Stocks Mixed on Data and Persistent Weakness in Tech

Charles Schwab: On the Market

Posted: 7/31/2017 4:15 PM ET

Stocks Mixed on Data and Persistent Weakness in Tech

U.S. stocks finished mixed, as investors weighed relatively upbeat global economic data and continued uncertainty surrounding the tech sector. Treasury yields and the U.S. dollar were little changed, while crude oil moved above $50/barrel and gold was slightly higher. M&A activity was in focus after Discovery Communications agreed to acquire Scripps Networks Interactive for nearly $15 billion.

The Dow Jones Industrial Average (DJIA) advanced 61 points (0.3%) to 21,891, the S&P 500 Index was 2 points (0.1%) lower at 2,470, and the Nasdaq Composite declined 27 points (0.4%) to 6,348. In heavy volume, 1.0 billion shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil gained $0.46 to $50.17 per barrel and wholesale gasoline was $0.03 higher at $1.68 per gallon. Elsewhere, the Bloomberg gold spot price inched $0.57 higher to $1,270.21 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 92.85.

Discovery Communications Inc. (DISCA $27) announced an agreement to acquire Scripps Networks Interactive Inc. (SNI $87) for $90.00 per share in cash and stock, valued at about $14.6 billion. Under the terms of the deal Scripps shareholders will receive $63.00 per share in cash and $27.00 per share in Class C Common shares of Discovery stock. Shares of DISCA saw pressure on the news and as the company reported Q2 earnings that missed forecasts. SNI was modestly higher as rumors of the deal recently boosted its shares and the company lowered its guidance after posting softer-than-expected Q2 revenues.

Dynavax Technologies Corp. (DVAX $16) surged over 70% after an advisory committee for the U.S. Food & Drug Administration (FDA) supported the company's safety claim regarding its Hepatitis B vaccine candidate, prompting some analysts to upgrade the stock.

Pending home sales jump, regional manufacturing activity continues to show growth

Pending home sales rose 1.5% month-over-month (m/m) in June, versus the Bloomberg projection of a 1.0% increase, and following the upwardly revised 0.7% drop registered in May. Compared to last year, sales were 0.7% higher. Pending home sales reflect contract signings and are used as a gauge of the pipeline of existing home sales, which dipped slightly more than expected in June.

The Chicago Purchasing Managers Index (chart) declined more than expected but remained at a level depicting expansion (above 50), after falling to 58.9 in July from 65.7 in June, which was the highest since May 2014. Expectations called for a decrease to 60.0.

The Dallas Fed Manufacturing Activity Index surprisingly rose further into a level depicting expansion (a reading above zero). The index improved to 16.8 in July, from 15.0 in June, and compared to the expected decline to 13.0.

Today's reports begin a week that will see earnings continue to pour in and the economic calendar likely garnering attention given the recent action in bonds and currencies, while the markets appear a little less certain that another Fed rate hike this year is in the offing. Tomorrow, we will get a look at national manufacturing activity in July with the releases of the ISM Manufacturing Index, projected to dip to 56.5 from 57.8 in June, and the final Markit Manufacturing PMI Index, expected to be unrevised at 53.2 and up from June's 52.0 level. Readings above 50 for both depict expansion. We will also get a look at the health of the consumer and inflation, with the release of June personal income and spending, forecasted to match May's m/m gains of 0.4% and 0.1%, respectively, while the core PCE Index—a Fed favored gauge of inflation—is projected to remain at a 1.4% year-over-year rate and below the Fed's 2.0% target. Tomorrow's monthly U.S. auto sales and construction spending reports are also likely to be in focus.

As noted in the latest Schwab Market Perspective: Are Danger Signs Rising…or Will the Bull Run Continue?, a solid earnings season should contribute to a continuation of the bull market in stocks, along with economic data that is showing a robust labor market, but few signs of inflation building. Dangers are lurking, however, and the possibility of a decent-sized pullback has grown over the past couple of months, in light of monetary policy and geopolitical uncertainties. While we would likely view such a move as healthy, it can be disconcerting. Stay diversified and be prepared to guard against overreacting to any such move. Read more on the Markets & Economy page at www.schwab.com.

Treasuries were little changed, as the yields on the 2-year and 10-year notes, along with the 30-year bond, were all flat at 1.35%, 2.29% and 2.90%, respectively. Bond yields have shown some relative signs of life after recent pressure though the U.S. dollar remains hampered. The markets continue to grapple with geopolitical and global monetary policy uncertainties, exacerbated by last week's unchanged Fed monetary policy decision, as discussed by Schwab's Chief Investment Strategist Liz Ann Sonders in her latest article, Fed Keeps it on the QT. Liz Ann notes that the decision was unanimous, and the addition of the words "relatively soon" point to a September start point to balance sheet shrinkage, or quantitative tightening (QT). Next up is the Jackson Hole annual conference, at which Yellen will speak, which could provide an opportunity to further steer the consensus around QT's timing. There is a September timing risk however, given that we could be in the midst of a debt ceiling stand-off, so stay tuned. Read more on the Markets & Economy page at www.schwab.com and follow Liz Ann on Twitter: @lizannsonders.

The political front remains a source of market uncertainty in the wake another failed attempt at health care reform as discussed in Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend's article, Health Care Reform: What Investors Should Know, on the Insights & Ideas page at www.schwab.com.

Europe mixed, Asia mostly higher following data and amid geopolitical uncertainty

European equities finished mixed in late-day action, with basic materials and oil & gas issues finding some support from upbeat economic data in the region, which followed relatively favorable reports out of Asia. However, the rally in technology issues continued to pause as analysts grapple with valuation concerns as earnings season rolls on. Also, consumer goods stocks were pressured by tobacco companies in the wake of late Friday's FDA announcement that it plans to crackdown on nicotine levels in cigarettes. The euro and British pound both moved higher in late-day action versus the U.S. dollar to apply some pressure on the markets, ahead of this week's monetary policy decision from the Bank of England, while core eurozone consumer price inflation estimate came in slightly hotter than expected. Bond yields in the region finished mixed. German retail sales rose more than expected in June, while the eurozone unemployment rate unexpectedly dipped. Stocks appeared to shrug off flared-up geopolitical concerns in the wake of another missile test by North Korea late last week. For a look at global investing, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, latest article, An important benefit to global investors is back after 20 years on the Markets & Economy page at www.schwab.com. Follow Jeff on Twitter: @jeffreykleintop.

Stocks in Asia finished mostly to the upside, with the markets digesting some economic data, along with the continued global earnings season. Japanese equities declined, with the yen gaining ground to overshadow an upbeat read on the nation's industrial production, which rebounded more than expected in June. However, stocks traded in mainland China and Hong Kong rallied following upbeat earnings from some key companies in the nation, and as manufacturing and non-manufacturing reports continued to suggest expansion in July, with the latter showing growth in activity out of the key services sector accelerated. Australian securities advanced those traded in India also rose ahead of this week's monetary policy decisions from the two countries. Meanwhile, South Korean stocks ticked only slightly higher, showing some late-day resiliency in the face of late last week's missile test from North Korea. Amid this backdrop and as South Korean and Indian markets remain near all-time highs, Schwab's Jeffrey Kleintop, CFA, offers his articles, Missiles and Markets: An investor guide to geopolitical risks on the Markets & Economy page at www.schwab.com, as well as, The Long Period of Underperformance for Emerging Market Stocks May Finally Be Over on the International Investing page.

Markit Manufacturing PMI readings from across the globe will dominate tomorrow's international economic calendar, while other items of note include PPI and trade data from South Korea, auto sales from Japan, employment figures from Germany and GDP from the Eurozone.

