries were higher, with the economic calendar void of any major reports today, as the yields on the 2-year note and the 30-year bond declined 3 basis points (bps) to 1.29% and 3.08%, respectively, and the yield on the 10-year note decreased 4 bps to 2.46%.

This week's economic calendar will decelerate somewhat and will remain dormant tomorrow, but later in the week we'll see a couple key reads on housing in the form of new and existing home sales, along with preliminary looks at manufacturing demand and activity in the form of durable goods orders and Markit's Manufacturing PMI Index. Weekly initial jobless claims and MBA Mortgage Applications will also be reported.

The stock markets attempted to pare a spate of losses after having pulled back from all-time highs reached in early March. The U.S. dollar experienced some fresh choppiness and Treasury yields pared their recent rally, with the markets grappling with upbeat economic data, soothed concerns over the pace of any future Fed rate hikes, along with continued political uncertainty, domestically and abroad. As noted in the latest Schwab Market Perspective: Teflon Market, political infighting, Presidential tweets, North Korean missile launches, oil falling below $50, European political uncertainty, higher bond yields, and the Fed raising rates: none of those forces have knocked stocks off their recent uptrend. Volatility remains remarkably low but that doesn't mean it won't pick up—investors should be prepared for bouts of volatility, and pullbacks along the way. The U.S. economy continues to expand; although there are signs that first quarter growth could be on the weak side, largely due to continued seasonal issues. We believe that economic growth is generally accelerating, a thought bolstered by the Fed’s confidence to raise rates again. Politics, both here and abroad, are keeping policy uncertainty high and should also contribute to bouts of volatility. Read more at www.schwab.com/marketinsight.

For analysis of the Fed and its implications for bond investors, see the video from Schwab's Chief Fixed Income Strategist, Kathy Jones and Vice President of Trading and Derivatives, Randy Frederick titled Three Fed Hikes Seen in 2017: How Should Bond Investors Respond?, while Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers timely commentary on the political front in his latest article, Return of the Debt Ceiling: What It Means for Investors at www.schwab.com/insights. Follow Kathy and Randy on Twitter: @kathyjones and @randyafrederick.

Modest losses in Europe, Asia mostly lower 

European equities finished mostly lower in the wake of the conclusion of the G20 meeting of finance ministers and central bank officials, where the pledge to resist protectionism was scrapped, stoking concerns over global trade. Adding to the anxiety, U.K. Prime Minister May announced that she will trigger Article 50 to formally start the Brexit process on March 29, where it will begin an estimated two years of negotiations. Meanwhile, political uncertainty in France continues to ramp up, as the top five candidates running in the forthcoming Presidential election will debate tonight. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, and Randy Frederick discuss the upcoming election and its possible implications in the video,  Why Should the French Presidential Election Be Important to Investors? at www.schwab.com/insights. Follow Jeff on Twitter: @jeffreykleintop. For additional international perspective, be sure to check out Jeff's articles, Five Reasons to Stay Invested Despite Heightened Uncertainty and The future of Europe: EU 2.0 and its impact on the markets at www.schwab.com/oninternational, as well as Director of International Research, Michelle Gibley's CFA, article, Europe Votes: Could More Countries Reject the EU?.

In economic news, producer prices in Germany were slightly cooler than expected for February, while wages in the Eurozone increased at a faster pace than forecasts, and housing prices in the U.K. were in line with estimates. The euro and the British pound traded lower against the greenback following the Brexit announcement, while bond yields in the region were mixed.

Stocks in Asia finished mostly lower amid sparse news and lighter than usual volume due to markets in Japan being closed for a holiday. Mainland Chinese shares rose and equities in Hong Kong gained ground, despite a flare-up in concerns over the nation’s property market after data showed a marked increase in housing prices, and not only within just the larger cities. As well, the conclusion to the G20 meeting had little impact, even though officials dropped a pledge to avoid protectionism. The banking sector weighed on Australian securities with increased debate over the nation’s housing sector and the government’s backing of fresh regulatory oversight of property investing. Elsewhere, stocks trading in South Korea and India declined. Schwab's Michelle Gibley, CFA, provides timely analysis of global investing in her articles, Fed Rate Hikes May Benefit Japanese Stocks and Currency Hedging: 5 Things You Need to Know, at www.schwab.com/oninternational.

