Markets Trim Monday Gains

Charles Schwab: On the Market

Posted: 6/20/2017 4:15 PM ET

Markets Trim Monday Gains

U.S. equities erased some of the gains seen yesterday, with tech issues applying pressure, along with energy stocks following a sharp decline in crude oil prices on oversupply concerns amid a flood of output coming from Libya and Nigeria. Meanwhile, an uncertain political landscape also contributed to the uncertainty. Treasuries were higher with the economic calendar again empty, while gold was little changed and the U.S. dollar gained ground.

The Dow Jones Industrial Average (DJIA) fell 62 points (0.3%) to 21,467, the S&P 500 Index declined 16 points (0.7%) to 2,437, and the Nasdaq Composite decreased 51 points (0.8%) to 6,188. In moderately-heavy volume, 811 million shares were traded on the NYSE and 2.5 billion shares changed hands on the Nasdaq. WTI crude oil declined $0.92 to $43.51 per barrel and wholesale gasoline lost $0.03 to $1.42 per gallon. Elsewhere, the Bloomberg gold spot price decreased $1.37 to $1,242.47 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% higher at 97.76.

Lennar Corp. (LEN $54) posted a Q2 profit of $0.91 per share, well above the FactSet consensus estimate of $0.79, on a 19% year-over-year (y/y) increase in revenues to $3.3 billion, also eclipsing the $2.8 billion forecast. Chief Executive Officer Stuart Miller said the strong results “were supported by an improved macroeconomic environment, renewed optimism, wage and job growth, and increased consumer confidence.” He added that despite recent housing reports the company is seeing the market revert more to normal than the slow and steady recovery pace of the last several years. Shares were nicely higher.

Biopharmaceutical company Parexel International Corp. (PRXL $87) confirmed that it will be acquired by private equity firm Pamplona Capital Management for $88.10 per share in cash, or an enterprise value of roughly $5 billion, including debt. The purchase price represents about a 5% premium to yesterday’s closing price and a near 28% premium since early May when speculation of a deal surfaced. Shares of PRXL were higher.

The Nasdaq pared yesterday’s rally, and its best day since November, which has lagged the Dow and S&P due to the recent pressure on technology issues. With the spotlight remaining 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? Also, Schwab’s Chief Investment Strategist Liz Ann Sonders provides her insight into the sector in her latest article, The Space Between … Tech Today Doesn't Resemble Tech Circa 2000, where she believes the breathless reporting of a “tech wreck” in the financial media is a bit of a stretch in her opinion, as well as the parallels being drawn between tech today and tech circa 200. Find out why, and see both articles on the Markets & Economy page at www.schwab.com, while you can also follow Schwab and Liz Ann on Twitter: @schwabresearch and @lizannsonders.

Economic calendar remains quiet, gets in motion tomorrow

Treasuries were higher, as the economic calendar was again void of any major releases today. The yield on the 2-year note was 1 basis point (bp) lower at 1.35%, the yield on the 10-year note was down 3 basis points (bps) at 2.16%, and the 30-year bond rate declined 5 bps to 2.74%.

Treasury yields have been in a trading range 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 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, Schwab's Liz Ann Sonders addresses the recent mixed economic data in her article, Turn Down For What: Why is Job Growth Slowing?, on the Markets & Economy page at www.schwab.com.

The economic calendar is scant this week, and won’t get moving until tomorrow, where housing will take center stage with the release of existing home sales, with economists forecasting a slight downtick during May to an annual rate of 5.55 million units, as well as weekly MBA Mortgage Applications. More housing data will come later in the week via the new home sales report. Manufacturing and business activity will also likely 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.

A couple of Federal Reserve officials spoke yesterday, with some hawkish comments coming from Federal Reserve Bank of New York President William Dudley, with a host of other speeches at various engagements slated for today and throughout the remainder of 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.

European equities lower on oil, politics and Brexit worries; Asia mixed

European equities finished lower, with pressure coming from energy stocks amid the tumble in crude oil prices, and as Brexit talks were in focus after negotiations officially began yesterday in Brussels. According to Reuters, chief negotiators from the European Union (EU) and the U.K. agreed that dialogue up through October should focus on expatriate citizens’ rights and the settling of financial accounts. The British pound added to its recent slide versus the U.S. dollar amid the uncertainty, as well as Bank of England Governor Mark Carney’s comments on his continued worries of the impact of Brexit on the U.K. economy, and after signaling that as a result he isn’t in any rush to begin adjusting interest rates. Adding to the mix, investors continue to struggle with the recent U.K. election that surprisingly resulted in a hung parliament and fostered uncertainty surrounding Brexit negotiations and whether they will yield hard or softer exit terms. 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?.

In economic news, Spain’s trade deficit widened more than expected for April, and producer prices in Germany matched expectations. The euro is also modestly lower versus the greenback and bond yields in the region are mixed.