Stocks Start Week Strong

Charles Schwab; On the Market

Posted: 6/19/2017 4:15 PM ET

Stocks Start Week Strong

U.S. stocks began the week with solid gains as technology issues led a broad based advance that pushed the Dow and S&P to fresh record highs, while the Nasdaq saw the largest percentage gain for the day. The advance for equities lacked a clear catalyst as the domestic docket was devoid of any major releases today and will remain blank again tomorrow. Treasuries, gold and crude oil prices were lower and the U.S. dollar was nicely higher.

The Dow Jones Industrial Average (DJIA) rose 145 points (0.7%) to 21,529, the S&P 500 Index advanced 20 points (0.8%) to 2,453, and the Nasdaq Composite rallied 87 points (1.4%) to 6,239. In moderate volume, 801 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq. WTI crude oil declined $0.54 to $44.39 per barrel and wholesale gasoline was unchanged at $1.45 per gallon. Elsewhere, the Bloomberg gold spot price decreased $9.17 to $1,244.56 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% higher at 97.56.

Shares of Valeant Pharmaceuticals International Inc. (VRX $13) traded nicely higher, after it was announced that billionaire hedge-fund manager John Paulson, its largest shareholder, will join the board of the struggling drugmaker in an effort to aid in its turnaround. The move comes only months after fellow fund manager Bill Ackman, a long-time champion of VRX, bailed, with the company posting an 80% loss from its peak in 2015 amid drug pricing and accounting scandals.

The Nasdaq jumped back on track after a dismal performance last week, when the index lagged the Dow and S&P 500 due to pressure on technology issues. This week is “Tech Week” at the White House, as President Trump will meet with executives from a number of top technology firms, where he is expected to solicit their help in speeding up the process of modernizing the federal government’s technology, as well as discussions on cyber-security. 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.

Slow start to week’s economic calendar

Treasuries finished lower with the economic calendar void of any major releases today. The yields on the 2-year and 10-year notes were 4 basis points (bps) higher at 1.36% and 2.19%, and the 30-year bond rate was up 1 bp at 2.79%.

Treasury yields have been in a trading range lately amid a host of domestic and European political uncertainty, mixed economic data, and last week’s highly-expected rate hike by the Fed and details of the process in beginning to shrink its inflated balance sheet sometime this year. Schwab's Chief Fixed Income Strategist, Kathy Jones discusses the Fed's potential changes to its bloated balance sheet and the impact on the bond markets in her article, Will the Fed Reduce Its Balance Sheet? What Bond Investors Should Know on the Fixed Income page at www.schwab.com. Follow Kathy on Twitter: @kathyjones. Also, Chief Investment Strategist Liz Ann Sonders addresses the recent mixed economic data in her latest article, Turn Down For What: Why is Job Growth Slowing?, on the Markets & Economy page at www.schwab.com and follow Liz Ann on Twitter: @lizannsonders.

The economic calendar is sparse this week, with tomorrow’s ledger also bare, while later in the week investors will get some housing data with the releases of new and existing home sales, as well as weekly MBA Mortgage Applications. Manufacturing and business activity will also be on tap, with data from Markit's preliminary Manufacturing and Services PMIs and the Kansas City Fed Manufacturing Index. Other reports of note include weekly initial jobless claims and the Index of Leading Economic Indicators.

As well, a number of Federal Reserve officials are slated to speak at various engagements throughout the week. As noted in the latest Schwab Market Perspective: Goldilocks…or the Three Bears?, we believe the market will likely largely look past the expected FOMC rate hike, and focus more on any information with regard to the Fed’s balance sheet. It is now expected that the Fed will begin the process of slowly reducing its bloated balance sheet by the end of this year, but that process (and commentary surrounding it) could be a source of elevated volatility in the months to come. Read more on the Markets & Economy page at www.schwab.com, including our continued belief that the bull market has legs, but why investors should be aware that risks are elevated.

Equities in Europe and Asia end higher 

European equities finished broadly higher, with politics taking center stage, while also getting a tailwind from last week’s extension of loan agreements to Greece by its creditors that ended speculation over whether the country would be able to meet large bond payments coming due in July. The second round of parliamentary elections in France over the weekend ushered in a solid win for newly-elected President Macron, with his Republic on the Move party, along with an ally in the Modem centrist party, producing an absolute majority, paving the way for easy passage of Macron’s reform program. The British pound was modestly lower versus the U.S. dollar, as Brexit negotiations began in Brussels today, and amid a cloud of uncertainty in the U.K. following reports over the weekend that the nation’s senior conservative leaders are preparing to initiate a challenge to Prime Minister May’s leadership if she softens her stance on Brexit. The euro also lost modest ground versus the greenback and bond yields in the region were lower. Amid the political turmoil overseas, including upcoming elections in Italy and Germany later this year, see Schwab's Chief Global Investment Strategist 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?. Economic news was sparse, with April industrial output in Italy declining and housing prices in the U.K. ticked lower for June.

Stocks in Asia began the trading week higher across the board on the heels of Friday's fresh high for the Dow in the U.S., as well as optimism in China with regard to an upcoming MSCI decision. Japanese equities increased, with the yen gliding lower during the session and following a report that showed an unexpected trade deficit, as the nation's imports exhibited surprising strength, while exports fell short of expectations. Mainland Chinese stocks rose and shares trading in Hong Kong jumped amid increased hopes that MSCI will include the Asian nation’s A-shares in its emerging markets indexes when it announces its decision later this week, while showing little reaction to data that showed housing prices continue to steadily rise. Australian securities returned from a long holiday weekend to finish higher, despite Moody’s downgrade of twelve of the nation’s lenders, including its four largest banks, while Indian listings traded higher and South Korean equities gained ground. For more of a look at the global economic front, see Jeffrey Kleintop's video, What's the Current State of the Global Economy? on the Insights & Ideas page at www.schwab.com. Follow Jeff on Twitter: @jeffreykleintop.

The international docket for tomorrow will include department store sales from Japan, leading indicators from China, house price data from Australia, PPI from Germany and the current account for the Eurozone.

Markets Mixed Following Expected Fed Rate Hike

Charles Schwab: On the Market

Posted: 6/14/2017 4:15 PM ET

Markets Mixed Following Expected Fed Rate Hike

U.S. equities finished mixed and near the unchanged mark, with the Nasdaq taking a hit on pressure from tech stocks, after the Federal Reserve's decision to increase the target for its fed funds rate, as the move was widely expected. Treasuries pared gains in the wake of the Fed decision, after rallying on the heels of early morning reads on retail sales and consumer price inflation that missed expectations. Gold reversed course to finish lower, while the U.S. dollar trimmed its losses to end nearly unchanged, and crude oil prices tumbled following a bearish government inventory report.

The Dow Jones Industrial Average (DJIA) increased 46 points (0.2%) to 21,375, the S&P 500 Index declined 2 points (0.1%) to 2,438, and the Nasdaq Composite lost 25 points (0.4) to 6,195. 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 $1.73 to $44.73 per barrel and wholesale gasoline was $0.07 lower at $1.43 per gallon. Elsewhere, the Bloomberg gold spot price decreased $7.31 to $1,259.24 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 96.97.

H&R Block Inc. (HRB $29) rallied after the company announced Q4 financial results of $1.96 per share from continuing operations, topping the $1.91 FactSet consensus estimate, while revenues increased 1.3% year-over-year (y/y) to $2.3 billion, roughly matching expectations. The company also raised its quarterly dividend by 9% to $0.24 per share.

Technology issues recently experienced a sharp pull-back, prior to yesterday's advance, that some have attributed to a possible rotational trade. Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA discusses in his latest Schwab Sector Views: Technology—Too Far or Room to Run?, that the technology sector has been on a remarkable run. It was the best-performing sector over the past three- and 12-month periods, as well as the best year-to-date performer—and it really isn’t all that close. 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? Some might even be wondering if we’re at risk of repeating the collapse that started in 2000, when tech saw its weighting fall from 33% of the S&P 500 to 14% a mere three years later. Read more on the Markets & Economy page at www.schwab.com and follow Schwab on twitter: @schwabresearch.