Tomorrow, the international economic calendar will include leading indicators from China and the House Price Index from Australia. Also, a plethora of releases will flow from the U.K., including CPI, the Retail Price Index, PPI, the House Price Index and public sector borrowing.

Fed Raises Rates, Stocks Rally

On the Market

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

Fed Raises Rates, Stocks Rally

U.S. stocks finished higher after the Federal Reserve hiked the target for its fed funds rate, as widely expected, while an increase in crude oil prices gave energy issues a boost. Treasury yields fell following the Fed's rate decision, while the economic calendar delivered in line reads on retail sales and consumer price inflation, as well as a 12-year high in homebuilder sentiment. Meanwhile, news on the equity front was light. The U.S. dollar declined, and gold jumped higher.

The Dow Jones Industrial Average (DJIA) increased 113 points (0.5%) to 20,950, the S&P 500 Index gained 20 points (0.8%) to 2,385, and the Nasdaq Composite advanced 43 points (0.7%) to 5,900. In moderately-heavy volume, 913 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil rose $1.14 to $48.86 per barrel and wholesale gasoline was unchanged at $1.58 per gallon. Elsewhere, the Bloomberg gold spot price jumped $21.13 to $1,220.25 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—fell 1.0% to 100.71.

Capital One Financial Corp. (COF $90) finished lower after it announced that its February loan data showed U.S. borrowing decreased versus the prior month and its charge-off rate exceeded expectations, more than offsetting upbeat results from its auto loan segment.

Hostess Brands Inc. (TWNK $16) reported 4Q earnings-per-share (EPS) of $0.14, one penny above the FactSet estimate, as revenues increased 21.6% year-over-year (y/y) to $179 million, topping the projected $170 million. The company reaffirmed its 2017 revenue guidance. Shares were higher. 

Fed raises target for rates, economic news roughly in line with forecasts

The Federal Open Market Committee (FOMC) concluded its two-day monetary policy meeting, agreeing to raise the target for its fed funds rate by 25 bps to a range of 0.75%-1.00%, a move that was widely expected. The FOMC also kept its rate outlook intact, indicating that most Committee members projected two additional rate increases for 2017. In its statement, the FOMC said the pace of any future rate increases would be gradual, and that near-term risks to the economy are “roughly balanced.” Regarding inflation, the Fed indicated that it has increased in recent quarters, moving closer to its 2% longer-run objective, while describing job gains as "solid" and that business investment "appears to have firmed somewhat." Minneapolis Fed president Neel Kashkari was the only member to dissent, opting in favor of a hold.

As well, the Fed provided economic projections, showing only a slight downward change to gross domestic product for next year, while keeping its forecast for inflation and the unemployment rate intact. In her press conference following the decision, Fed Chairwoman Janet Yellen said the economy continues to expand at a moderate pace and that job gains should strengthen further, while also noting that core inflation should reach its 2% benchmark in the next few years. As well, Yellen indicated that waiting too long to adjust policy could mean an increase in the rapidity of any increases in the future. Read more insightful analysis of the Fed’s decision in an article from Schwab’s Director of Fixed Income, Collin Martin, later today at www.schwab.com/marketinsight, while you can find our article Fed Rate Hike: What Does it Mean for Your Portfolio?, at www.schwab.com/insights, and you can also follow Schwab on Twitter: @schwabresearch.

Advance retail sales (chart) for February ticked 0.1% higher month-over-month (m/m), matching the Bloomberg forecast, and compared to January's upwardly revised 0.6% rise. Also, last month's sales ex-autos were up by 0.2% m/m, topping expectations of a 0.1% gain, and following the positive revision to a 1.2% gain seen in the previous month. Sales ex-autos and gas were higher by 0.2% m/m, in line with estimates, and versus January's favorable revision to a 1.1% gain. The retail sales control group, a figure used to help calculate GDP, rose 0.1%, compared to the projected 0.2% rise, but the prior month's figure was revised solidly higher to a 0.8% increase from the previously reported 0.4% gain.

The Consumer Price Index (CPI) (chart) was up 0.1% m/m in February, above estimates of a flat reading, while January's 0.6% increase was unrevised. The core rate, which strips out food and energy, gained 0.2% m/m, matching expectations and compared to January's unrevised 0.3% rise. Y/Y, prices were 2.7% higher for the headline rate, in line with forecasts, while the core rate was up 2.2%, also matching projections. January y/y figures showed an unrevised 2.5% rise and an unadjusted 2.3% increase for the headline and core rates respectively.