Fed hikes rates, retail sales and consumer price inflation miss estimates

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 1.00%-1.25%, a move that was widely expected. The FOMC also kept its rate outlook intact, indicating that most Committee members projected one additional rate increase for 2017, while continuing to forecast three hikes in 2018. In its statement, the FOMC said that near-term risks to the economy are “roughly balanced,” but that the Committee "is monitoring inflation developments closely." However, the Fed indicated that, “Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the committee’s 2 percent objective over the medium term.” In a separate statement, the Fed also provided details of its plan to wind down its bloated balance sheet, by gradually shedding a fixed amount of assets on a monthly basis, but without providing a starting point for the program. The Committee said it anticipates the initial cap to be $10 billion per month--$ 6 billion from Treasuries and $4 billion from mortgage-backed securities—to increase every three months in those amounts to reach $30 billion and $20 billion, respectively.

As well, the Fed provided updated economic projections, showing only a slight upward change to gross domestic product for this year, while lowering its forecasts for inflation and the unemployment rate. In her press conference following the decision, Fed Chairwoman Janet Yellen said the upcoming rate of economic growth warrants further gradual rate hikes, while also noting that "one-off" price declines is what is behind recent softer-than-expected inflation readings. Regarding the program of trimming the balance sheet, she didn't indicate a firm timeframe, only saying she expects it to be initiated this year and that it could take a few years to complete. Read more insightful analysis of the Fed’s decision in an article from Schwab’s Chief Fixed Income Strategist, Kathy Jones, later today at www.schwab.com, while you can also read Kathy's article, Will the Fed Reduce Its Balance Sheet? What Bond Investors Should Know, where she discusses the Fed's potential changes to its inflated balance sheet and the impact on the bond markets, on the Fixed Income page. Follow Kathy on Twitter: @kathyjones.

Advance retail sales (chart) for May declined 0.3% month-over-month (m/m), below the Bloomberg forecast of a flat read and compared to April's unrevised 0.4% gain. Last month's sales ex-autos were also down by 0.3% m/m, missing of expectations of a 0.1% gain, and following the positive revision to a 0.4% rise from the 0.3% reading seen in the previous month. Sales ex-autos and gas were flat m/m, missing estimates of a 0.3% rise, and versus April's favorably revised 0.5% gain. The retail sales control group, a figure used to help calculate GDP, was unchanged, compared to the projected 0.3% rise, and the prior month's figure was revised higher to a 0.6% increase from the previously reported 0.2% increase.

The Consumer Price Index (CPI) (chart) was down 0.1% m/m in May, below estimates calling for no change, while April's 0.2% increase was unrevised. The core rate, which strips out food and energy, rose 0.1% m/m, below expectations of a 0.2% increase and compared to April's unrevised 0.1% rise. Y/Y, prices were 1.9% higher for the headline rate, just shy of forecasts of a 2.0% rise, while the core rate was up 1.7%, below projections of a 1.9% gain. April y/y figures showed an unrevised 2.2% rise and an unadjusted 1.9% increase for the headline and core rates respectively.

The MBA Mortgage Application Index increased 2.8% last week, following the previous week's 7.1% rise. The advance came as a 9.2% jump in the Refinance Index was met with a 2.8% decline for the Purchase Index. The average 30-year mortgage rate decreased 1 basis point (bp) to 4.13%.

Business inventories (chart) declined 0.2% m/m in April, matching forecasts, and versus March's unrevised 0.2% increase.

Treasuries were higher, as the yield on the 2-year note declined 2 bps at 1.35%, while the yields on the 10-year note and the 30-year bond fell 7 bps to 2.15% and 2.80%, respectively.

Tomorrow's economic calendar will again be busy, beginning with weekly initial jobless claims, forecasted to decline to 241,000 from the prior week's 245,000, followed by the Import Price Index, with economists anticipating a 0.1% m/m decline for May, and then the Empire Manufacturing Index and Philly Fed Manufacturing Index will be released. Later in the morning, the Fed's May industrial production and capacity utilization report will be released, forecasted to show production increased 0.2% m/m and utilization ticked higher to 76.8%, while the NAHB Housing Market Index will round out the day, with a reading of 70 expected for June, matching that seen in May.

Europe erases early gains, Asia markets diverge ahead of Fed decision

European equities erased early tech fueled gains and closed mostly lower following the disappointing economic reads from the U.S., while caution ahead of today's Fed decision also likely kept gains and conviction in check. German Bundesbank president and European Central Bank (ECB) Governing Council member, Jens Weidmann, made remarks aimed at highlighting the risks of continuing extraordinary stimulative monetary measures for too long just days after the ECB dropped its reference to the possibility of further declines in interest rates. In other economic news in the region, jobs data reported out of the U.K. showed that fewer payroll additions were made than expected and a miss on wage growth has intensified in the three months through April, imposing the biggest loss of household purchasing power in almost three years, per Bloomberg. The Bank of England (BoE) is expected to make its next policy decision tomorrow and BoE Governor Mark Carney has warned of possible challenging times for the rest of the year as the uncertainty surrounding Brexit is helping to keep pay subdued.

Political uncertainty remains in the U.K. following its recent elections which saw Prime Minister Theresa May's party losing its majority resulting in a hung parliament, while the U.K.'s Brexit department has seen two of its four ministers depart this week, just days before negotiations with the European Union are set to start. For commentary on the political front check out Schwab's Chief Global Investment Strategist Jeffrey Kleintop, 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, and follow Jeff and Randy on Twitter: @jeffreykleintop and @randyafrederick.

The euro and British pound erased early losses and gained ground against the U.S. dollar and bond yields in the region were lower. Schwab's 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.

Stocks in Asia finished mixed as market participants eyed some data from China and awaited this afternoon's Federal Reserve monetary policy decision. Mainland Chinese securities declined 0.7%, while those traded in Hong Kong ticked higher, as a couple of mostly in line reads on retail sales and industrial production showcased some economic resiliency for the world's second largest economy as regulators continue to pursue a reduction of shadow banking risks. Japanese reports on industrial production and capacity utilization showed growth that matched the previous month's increase, but weren't enough to influence a positive finish as stocks in the island nation dipped, while the Bank of Japan gets sent to begin its two-day monetary policy meeting tomorrow. South Korean equities declined, despite a larger-than-expected decline in the country's unemployment rate to 3.6%, but the jobless figure for young people is still more than twice the overall level. Meanwhile, markets in Australia rallied, aided by strength in financial listings and despite a report that showed a decline in consumer sentiment. 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 Bank of England meeting, tomorrow's international economic calendar will include employment data from Australia, India's trade balance, CPI from France and Italy, retail sales from the U.K., and the Eurozone's trade balance.

Market Rebound Continues

Charles Schwab: On the Market

Posted: 5/22/2017 4:15 PM ET

Market Rebound Continues

U.S. equities continued their rebound from last week's malaise that came amid a flare-up in domestic political uncertainty and volatility. Defense stocks got a boost from President Trump's deals with Saudi Arabia on his first overseas trip, and Ford announced a new CEO. Treasury yields and gold are moved higher, and the U.S. dollar was little changed, with the economic calendar empty today. Meanwhile, crude oil prices extended a run as of late amid continued production cut optimism.

The Dow Jones Industrial Average (DJIA) increased 90 points (0.4%) to 20,895, the S&P 500 Index added 12 points (0.5%) to 2,394, and the Nasdaq Composite gained 49 points (0.8%) to 6,134. In moderate volume, 792 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.46 to $51.13 per barrel and wholesale gasoline was $0.01 higher at $1.66 per gallon. Elsewhere, the Bloomberg gold spot price increased $5.06 to $1,260.99 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 96.98.

Ford Motor Co. (F $11) announced that President and Chief Executive Officer (CEO) Mark Fields will retire and be replaced by Jim Hackett, who has led Ford Smart Mobility LLC since March 2016. Executive Chairman Bill Ford said Jim Hackett is the right CEO to lead Ford during a transformation period for the auto industry and the broader mobility space. Shares gained ground.

Huntsman Corp. (HUN $26) and Clariant AG (CLZNY $22) announced an agreement to combine in a merger of equals through an all-stock transaction, creating a global specialty chemical company with approximate annual sales of $13.2 billion. The merged company will be named HuntsmanClariant. Under the terms of the deal, Huntsman shareholders will receive 1.2196 shares of the new company for each share owned and each share of Clariant will remain outstanding as a share of the new company. Clariant shareholders will own about 52% of the company and Huntsman shareholders will own approximately 48%. HUN lost modest ground, while CLZNY moved nicely higher.

Amgen Inc. (AMGN $153) saw some pressure after a study of its osteoporosis treatment showed a newly observed cardiovascular safety signal that will have to be assessed, likely delaying approval in the U.S. Shares of AMGN's Belgian partner for the treatment, UCB SA (UCBJY $35), fell sharply.

Dow member Boeing Co. (BA $184) and Lockheed Martin Corp. (LMT $277), along with other aerospace and defense companies, moved higher after several defense and commercial agreements were announced yesterday amid President Donald Trump's visit to Saudi Arabia as part of his first trip overseas.

Fed, housing and business activity reports set to join political focus this week

Treasuries dipped as the U.S. economic docket was void of any major releases today. The yields on the 2-year and 10-year notes, along with the 30-year bond, all ticked 1 basis point (bp) higher to 1.28%, 2.25% and 2.91%, respectively. For analysis of the bond markets, see our article, Mixed Signals: What Does Recent Economic Data Mean for Bonds?, on the Insights & Ideas page at www.schwab.com and follow Schwab on Twitter: @schwabresearch.

Along with continued focus on the political front, this week's economic calendar will bring looks at the housing sector, beginning with tomorrow's new home sales report, with economists expecting a 1.8% month-over-month (m/m) decline during April to a rate of 610,000 units, as well as Markit's preliminary Manufacturing and Services PMIs for May with both indexes forecasted to inch higher to 53.0 and 53.3, respectively, while the Richmond Fed Manufacturing Index will round out the day, forecasted to move lower to a level of 15 for May. More housing data, manufacturing and business activity reports will come later in the in the form of existing home sales, the second read on Q1 GDP and preliminary durable goods orders. Schwab’s Chief Investment Strategist Liz Ann Sonders notes in her article, ½ Full: Seeing Through a Weak Q1 leading indicators say a lot more about the economy prospectively than backward-looking measures like GDP, and they remain quite healthy. Liz Ann concludes that we are likely just experiencing yet another "soft patch" in an ongoing expansion; so for now, "I am seeing the glass as half full." Read more on the Markets & Economy page at www.schwab.com and follow Liz Ann on Twitter: @lizannsonders.

Moreover, the release of the Fed's May meeting minutes could command attention as the markets grapple with the path of future rate hikes and the expected beginning of the paring of the Central Bank's bloated balance sheet. For analysis, see Schwab's Vice President of Trading and Derivatives, Randy Frederick's and Chief Fixed Income Strategist, Kathy Jones' video, Fed Rate-Hike Cycle: How Can Bond Investors Prepare? on the Insights & Ideas page at www.schwab.com, where Randy and Liz Ann Sonders also offer the video, June Rate-Hike Highly Likely? Follow Randy and Kathy on Twitter: @randyafrederick and @kathyjones.

Finally, following last week's brief spike in volatility, see the latest articles, Is The Stock Market Just Quiet Or Is It Too Quiet? from Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, and Liz Ann Sonders', Strange Brew: Heightened Uncertainties, Yet Plunging Volatility…What Gives? on the Markets & Economy page at www.schwab.com. Follow Jeff on Twitter: @jeffreykleintop.

Europe mixed on M&A, politics and euro strength, Asia mostly higher

European equities finished mixed, with the markets continuing the grapple with political uncertainty on both sides of the pond. The euro continued to climb versus the U.S. dollar, which has been pressured by ramped-up U.S. political uneasiness. The euro got a further boost from comments from German Chancellor Angela Merkel regarding the currency being "too weak," leading to Germany's trade surplus, per Bloomberg. However, the British pound dipped versus the greenback, as ongoing U.K. Brexit negotiations fostered uncertainty. Adding to the political risk, Germany, Italy and the U.K. face elections later this year. For analysis of the political uncertainty see Schwab's Jeffrey Kleintop's, CFA, and 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?. Bond yields in the region were mixed. Telecommunications issues led to the upside to extend a recent rally, while oil & gas issues moved modestly to the upside as crude oil prices extended a run as of late on optimism the extension of production cuts will be announced.

Stocks in Asia finished mostly to the upside as the U.S. markets continued to recover on Friday from a midweek selloff that came as volatility spiked amid flared-up U.S. political uncertainty, which appeared to call President Trump's ability to pass pro-growth policies into question. The global markets are shrugging off lingering geopolitical uncertainty as North Korea conducted another missile test over the weekend, while paying attention to U.S. President Trump's first foreign trip. Japanese equities gained ground, with the yen stabilizing after last week's rally, while the nation's trade report showed exports grew at a smaller pace than expected and imports topped forecasts. Australian securities rose, with basic materials recovering and oil & gas issues gaining ground as crude oil prices extend a recent run on optimism of extended production cuts. South Korean listings showed some resiliency in the face of the North Korean missile tests and a deceleration in that nation's export growth, advancing 0.7%, and markets in India moved higher, back to near record territory as the markets cheered the finalization of rates for the national sales tax, per Bloomberg.

Chinese stocks finished mixed, with mainland stocks declining, amid festering regulatory crackdown concerns and economic uncertainty in the wake of recent soft data, but those traded in Hong Kong increased, with insurers getting a boost from some analyst optimism toward the group. For analysis of the global front amid the backdrop of trade and geopolitical uncertainty, see Schwab's Jeffrey Kleintop's, CFA, articles, Missiles and Markets: An investor guide to geopolitical risks on the Markets & Economy page at www.schwab.com, as well as, Top Five Trade Issues Investors Should Be Watching on the International Investing page at www.schwab.com.

The Markit Manufacturing and Services PMIs from around the globe will dominate tomorrow's international economic calendar, while other reports will include the All-Industry Index from Japan, the Ifo Business Climate survey, GDP and trade data from Germany, as well as Spain's trade balance.

Stocks Shrug Geopolitics, Domestic Data

Charles Schwab: On the Market

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

Stocks Shrug Geopolitics, Domestic Data

U.S. equities finished higher on the day, apparently dismissing political uncertainty of late, as well as lackluster domestic economic data. Manufacturing and housing data came in below expectations, which followed softer-than-anticipated consumer inflation and retail sales reports while the markets were closed on Good Friday. Elsewhere, Treasuries were mixed, while gold, the U.S. dollar and crude oil prices fell.

The Dow Jones Industrial Average (DJIA) rose 184 points (0.9%) to 20,637, the S&P 500 Index gained 20 points (0.9%) to 2,349, and the Nasdaq Composite increased 52 points (0.9%) to 5,857. In moderate volume, 704 million shares were traded on the NYSE and 1.4 billion shares changed hands on the Nasdaq. WTI crude oil lost $0.53 to $52.65 per barrel and wholesale gasoline was $0.01 lower at $1.72 per gallon. Elsewhere, the Bloomberg gold spot price declined $2.91 to $1,282.78 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.3% at 100.31.