The Empire Manufacturing Index showed output from the New York region slipped but remained solidly in expansion territory (a reading above zero) for March. The index dipped to 16.4 from February's unrevised 18.7 level, with forecasts calling for a 15.0 reading.

The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment this month jumped to 71—the highest level since June 2005—compared to expectations for it to remain at February's unrevised 65 level, with a 50 mark separating good and poor conditions. The NAHB said builders are buoyed by President Trump's actions on regulatory reform, and while they are clearly confident, it expects some moderation moving forward amid a number of challenges, including rising material prices, higher mortgage rates, and shortages of lots and labor.

Business inventories (chart) rose 0.3% m/m in January, matching forecasts, and versus December's unrevised 0.4% gain.

The MBA Mortgage Application Index rose 3.1% last week, following the previous week's 3.3% gain. The increase came as a 4.1% gain for the Refinance Index was met with a 2.3% rise for the Purchase Index. The average 30-year mortgage rate jumped 10 basis points (bps) to 4.46%.

Treasuries moved higher following the Fed's decision, as the yield on the 2-year note fell 9 bps to 1.30%, the yield on the 10-year note was down 10 bps to 2.50% and the 30-year bond rate declined 7 bps to 3.11%.

For additional analysis on the stock markets and the potential increased volatility, see our article, End of an Era: Why Volatility May Return to the Stock Market at www.schwab.com/insights. Schwab’s Chief Investment Strategist Liz Ann Sonders offers her latest article, Big Machine: Why Large Caps Are Likely to Outperform at www.schwab.com/marketinsight, while Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers analysis of the political front in his latest article,  Return of the Debt Ceiling: What It Means for Investors, at www.schwab.com/insights. Follow Liz Ann on Twitter: @lizannsonders.

The domestic economic calendar will continue to be busy tomorrow, beginning with housing starts and building permits, forecasted to show starts rose 1.4% m/m during February to an annual rate of 1,264,000, and permits declined 1.9% to a 1,268,000 pace, followed by weekly initial jobless claims, with economists expecting a level of 240,000, down slightly from the prior week's 243,000. Rounding out the day will be the Philly Fed Manufacturing Index, expected to decline to a level of 30.0 for March from the 43.3 posted last month, as well as the Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, with the report anticipated to show that 5.56 million jobs were available to be filled in January, above the 5.50 registered in the month prior.

Europe higher, Asia mixed ahead of Fed decision

European equities traded modestly higher, with oil & gas issues leading the way as crude oil prices recovered from a recent tumble following some bullish oil inventory data. The markets appeared cautious ahead of today's monetary policy decision in the U.S., which is expected to deliver a rate hike. Political uncertainty in the region continued to garner heavy attention, with flared-up U.K. Brexit uneasiness as Prime Minister May was granted the right to trigger Article 50 yesterday, which will begin the formal process of negotiating the nation's exit from the European Union. This came as Scottish First Minister Sturgeon said earlier this week that she will start the legal process of preparing for a second independence referendum.

The markets also focused on today's Dutch election, which is considered a test of whether populism in Europe will threaten to break up the euro. This will set the stage for next month's key French Presidential election as discussed by Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, and Vice President of Trading and Derivatives, Randy Frederick in the video, Why Should the French Presidential Election Be Important to Investors? at www.schwab.com/insights. Follow Jeff on Twitter: @jeffreykleintop. Also, be sure to check out Jeff's articles, Five Reasons to Stay Invested Despite Heightened Uncertainty and The future of Europe: EU 2.0 and its impact on the markets at www.schwab.com/oninternational, where you can also find Director of International Research, Michelle Gibley's CFA, article, Europe Votes: Could More Countries Reject the EU?. In economic news, eurozone 3Q employment rose, while U.K. employment topped forecasts. The euro and British pound gained ground on the U.S. dollar, while bond yields in the region were mostly lower.