Shares of Eli Lilly and Co. (LLY $83) and Incyte Corp. (INCY $125) fell after their treatment for rheumatoid arthritis was rejected by the U.S. Food and Drug Administration (FDA). The FDA said in a letter that it is unable to approve the application in its current form and indicated clinical data are needed to determine the most appropriate doses. Both companies said they disagree with the FDA's conclusions and the timing of a resubmission will be based on further discussions with the agency. LLY reaffirmed its 2017 financial guidance and INCY said it is evaluating the impact on its previously-issued R&D expenses guidance for 2017.

Arconic Inc. (ARNC $27) announced that Chairman and Chief Executive Officer (CEO) Klaus Kleinfeld has stepped down, and David Hess will serve as Interim CEO, while Patricia Russo was appointed to serve as Interim Chair. The company said Kleinfeld stepped down by mutual agreement after the Board learned that amid a proxy fight, without consultation with or authorization by the Board, he had sent a letter directly to a senior officer of Elliot Management that the Board determined showed poor judgement. The company added that the decision was not made in response to the proxy fight or Elliot Management's criticisms of its strategy, leadership or performance and is not in any way related to the financials or records of the company. Shares were modestly higher.

Homebuilder sentiment and regional manufacturing slip more than expected

The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment this month declined to 68 from 71 in March, which was the highest level since June 2005, and compared to the Bloomberg expectation of a dip to 70. A 50 mark separates good and poor conditions. The NAHB said even with this month's modest drop, builder confidence is on very firm ground, and builders are reporting strong interest among potential home buyers. However, builders are facing several challenges, such as hefty regulatory costs and ongoing increases in building material prices.

Along with earnings season ramping up, tomorrow's economic calendar will bring a look at housing construction activity in the form of housing starts and building permits. Starts are projected to decline 3.0% month-over-month to an annualized rate of 1,250,000 units, while permits are forecasted to rise 2.8% to an annual rate of 1,250,000 units.

Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, notes in his recent Schwab Sector Views: Housing—Building Bubble or Growing Trouble?, for now, we believe the housing market is a modestly positive contributor to overall U.S. economic activity. Although prices have risen, the lack of new building means that there hasn't been a surge of activity in housing that could give a real jolt to housing. At this point, we aren't overly concerned about a bubble building. Read more, as well as Brad's views on other sectors on the Markets & Economy page at www.schwab.com and follow Schwab on Twitter: @schwabresearch.

The Empire Manufacturing Index showed output from the New York region fell more than expected but remained in expansion territory (a reading above zero) for April. The index dropped to 5.2 from March's unrevised 16.4 level, with the Bloomberg forecast calling for a 15.0 reading.

Treasuries finished mixed, as the yield on the 2-year note declined 2 basis points (bps) to 1.19%, while the yields on the 10-year note and the 30-year bond rose 2 bps to 2.25% and 2.91%, respectively.

Bond yields and the U.S. dollar have come under pressure recently amid flared-up geopolitical concerns, President Donald Trump's comments that he thought the greenback was getting "too strong," and some cooler-than-expected inflation data.

For a look at the moves in the bond markets, see Schwab's Senior Fixed Income Research Analyst, Collin Martin's, CFA, latest article titled, What Investors Should Know About the High-Yield Bond Rally on the Markets & Economy page at www.schwab.com, along with Collin's and Vice President of Trading and Derivatives, Randy Frederick's video Fed Hiked Interest Rates, So Why Are Bond Yields Still So Low?. Randy and Schwab's Chief Fixed Income Strategist, Kathy Jones also discuss, Three Fed Hikes Seen in 2017: How Should Bond Investors Respond. See these and other videos at the Insights & Ideas page on www.schwab.com. Follow Randy and Kathy on Twitter: @randyafrederick and @kathyjones.

As noted in the latest Schwab Market Perspective: Reassessing Risk and Reflation, investors appear to be shying away from risk, resulting in a pullback in stocks. We view this as temporary, although patience will be required and sharper downturns could occur within the ongoing bull market. "Hard" economic data hasn't accelerated to the same degree as "soft" data (confidence/survey-based), and some convergence is expected. Political and geopolitical uncertainty abounds, while the Fed has begun to address the slow draining of its balance sheet. Global earnings have aided stock market gains, but the expectations bar is getting higher to hurdle. The next several weeks should show whether gains will persist or if expectations may have gone too far. Read more on the Markets & Economy page at www.schwab.com.

In addition to tomorrow's housing data, the Federal Reserve's industrial production and capacity utilization report is slated for release, with production expected to show a 0.4% m/m increase during March, while utilization is forecasted to have moved higher to 76.2%.

Asia mixed as many international markets remained closed

Stocks in Asia finished mixed amid heightened geopolitical concerns after another missile test by North Korea, while European markets remained closed for the Easter holiday, along with those in Hong Kong and Australia. The yen continued to gain ground amid the elevated uneasiness, likely limiting gains in Japan as stocks ticked only slightly higher. Chinese economic data is in focus as the nation reported that its 1Q GDP grew at a 6.9% year-over-year (y/y) pace, from the 6.8% expansion posted in 4Q, where it was expected to remain. Also, China's retail sales, industrial production and fixed asset investment all topped expectations, but mainland Chinese shares declined. China's markets were hampered by the heightened North Korean tensions and exacerbated concerns about further regulatory crackdowns on the markets. For more on China, see Schwab's Director of International Research Michelle Gibley's, CFA, article, 5 Big Risks Posed by China (And Why They Shouldn't Crash Global Markets in 2017) at www.schwab.com/oninternational. Stocks in South Korea rose modestly, while those traded in India fell. For a look at the global trade landscape, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, article, Top Five Trade Issues Investors Should Be Watching. Read both these articles on the International Investing page at www.schwab.com and follow Jeff on Twitter: @jeffreykleintop.

Stocks Close Higher with Financials Leading Gains

Charles Schwab: On the Market

Posted: 3/30/2017 4:15 PM ET

Stocks Close Higher with Financials Leading Gains

U.S. equities finished the trading session higher with financial shares leading gains as Treasury yields gained ground. In economic news, 4Q GDP growth was revised to the upside and weekly jobless claims dipped, but were higher than expected. Crude oil prices extended a rebound, the U.S. dollar managed a solid advance and gold was lower. On the equity front, Lululemon announced 1Q and full-year guidance that was below the Street's forecasts and ConocoPhillips revealed an agreement to sell assets for $13.3 billion.

The Dow Jones Industrial Average (DJIA) increased 69 points (0.3%) to 20,728, the S&P 500 Index increased 7 points (0.3%) to 2,368, and the Nasdaq Composite was 17 points (0.3%) higher at 5,914. In moderate volume, 761 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil gained $0.84 to $50.35 per barrel and wholesale gasoline gained $0.01 to $1.68 per gallon. Elsewhere, the Bloomberg gold spot price moved $8.73 lower to $1,244.72 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—advanced 0.5% to 100.50.

Lululemon Athletica Inc. (LULU $51) reported 4Q earnings-per-share (EPS) of $0.99, or $1.00 ex-items, versus the $1.01 FactSet estimate, as revenues grew 12.0% year-over-year (y/y) to $790 million, above the projected $783 million. 4Q same-store sales rose 8.0% y/y, compared to the expected 5.4% gain. LULU issued 1Q and full-year guidance that was well below the Street's forecasts, with the company noting a slow start to 2017. Shares tumbled over 20%.

ConocoPhillips (COP $50) announced an agreement to sell its interest in the Foster Creek Christina Lake oil sands partnership, as well as the majority of its western Canada Deep Basin gas assets to Cenovus Energy Inc. (CVE $11) for total proceeds of $13.3 billion. COP said the proceeds will be used to reduce debt and to double its existing share repurchase authorization to $6.0 billion. COP rallied, while CVE fell.

Final read on 4Q GDP revised higher, jobless claims dip

The final look (of three) at 4Q Gross Domestic Product (chart), the broadest measure of economic output, showed a quarter-over-quarter (q/q) annualized rate of growth of 2.1%, adjusted up from the 1.9% expansion posted in the second and first reports. This compared to the Bloomberg forecast of a revised 2.0% pace of growth. 3Q GDP expanded by an unrevised 3.5% rate. Personal consumption came in at a 3.5% gain for 4Q, up from the preliminary estimate of 3.0%, where it was expected to remain. Personal consumption grew by an unrevised 3.0% in 3Q.

On inflation, the GDP Price Index was adjusted to a 2.1% gain, versus forecasts of an unrevised 2.0% increase, while the core PCE Index, which excludes food and energy, was adjusted to a 1.3% rise, compared to expectations of an unrevised 1.2% gain.

Schwab’s Chief Investment Strategist Liz Ann Sonders notes in her latest article, Hard Times: Time for the Hard Data to Catch Up to the Soft Data, after a "typical" weak first quarter, economic growth should accelerate. Based on history, soft data—generally survey-based readings, such as consumer and business measures of confidence, as well as purchasing managers' surveys (PMIs)—is likely to retreat, while hard data—quantitative data or actual measures of economic activity—is likely to gain steam but curb your enthusiasm for a more meaningful acceleration due to longer-term pressures. Read more at www.schwab.com/marketinsight, and follow Liz Ann on Twitter: @lizannsonders.

Weekly initial jobless claims (chart) declined by 3,000 to 258,000 last week, above forecasts of 247,000, with the prior week’s figure being unrevised at 261,000. The four-week moving average rose by 7,750 to 254,250, while continuing claims jumped by 65,000 to 2,052,000, north of estimates of 2,031,000.

Treasuries finished lower, with the yield on the 2-year note ticking 1 basis point (bp) higher to 1.28%, the yield on the 10-year note rising 4 bps to 2.42%, and the 30-year bond rate gaining 5 bps to 3.03%.

Bond yields have come under pressure as of late, while the U.S. dollar has shown some signs of recovery and the stock markets have been choppy following a string of losses. The markets continue to grapple with U.S. and European political uncertainty, solid economic data, and the Fed's March rate hike, which included an outlook that appeared to calm concerns of a faster pace of rate increases this year than had been expected.

For analysis, see our commentary titled, Stay Disciplined: Resilient Bull Market Is No Cause for Complacency, at www.schwab.com/insights, and follow Schwab on Twitter: @schwabresearch. Also, for a look at the recent activity in the bond markets, check out the video 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' video, 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.

Tomorrow, the U.S. economic calendar will finish off the week with releases expected to include personal income and spending, with economists predicting a 0.4% m/m increase in income and a 0.2% rise in spending in February, matching the respective advances seen the month prior, as well as the Chicago Purchasing Managers Index, forecasted to tick lower to 56.9 in March from the 57.4 registered in February, though a level above 50 indicates expansion in activity. Rounding out the day will be the final March University of Michigan Consumer Sentiment Index, expected to remain at the preliminary level of 97.6, but above February's final read of 96.3.

Europe mostly higher, Asia mixed

European equities finished mostly higher, with oil & gas issues continuing to recover along with crude oil prices. Cooler-than-expected German inflation data and recent dovish commentary from European Central Bank (ECB) officials weighed on the euro and suggested the central bank will hold off on cutting back on its accommodative monetary policy in the near term. Moreover, political uncertainty continued to hamstring conviction following the U.K.'s triggering of formal Brexit negotiations yesterday and a recent push for a new Scottish independence referendum, while next month's key French Presidential election looms. For analysis of the European political front, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, and Randy Frederick's video's, "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, and Director of International Research, Michelle Gibley's CFA, article, Europe Votes: Could More Countries Reject the EU? at www.schwab.com/oninternational. Follow Jeff on Twitter: @jeffreykleintop. The British pound rebounded versus the U.S. dollar to likely hamper the U.K. markets, while bond yields in the region finished mixed.

Stocks in Asia finished mixed with festering political uncertainty in the U.S. and Europe continuing to drain conviction as the quarter nears a close, though the recovery in oil prices helped provide some support. Japanese equities fell despite the yen retreating somewhat from a recent rally, with utilities falling solidly to weigh on the markets. Stocks trading in mainland China and Hong Kong dropped with resurfacing liquidity concerns pressuring the markets. Japan and China have seen some choppiness in the wake of the Fed's March rate hike and outlook for future increases, as discussed by Schwab's Michelle Gibley, CFA, in her recent article, Fed Rate Hikes May Benefit Japanese Stocks, and Jeffrey Kleintop, CFA, in his commentary, The Fed has China in a Tough Spotat www.schwab.com/oninternational. Australian securities gained ground amid the extended recovery in oil & gas issues, while South Korean shares dipped. Indian stocks increased to post a three-session winning streak.

The international economic docket for tomorrow will include a plethora of releases from Japan as the island nation releases reports on its jobless rate, CPI, industrial production, housing starts, construction orders and vehicle production. Additional releases for tomorrow will include manufacturing and non-manufacturing PMIs from China, private sector credit from Australia, consumer confidence, GDP and business investment from the U.K., consumer spending from France, and CPI from France, Italy and the Eurozone.

Stocks Mostly Flat, Yellen Hints at Possibility of March Hike

Charles Schwab: On the Market

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

Stocks Mostly Flat, Yellen Hints at Possibility of March Hike

U.S. stocks oscillated around the unchanged mark to close mostly flat as the markets eyed the afternoon speech from Fed Chairwoman Janet Yellen, where she suggested a March rate hike could be a possibility. Treasury yields were nearly unchanged despite domestic services sector growth unexpectedly accelerating to the highest pace since October 2015. The U.S. dollar fell; giving back some of its recent rally, while gold and crude oil prices were higher.

The Dow Jones Industrial Average (DJIA) ticked nearly 3 points higher to 21,006, the S&P 500 Index added 1 point to 2,383, and the Nasdaq Composite increased 10 points (0.2%) to 5,871. In moderately-heavy volume, 825 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil ticked $0.72 higher to $53.33 per barrel and wholesale gasoline added $0.01 to $1.65 per gallon. Elsewhere, the Bloomberg gold spot price ticked $0.50 higher to $1,234.75 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.8% lower at 101.39. Markets were higher for the week, as the DJIA increased 0.9%, the S&P 500 Index advanced 0.7%, and the Nasdaq Composite ticked 0.4% higher.

Costco Wholesale Corp. (COST $170) reported fiscal 2Q earnings-per-share (EPS) of $1.17, below the $1.36 FactSet estimate, with revenues rising 5.7% year-over-year (y/y) to $29.8 billion, south of the projected $29.9 billion. 2Q same-store sales rose 3.0% y/y, compared to the expected 3.2% gain. Separately, the company announced that it will increase its annual membership fees. Shares finished solidly lower.

Marvell Technology Group Ltd. (MRVL $16) posted a 4Q loss of $0.15 per share, or EPS of $0.22 ex-items, above the forecasted profit of $0.19 per share, as revenues declined 5.2% y/y to $571 million, topping the expected $568 million. The company issued 1Q guidance that exceeded estimates. Shares gained ground.

General Motors Co. (GM $38) reversed to the upside amid reports that Peugeot SA's (PUGOY $20) board met today and approved the acquisition of GM's Opel unit. Neither company commented on the reports.

The technology sector has been one of the best performing groups in the post-election rally for the markets and amid earnings season that is winding down. Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, discusses in his latest Schwab Sector Views: Can the Tech Rally Continue?at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch.