Stocks in Asia finished mixed ahead of today's highly expected rate hike in the U.S., while European political uncertainty remained elevated. Japanese equities declined, while those in China were mixed, as mainland listings ticked higher and shares in Hong Kong declined, with Premier Li concluding its annual National People's Congress by offering a relatively upbeat economic tone but expressing a mixed outlook for trade relations with the U.S. Stocks in Australia gained ground after the nation reported a slight increase in consumer confidence, while South Korea's markets finished flat and India's traded modestly lower. Schwab's Michelle Gibley, CFA, provides timely analysis of global investing in her articles, Currency Hedging: 5 Things You Need to Know and Emerging Markets: Why They Deserve a Place in Your Portfolio at www.schwab.com/oninternational, and be sure to check out our release, Why Your Portfolio Needs International Stocks—Despite 2017 Risks at www.schwab.com/insights.

Reports set for release on tomorrow's international economic calendar include employment data from Australia, and CPI from the Eurozone, while both the Bank of Japan and the Bank of England will conduct their respective monetary policy meetings, with economists expecting no change to the stance of either nation.

Oil, Fed and Politics Pressure Markets

Charles Schwab: On the Market

Posted: 3/14/2017 4:15 PM ET

Oil, Fed and Politics Pressure Markets

U.S. equities finished lower ahead of tomorrow's highly-anticipated monetary policy decision from the Fed, with expectations high for a 25 basis point rate hike, while political uncertainty across the pond continued to fester. Energy issues came under pressure amid a drop in crude oil prices in the wake of a bearish OPEC report showing a jump in production from Saudi Arabia. Treasury yields declined despite a hotter-than-expected producer price inflation report, while the U.S. dollar was higher and gold lost ground.

The Dow Jones Industrial Average (DJIA) declined 44 points (0.2%) to 20,837, the S&P 500 Index lost 8 points (0.3%) to 2,365, and the Nasdaq Composite decreased 19 points (0.3%) to 5,857. In moderate volume, 748 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq. WTI crude oil fell $0.48 to $47.72 per barrel and wholesale gasoline was unchanged at $1.58 per gallon. Elsewhere, the Bloomberg gold spot price declined $5.16 to $1,199.14 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% higher at 101.69.

HD Supply Holdings Inc. (HDS $41) reported 4Q earnings-per-share (EPS) of $0.26, or $0.44 ex-items, compared to the FactSet estimate of $0.43, as revenues rose 3.2% year-over-year (y/y) to $1.6 billion, roughly in line with forecasts. The industrial distributor issued 1Q EPS guidance that missed expectations and shares were solidly lower.

Shares of MoneyGram International Inc. (MGI $16) surged after the company received a takeover proposal from Euronet Worldwide Inc. (EEFT $83) for $15.20 per share in cash, valuing it at more than $1 billion. EEFT said the offer represents a 15% premium over MGI's previously agreed upon takeover by Ant Financial Services Group. MGI has not commented on EEFT's offer.

Producer price inflation hotter than expected, small business optimism dips slightly

The Producer Price Index (PPI) (chart) showed prices at the wholesale level in February were up 0.3% month-over-month (m/m), above the Bloomberg expectation calling for a 0.1% gain and compared to January's unrevised 0.6% rise. The core rate, which excludes food and energy, rose 0.3%, versus forecasts of a 0.2% advance and January's unrevised 0.4% increase. Y/Y, the headline rate was 2.2% higher, north of projections of a 1.9% increase, and the core PPI rose 1.5% last month, matching estimates. In January, producer prices were 1.6% higher and up 1.2% for the headline and core rates, respectively.

The National Federation of Independent Business (NFIB) Small Business Optimism Index for February dipped to 105.3 from January's 105.9 level, compared to forecasts calling for a decline to 105.6.

Treasuries finished higher, as the yield on the 2-year note was flat at 1.37%, while the yield on the 10-year note declined 3 basis points (bps) to 2.59%, and the 30-year bond rate decreased 4 bps to 3.17%.

The markets are awaiting tomorrow's conclusion of two-day monetary policy meeting from the Federal Open Market Committee (FOMC), expected to deliver a 25 bp hike to the target for the fed funds rate. The statement and accompanying updated economic projections are poised to also garner heavy attention, with the markets looking to see if the pace of rate hikes is expected to accelerate beyond current expectations. This will be followed by the customary press conference by Fed Chairwoman Janet Yellen, which typically garners scrutiny. Schwab's Chief Fixed Income Strategist, Kathy Jones offers a look at the Fed meeting and the impact on bond investing in her article, Will the Fed Hike Rates This Week? at www.schwab.com/insights. Follow Kathy on Twitter: @kathyjones.