ISM services sector report unexpectedly improves

The February Institute for Supply Management (ISM) non-Manufacturing Index (chart) surprisingly rose to 57.6—the highest since October 2015—from January's unrevised 56.5 level, where the Bloomberg forecast called for it to remain. A reading above 50 denotes expansion. New orders improved to 61.2 and employment ticked higher to 55.2, while prices declined to 57.7. The ISM said comments from respondents continued to be mixed, with some uncertainty, however, the majority indicated a positive outlook on business conditions and the overall economy.

The final Markit U.S. Services PMI Index was revised to 53.8 in February from the preliminary 53.9 level, versus estimates of a 54.0 reading, and compared to the 55.6 figure posted in January. However, a reading above 50 depicts expansion. The release is independent and differs from ISM's report, as it has less historic value and Markit weights its index components differently.

As noted in the latest Schwab Market Perspective: Not So Fast!, economic data has continued to beat expectations, but the number of upside surprises may start to level off. That doesn't mean things are getting worse, just that expectations are catching up with the improvements in the data, which could have a dampening impact on investor enthusiasm in the near term. However, ultimately, we believe fiscal stimulus is coming—although perhaps later than anticipated—and the bull market in U.S. stocks will continue. Read more at www.schwab.com/marketinsight.

Treasuries were nearly unchanged, with the yields on the 2-year and 10-year notes, as well as the 30-year bond flat at 1.31%, 2.48% and 3.07%, respectively. Bond yields paused from a recent rally, while the U.S. dollar pulled back from a run as of late and the stock markets were flat after yesterday's retreat from all-time highs.

With expectations of a possible Fed rate hike later this month jumping this week in the wake of continued strong economic data and commentary from Central Bank members, the markets focused on Federal Reserve Chairwoman Janet Yellen's speech on the economic outlook, where she noted that the economy has exhibited remarkable resilience and is close to meeting the Fed's goals of maximum employment and price stability. These comments appeared to preserve elevated rate hike expectations.  For analysis of the Fed, check out 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 follow Kathy on Twitter: @kathyjones. Political risk remains in focus following President Trump's first speech in front of Congress this week as discussed by Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend in his latest article, Presidential Reset: What Does Trump's Speech Mean for His Agenda?, at www.schwab.com/insights.

Finally, in light of the rally to all-time highs for stocks, Schwab’s Chief Investment Strategist Liz Ann Sonders offers a look at investing strategies in the current bull market in her latest article, Radioactive: Is Passive's Dominance Over Active Set to Wane?, at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders.

Europe mixed, Asia lower

European equities finished mixed, with financials gaining ground as bond yields in the region and the U.S. extend rallies, bolstered by boosted expectations of a possible rate hike in the U.S. later this month. The markets awaited today's speech from U.S. Fed Chairwoman Janet Yellen today. Also, eurozone political risk continued to fester as a key French Presidential election looms, 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. Also, be sure to check out Jeff's article, Five Reasons to Stay Invested Despite Heightened Uncertaintyat www.schwab.com/oninternational. Follow Jeff on Twitter: @jeffreykleintop. In economic news, Markit's final Eurozone Composite PMI Index—a gauge of business activity in both the services and manufacturing sectors—was unrevised at 56.0 for February, matching expectations and above the 54.4 level posted in January. A reading above 50 denotes expansion. Markit's U.K. Composite PMI Index showed although activity decelerated, it remained in expansion territory. The euro was higher and the British pound dipped versus the U.S. dollar.

Stocks in Asia finished mostly lower on the heels of the drop in the U.S. markets from all-time highs, amid the backdrop of heightened expectations of a possible rate hike in the nation later this month, while the markets awaited today's speech from U.S. Fed Chair Janet Yellen. Japanese equities declined, with the yen recovering from a recent slide and as data showed household spending dropped more than expected in January, though the nation's core consumer price inflation unexpectedly rose. Chinese stock markets traded lower, continuing to pare recent rallies that have been bolstered by upbeat economic data. The favorable data continued today as a read on key services sector activity showed growth accelerated last month. Australian securities dropped and South Korean listings fell, while Indian equities finished flat. Schwab's Director of International Research, Michelle Gibley, CFA, provides some 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 Portfolioat 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.

Stocks continue to rally as data counters political risk

U.S. stocks extended a rally on the week, registering fresh all-time highs. They joined a global equity market push to the upside that was bolstered by a plethora of upbeat global business activity reports, as favorable data out of China and Europe was met with a jump in the U.S. ISM Manufacturing Index to the highest level since August 2014. Expectations of a Fed rate hike later this month rose, which helped send the U.S. dollar higher, revived a rally in Treasury yields and helped boost the financial sector. Along with the economic optimism, President Donald Trump's dialed-down tone in his first address to Congress, although lacking details of his reflationary policy plans, appeared to be met positively by the markets.

With earnings season all but in the books and Fedspeak going quiet ahead of its March 14-15 meeting, all eyes will likely focus on next week's U.S. economic calendar, which will deliver reads on factory orders, the trade balance and 4Q nonfarm productivity and unit labor costs. However, the docket will be headlined by Friday's key nonfarm payroll report for February.

As noted in the latest Schwab Market Perspective: "Phenomenal" Expectations, U.S. stock indexes broke to the upside, on better economic data but also heightened expectations of tax and regulatory reform. 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.

International reports due out next week that deserve a mention include: Australia—retail sales and the Reserve Bank of Australia's monetary policy decision. China—trade balance and inflation reports. Japan—trade balance and 4Q GDP. Eurozone—investor confidence, 4Q GDP and the European Central Bank monetary policy decision, along with German factory orders and trade balance. U.K.—industrial and manufacturing production, trade balance and inflation forecast.

Stocks Finish Friday with Gains

Charles Schwab: On the Market

Posted: 2/10/2017 4:15 PM ET

Stocks Finish Friday with Gains

U.S. stocks continued to trade in record-high territory, staging another solid advance as yesterday's comments from President Trump regarding his soon-to-be-announced tax plan continued to fuel gains. Crude oil extended its recent rally, the U.S. dollar increased, Treasuries were lower and gold ticked slightly higher. In economic news, consumer sentiment dropped from a 13-year high and short-term inflation expectations rose.

The Dow Jones Industrial Average (DJIA) advanced 97 points (0.5%) to 20,269, the S&P 500 Index gained 8 points (0.4%) to 2,316, and the Nasdaq Composite added 19 points (0.3%) to 5,734. In moderate volume, 789 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil increased $0.86 to $53.86 per barrel and wholesale gasoline rose $0.02 to $1.59 per gallon. Elsewhere, the Bloomberg gold spot price ticked $3.14 higher to $1,233.51 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% higher at 100.76. Markets were higher for the week, as the DJIA increased 1.0%, the S&P 500 Index advanced 0.8% and the Nasdaq Composite gained 1.2%.

Activision Blizzard Inc. (ATVI $47) announced 4Q earnings-per-share (EPS) ex-items of $0.92 per share, well above the expected $0.73, with revenues growing 15.8% year-over-year (y/y) to $2.5 billion, compared to the anticipated $2.4 billion. Separately, the gaming company announced a new share repurchase program of up to $1.0 billion and a 15% increase of its dividend to $0.30 per share. Shares surged.

NVIDIA Corp. (NVDA $114) posted 4Q EPS of $0.99, above the $0.83 FactSet estimate, as revenues jumped 55.0% y/y to $2.2 billion, versus the projected $2.1 billion. The chipmaker issued 1Q revenue guidance with a midpoint that was slightly above forecasts. Shares gave up an early gain and traded lower as the Street scrutinized its quarterly performance and guidance after 3Q's blowout results that took the stock on a more than 70% rally.