The FOMC decision will be preceded by a plethora of economic reports such as MBA mortgage applications, the Empire Manufacturing Index, the Consumer Price Index (CPI), retail sales, the NAHB Housing Markets Index and business inventories. The read on consumer inflation will likely garner the heaviest attention. Core CPI is estimated to come in at 2.2% y/y for last month, a slight deceleration from the 2.3% gain in January, but the FOMC's favored core PCE Index remains slightly below its longer-run objective of 2.0%. Earlier this month, FOMC Chairwoman Janet Yellen bolstered rate hike expectations by noting that the economy is close to meeting the Fed's goals of maximum employment and price stability and that gradual increases in the fed funds rate will likely be appropriate in the months and years ahead to keep the economy from significantly overheating.

As noted in the latest Schwab Market Perspective: "Phenomenal" Expectations, the economic picture continues to look good, but inflation is heating up, and we are watching to see if this could force the Fed's hand. History compiled by Strategas Research Partners shows that the best stock market performance during a rate hiking cycle comes when the Fed moves slowly in the first year, but quicker in the second year. That pattern appears to be panning out in this cycle. Read more at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch.

Finally, for a look at the break in the rally in the stock markets and possibility of increased volatility, see our article, End of an Era: Why Volatility May Return to the Stock Market and video from Schwab’s Chief Investment Strategist Liz Ann Sonders and Vice President of Trading and Derivatives, Randy Frederick titled, Stock Rally Continues, but Is It Time for Markets to Take a Breather?, at www.schwab.com/insights. Follow Liz Ann and Randy on Twitter: @lizannsonders and @randyafrederick. And for analysis of the political front, see Vice President of Legislative and Regulatory Affairs, Michael T. Townsend's article, Presidential Reset: What Does Trump's Speech Mean for His Agenda?, at www.schwab.com/insights.

Europe dips as political uncertainty festers, Asia mixed 

European equities finished lower, with oil & gas and financial stocks leading to the downside amid some caution ahead of tomorrow's highly expected rate hike in the U.S., while crude oil prices fell on an OPEC report showing a jump in production from Saudi Arabia. Political uncertainty in the region also garnered heavy attention to likely hamstring sentiment, with U.K. Brexit uneasiness continuing to flare-up as Prime Minister May was granted the right to trigger Article 50, which will begin the formal process of negotiating the nation's exit from the European Union, following Scottish First Minister Sturgeon's news yesterday that she will start the legal process of preparing for a second independence referendum. Also, the markets are paying attention to tomorrow's Dutch election, which will set the stage for next month's key French Presidential election as discussed by Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, and Randy Frederick in the video, Why Should the French Presidential Election Be Important to Investors? at www.schwab.com/insights. Follow Jeff on Twitter: @jeffreykleintop. Also, be sure to check out Jeff's articles, Five Reasons to Stay Invested Despite Heightened Uncertainty and The future of Europe: EU 2.0 and its impact on the markets at www.schwab.com/oninternational, where you can also find Director of International Research, Michelle Gibley's CFA, article, Europe Votes: Could More Countries Reject the EU?.

In economic news, eurozone industrial production rose by a smaller amount than expected for January, while German investor confidence improved by a smaller amount than forecasted for this month. The euro dipped and British pound fell compared to the U.S. dollar, while bond yields in the region were mixed.

Stocks in Asia finished mixed, with the markets digesting some diverging Chinese economic data and as the markets appear to be treading cautiously ahead of tomorrow's highly expected rate hike in the U.S. Moreover, European political uncertainty continues to ramp up, likely weighing on conviction. Japanese equities dipped, despite some weakness in the yen, while those traded in Australia finished flat. South Korean securities rose, extending a run that has ensued in the wake of last week's court ruling to uphold a parliamentary vote to impeach President Park, and markets in India jumped in a return to action following yesterday's holiday and following the weekend's state elections that showed Prime Minister Modi's party won by a larger amount than expected. Stocks in mainland China ticked higher and those traded in Hong Kong were little changed following reports that showed the nation's industrial production and fixed asset investment topped expectations, though retail sales missed forecasts for last month. Schwab's Michelle Gibley, CFA, provides timely analysis of global investing in her articles, Currency Hedging: 5 Things You Need to Know and Emerging Markets: Why They Deserve a Place in Your Portfolio at www.schwab.com/oninternational, and be sure to check out our release, Why Your Portfolio Needs International Stocks—Despite 2017 Risks at www.schwab.com/insights.

Tomorrow, the international economic calendar will offer employment data from South Korea, India's trade balance, industrial production and retail sales from Japan, CPI from France and Italy, and employment figures from the U.K.

Stocks Able to Avoid 4-day Losing Streak

Charles Schwab: On the Market

Posted: 3/9/2017 4:15 PM ET

Stocks Able to Avoid 4-day Losing Streak

After a brief dip into negative territory, the U.S. equity markets were able to notch slim gains and avoid a fourth-straight session of losses, as investors await tomorrow's jobs report, and as political uncertainty on both sides of the pond persisted. Meanwhile, Treasury yields inched higher, following a rise in jobless claims, but crude oil, gold and the U.S. dollar lost ground.

The Dow Jones Industrial Average (DJIA) ticked 2 points higher to 20,858, the S&P 500 Index gained 2 points (0.1%) to 2,365, and the Nasdaq Composite added a shade over a point to 5,839. In moderate volume, 881 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil fell $1.00 lower to $49.28 per barrel and wholesale gasoline lost $0.03 to $1.62 per gallon. Elsewhere, the Bloomberg gold spot price declined $6.67 to $1,201.64 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% lower at 101.89.

Staples Inc. (SPLS $8) reported a 4Q loss of $0.94 per share, or earnings-per-share (EPS) of $0.25 ex-items, versus the FactSet estimate calling for a profit of $0.26, as revenues declined 2.9% year-over-year (y/y) to $4.6 billion, below the projected $5.0 billion. 4Q same-store sales decreased 0.9% y/y, compared to the estimated 2.6% drop. SPLS issued 1Q EPS guidance that bracketed analysts' expectations. Shares were lower.

American International Group Inc. (AIG $63) announced that its President and Chief Executive Officer (CEO) Peter Hancock has notified the Board of his intention to resign. He will remain as CEO until a successor has been named, which the Board will conduct a comprehensive search for. AIG gave up an early advance and finished lower.

Shares of Tailored Brands Inc. (TLRD $16) tumbled over 30% after posting a 4Q net loss of $0.62 per share, or $0.19 ex-items, missing the projected shortfall of $0.12 per share, as revenues decreased 3.9% y/y to $793 million, south of the forecasted $811 million. 4Q same-store sales at Men's Wearhouse and K&G declined, while sales at Jos. A. Bank dropped sharply. The company said the challenging retail environment resulted in soft traffic, which drove lower-than-forecasted 4Q net sales and gross margins. TLRD issued current year EPS guidance that missed estimates.

Jobless claims jump ahead of February labor report

Weekly initial jobless claims (chart) jumped by 20,000 to 243,000 last week, above the Bloomberg forecast of 238,000, with the prior week’s figure being unrevised at 223,000. The four-week moving average rose by 2,250 to 236,500, while continuing claims declined by 6,000 to 2,058,000, south of estimates of 2,062,000.

The larger-than-expected rise in jobless claims doesn’t appear to be causing too much concern, given that they hit a 44-year low in the prior week, per Bloomberg, and as data has shown the labor market remains solid. This sets the stage for tomorrow's key February nonfarm payroll report, expected to show an increase of 200,000 jobs and a rise of 210,000 jobs to private sector payrolls (economic calendar). The unemployment rate is forecasted to dip to 4.7% from 4.8%, and average hourly earnings are projected to rise 0.3% month-over-month (m/m). The report likely will have little impact on Fed rate hike expectations for next week that have surged to almost a certainty, but the data, notably the wage growth figure, could cause some volatility as the markets grapple with what it means for the frequency of rate hikes for the rest of the year.

As noted in the latest Schwab Market Perspective: "Phenomenal" Expectations, the bar is now set higher for policy action to support the rhetoric, setting up the possibility for a market pullback and/or a pickup in volatility. The economic picture continues to look good, but inflation is heating up, which has put a March rate hike by the Federal Reserve firmly on the table. An earnings growth recovery has helped fuel a global rally, but there are risks that expectations and valuations have gotten a bit extended. Read more at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch.