Expedia Inc. (EXPE $123) reported adjusted 4Q EPS of $1.17, below the forecasted $1.36, with revenues rising 23.0% y/y to $2.1 billion, roughly in line with expectations. Gross bookings increased 8.0% y/y. Shares finished lower.

Sears Holdings Corp. (SHLD $7) jumped over 25% after unveiling its next phase of its restructuring plan, projected to deliver at least $1.0 billion in annualized cost savings in 2017 from the previously announced closure of 108 Kmart and 42 Sears stores, and reduce debt. The company also announced preliminary 4Q guidance that was above forecasts.

Consumer sentiment falls from 13-year high, import prices top forecasts

The preliminary University of Michigan Consumer Sentiment Index (chart) declined this month to 95.7, from the prior month's 98.5 level—which was the highest since January 2004—and compared to expectations of a dip to 98.0. The current economic conditions component held steady m/m, while the outlook portion deteriorated. The 1-year inflation estimate rose from 2.6% to 2.8%, and 5-10 year inflation outlook dipped to 2.5% from 2.6%.

The Import Price Index (chart) increased 0.4% month-over-month (m/m) for January, compared to the Bloomberg projection of a 0.3% increase and December's upwardly revised 0.5% gain. Compared to last year, prices were higher by 3.7%, north of forecasts calling for a 3.4% jump, and following December's upwardly revised 2.0% increase.

Treasuries were lower, with the yields on the 2-year and 10-year notes along with the 30-year bond, ticking 1 basis point higher to 1.19%, 2.41% and 3.01%, respectively. For a look at the bond markets, see Schwab's Director of Income Planning, Rob Williams', CFP, and Senior Research Analyst, Cooper Howard's, CFA, latest article, Short-Term Bonds: Why They Could Outperform As Interest Rates Rise, at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch.

The stock markets are back in record territory, while the U.S. dollar and Treasury yields ticked higher, bolstered by U.S. President Donald Trump saying yesterday that "something phenomenal" will likely be announced regarding his tax plan in 2-3 weeks. This is overshadowing the recent flare-up in concerns about global trade relations and immigration on the heels of Trump's actions and comments. Also, last week's relatively dovish takeaway of the Fed's unchanged monetary policy decision and continued upbeat economic data have aided the markets. Crude oil prices are extending a rally to lend further support, in the wake of a report that suggested OPEC had achieved initial compliance of 90% with their recent production cut agreement. Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, discusses President Trump and oil in his latest Schwab Sector Views: Trump Plus OPEC Equals ...What for Energy? at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch.

For further analysis of the markets recent rallies, see Schwab’s Chief Investment Strategist Liz Ann Sonders' and Schwab's Vice President of Trading and Derivatives, Randy Frederick's latest video, What Can Investors Make of Latest Fed Meeting and January Labor Report?, at  www.schwab.com/insights.

Finally, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers his latest article, Simple Indicators In A Complex World, noting that while markets may exhibit increasing volatility, we believe the bull market is being supported by tangible and effective indicators of global growth. For more useful indicators see Jeff's article, Five Reasons to Stay Invested Despite Heightened Uncertainty. Read these articles at www.schwab.com/oninternational, and follow Jeff on Twitter: @jeffreykleintop.

Europe mixed, Asia mostly higher 

European equities finished mixed, with lingering political uncertainty ahead of some key elections in the region being met with renewed optimism regarding U.S. President Donald Trump's promise of a "phenomenal" tax plan in the coming weeks. For analysis of these issues, see Schwab's Jeffrey Kleintop's, CFA, article, President Trump and Global Trade: How Will Campaign Promises Play Out? and Director of International Research, Michelle Gibley's CFA, release, Europe Votes: Could More Countries Reject the EU? at www.schwab.com/oninternational. Also, the markets digested a stronger-than-expected read on China's trade activity and crude oil's continued rally on reports of OPEC's compliance with its production cuts that boosted the energy sector. In economic news, French industrial and manufacturing production reports both missed estimates, while the U.K. trade deficit narrowed more than expected and the nation's manufacturing and industrial production both easily bested forecasts. The euro dipped and the British pound was little changed versus the U.S. dollar, while bond yields in the region finished mostly higher.

For global market investing analysis, see Schwab's Jeffrey Kleintop's, CFA, articles, The CURE for a calm Market: Four risks for 2017, and 5 Reasons International Stocks May Underperform In 2017. Read these articles at www.schwab.com/oninternational.

Stocks in Asia finished higher following the gains seen in the U.S. and European markets yesterday, bolstered by the continued rebound in crude oil prices and as U.S. President Donald Trump made a promise to expect his tax plan soon. The renewed U.S. tax optimism overshadowed heightened global trade and immigration concerns. Also, China reported a favorable read on its trade activity, headlined by stronger-than-expected January export growth. Japanese equities rallied with the yen giving back a jump as of late amid a strong advance in the U.S. dollar, while traders awaited today's meeting between Prime Minister Abe and U.S. President Donald Trump. Mainland Chinese shares advanced and those traded in Hong Kong also rose, while Australian securities gained ground and South Korean stocks traded higher. Indian equities finished flat. For our analysis of the global markets, 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.

Stocks ride late-week rally back to record highs

Conviction remained contained to begin the week amid exacerbated global market uneasiness toward the political risks in the U.S. and Europe, with the former exacerbating trade and immigration concerns and the latter facing key elections. However, the major U.S. equity markets staged a late-week rally into positive territory and back to record highs as reflation optimism resurfaced as President Trump pledged that a "phenomenal" tax plan was in the offing. The U.S. Dollar Index posted the first weekly gain of 2017 and Treasury yields pared early losses. Crude oil prices battled back to near the flatline as reports of OPEC production cut compliance countered oversupply concerns in the wake of a couple bearish oil inventory reports. Gold extended its recent jump in choppy trading.

The economic calendar was relatively light, though earnings season continued to roll on and continued to paint a relatively positive picture against elevated expectations. Hasbro Inc. (HAS $98) and Activision Blizzard were standout winners, while Michael Kors Holdings Ltd. (KORS $38) and Twitter Inc. (TWTR $16) were hammered by their guidance. Per Bloomberg, with earnings season past the apex, of the 357 companies in the S&P 500 Index that have reported, about 51% have topped sales estimates and approximately 75% have exceeded earnings forecasts, with technology issues leading the way adding credence to Schwab's Brad Sorensen's, CFA, outperform rating on the sector in his latest Schwab Sector Views at www.schwab.com/marketinsight.

Next week, the domestic economic front will heat back up, with the Producer Price Index (PPI), Consumer Price Index (CPI), retail sales, industrial production, the Leading Index and housing starts and building permits, providing a good read on many key contributors to economic output. Also, the NFIB Small Business Optimism Index and regional manufacturing reports out of New York and Philadelphia are poised to also garner attention, along with festering political uncertainty on both sides of the Atlantic and the continued dissemination of earnings reports. Finally, Federal Reserve Chairwoman Janet Yellen will deliver her semi-annual testimony before Congress.

As noted in the latest Schwab Market Perspective: Not So Fast!, investor caution is rising, which contrarily should help the bull market continue. Economic data has continued to beat expectations, but the number of upside surprises may start to level off, and investor enthusiasm toward potential new policies from Washington could wane as political realities set in. International growth appears stable, but acceleration doesn't seem to be on the horizon, while trade tensions pose a risk to global economies and markets. Read more at www.schwab.com/marketinsight.

International reports to look out for include: Australia—consumer confidence and employment change. China—lending statistics, CPI and PPI. India—trade balance, CPI and PPI. Japan—4Q GDP and industrial production. Eurozone—4Q GDP, trade balance and ECB policy meeting minutes. U.K.—CPI, employment change and retail sales.