The Import Price Index (chart) increased 0.2% m/m for February, compared to projections of a 0.1% increase and January's upwardly revised 0.6% gain. Compared to last year, prices were higher by 4.6%, above forecasts calling for a 4.4% jump, and following January's upwardly revised 3.8% increase.

Treasuries were lower, as the yield on the 2-year note ticked 1 basis point (bp) higher to 1.36%, while the yields on the 10-year note and the 30-year bond increased 3 bps to 2.59% and 3.18%, respectively.

Stocks avoided posting a fourth-straight session of losses that has pulled them back from record highs, while Treasury yields regained some upward momentum, amid festering global political uncertainty and boosted expectations of a Fed rate hike next week. Amid this backdrop, see our article, End of an Era: Why Volatility May Return to the Stock Market and video from Schwab’s Chief Investment Strategist Liz Ann Sonders and Vice President of Trading and Derivatives, Randy Frederick titled, Stock Rally Continues, but Is It Time for Markets to Take a Breather?, at www.schwab.com/insights. Follow Liz Ann and Randy on Twitter: @lizannsonders and @randyafrederick.

For analysis of the Fed and President Trump's highly-anticipated reflationary policies, see Schwab's Chief Fixed Income Strategist, Kathy Jones' article, What would a shake-up at the Fed mean for bond investors? at www.schwab.com/onbonds, and Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, Presidential Reset: What Does Trump's Speech Mean for His Agenda?, at www.schwab.com/insights. Follow Kathy on Twitter: @kathyjones.

Europe turns higher after ECB's Draghi offers upbeat tone, Asia mixed on China data

European equities overcame early losses and finished mostly higher, despite oil & gas issues falling as crude oil prices extended yesterday's drop that ensued after some bearish oil inventory reports. The markets digested the expected unchanged monetary policy decision from the European Central Bank (ECB). Stocks got a boost from ECB President Mario Draghi's relatively upbeat tone about the economy, noting that the cyclical recovery may be gaining momentum, though he reiterated the need to continue its stimulus measures as underlying inflation pressures remain subdued. Political uncertainty continued to linger, as the key French Presidential election continues to nudge closer as discussed by Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, and Randy Frederick in the video, Why Should the French Presidential Election Be Important to Investors? at www.schwab.com/insights. Also, be sure to check out Jeff's articles, Five Reasons to Stay Invested Despite Heightened Uncertainty and The future of Europe: EU 2.0 and its impact on the markets at www.schwab.com/oninternational. Follow Jeff and Randy on Twitter: @jeffreykleintop and @randyafrederick. In other economic news, Spanish house transactions jumped in January, French business sentiment unexpectedly rose last month, and Irish 4Q GDP growth easily topped forecasts. The euro gained ground and the British pound dipped versus the U.S. dollar, while bond yields in the region turned to the upside to boost the financial sector.

Stocks in Asia finished mixed as traders digested some mixed February Chinese inflation data and crude oil's drop yesterday, while appearing to tread cautiously ahead of today's monetary policy decision from the European Central Bank and tomorrow's key U.S. labor report. Moreover, political uncertainty lingered and the markets continued to brace for the impact of a potential rate hike in the U.S. next week, which expectations of have jumped. Mainland Chinese stocks and those listed in Hong Kong dropped, following reports that showed the nation's consumer price index rose by a much smaller rate than expected, but producer price inflation accelerated more than anticipated. After the closing bell, China reported that its new yuan loans topped forecasts, while its aggregate financing—a gauge of total credit issued—was below estimates and its money supply figures were mixed for last month. Australian equities declined, bogged down by weakness in oil & gas and basic materials issues, while South Korea's markets also lost ground.

However, stocks in Japan bucked the trend, finishing higher, aided by some weakness in the yen, while Indian securities ticked higher, led by strength in auto stocks though gains were held in check as the markets awaited exit polls from five state elections, per Bloomberg. For insight on global investing, see Schwab's Director of International Research, Michelle Gibley's, CFA, articles, Currency Hedging: 5 Things You Need to Know and Emerging Markets: Why They Deserve a Place in Your Portfolio at www.schwab.com/oninternational, and be sure to check out our release, Why Your Portfolio Needs International Stocks—Despite 2017 Risks at www.schwab.com/insights.