Stocks in Asia finished mixed, as yesterday’s optimism over the MSCI’s decision on China cooled a bit. Investors are waiting to see if MSCI will include the Asian nation’s A-shares in its emerging markets indexes when it announces its decision later this week. This will be the fourth shot at MSCI inclusion for China after being passed over the prior three attempts. Whispers on the Street currently put the odds of inclusion at 50/50. Japanese equities rose, with the yen losing ground, and following a report that showed noted improvement in the nation's business sentiment, hitting its highest level in nearly a decade. Mainland Chinese stocks and those traded in Hong Kong fell on tempered hopes of MSCI’s upcoming decision, while investors also begin to look toward high-level talks between the U.S. and China that begin tomorrow, with U.S. officials not hiding its intent to continue to pressure China on help with the North Korea issue. Elsewhere, South Korean securities ticked lower and Indian listings were flat.

Australian markets fell on the heels of Moody’s downgrade of twelve of the nation’s lenders, including its four largest banks, and after the Reserve Bank of Australia released the minutes from its last monetary policy meeting which showed the central bank was concerned about household debt and wage growth, despite being positive about economic progress going forward. For 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.

Items set for release on tomorrow's international economic calendar include Japan's All-Industry Index, industrial orders from Spain, and public sector net borrowing from the U.K.

Rise in Crude Oil Prices Fuel Market Gains

Charles Schwab: On the Market

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

Rise in Crude Oil Prices Fuel Market Gains

U.S. equities finished higher, as upbeat homebuilder sentiment and a jump in crude oil prices on optimism of extended production cuts overshadowed heightened geopolitical concerns toward North Korea, a global cyber-attack over the weekend, and more disappointing Chinese economic data. Treasury yields ticked higher, as did gold, while the U.S. dollar lost ground.

The Dow Jones Industrial Average (DJIA) rose 85 points (0.4%) to 20,982, the S&P 500 Index added 11 points (0.5%) to 2,402, and the Nasdaq Composite increased 28 points (0.5%) to 6,150. In moderate volume, 849 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil increased $1.01 to $48.85 per barrel and wholesale gasoline added $0.02 to $1.60 per gallon. Elsewhere, the Bloomberg gold spot price moved $2.34 higher to $1,230.70 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% lower at 98.92.

Thermo Fisher Scientific Inc. (TMO $173) announced an agreement to acquire Patheon NV (PTHN $35) for $35.00 per share in cash, for about $7.2 billion, including the assumption of $2.0 billion in debt. TMO was modestly higher, while shares of PTHN rallied over 30%.

Moody's Corporation (MCO $116) announced an agreement to acquire Amsterdam-based business information provider Bureau van Dijk for about $3.3 billion. MCO finished higher.

Energy stocks saw gains to propel the markets as crude oil prices rallied after Saudi Arabia and Russia said they are in favor of extending production cuts until March 2018, longer than the six month extension that had been expected by the markets. Also, internet security companies got a boost from a cyber-attack that affected dozens of countries over the weekend. For a look at energy and all other major sectors see, Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, latest Schwab Sector Views: Is Energy an Opportunity or a Trap? on the Markets & Economy page at www.schwab.com and follow Schwab on Twitter: @schwabresearch.

Homebuilder sentiment surprisingly improves, regional manufacturing report misses

The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment this month improved to 70—the second highest reading since 2005—from 68 in April, where the Bloomberg forecast called for it to remain. A 50 mark separates good and poor conditions. The NAHB said the report shows the builders' optimism in the housing market is solidifying, even as they deal with higher building material costs and shortages of lots and labor.

Tomorrow, we will get a look at housing construction activity in the form of April housing starts and building permits. Starts are forecasted to rebound from a four-month low in March, rising 3.7% month-over-month (m/m) to an annual rate of 1,260,000 units. Permits are projected to tick 0.2% higher to an annual rate of 1,270,000 units. As noted in the latest Schwab Market Perspective: Sell in May…or Settle In?, after a long downturn, we're starting to see an encouraging uptick in both home ownership and household formations. This suggests that consumer confidence is starting to translate into some economy-boosting action. Read more on the Markets & Economy page at www.schwab.com. In addition, the other item on tomorrow's docket will be the Federal Reserve's industrial production and capacity utilization report, forecasted to show production rose 0.4% m/m during April following the 0.5% increase seen in March, while utilization is expected to have ticked higher to 76.3% from the 76.1% registered the month prior.

The Empire Manufacturing Index showed output from the New York region surprisingly dropped into contraction territory (a reading below zero) for May. The index fell to -1.0 from April's unrevised 5.2 level, with forecasts calling for a 7.5 reading.

Treasuries are dipping, with the yield on the 2-year note little changed at 1.30%, while the yields on the 10-year note and the 30-year bond are ticking 1 basis point higher to 2.33% and 3.00%, 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. Follow Schwab on Twitter: @schwabresearch. Also, Schwab's Vice President of Trading and Derivatives, Randy Frederick and Chief Fixed Income Strategist, Kathy Jones offer the video, Fed Rate-Hike Cycle: How Can Bond Investors Prepare? on the Insights & Ideas page at www.schwab.com. Follow Randy and Kathy on Twitter: @randyafrederick and @kathyjones.

Finally, focus on the political front remains, and Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, discusses What the Coming Tax Cuts Mean for the Stock Market on the Markets & Economy page at www.schwab.com. Follow Jeff on Twitter: @jeffreykleintop. Moreover, see the video from Schwab's Randy Frederick and Vice President of Legislative and Regulatory Affairs, Michael T. Townsend titled, Washington Overview: Budget Deals, Tax Reform, and Trump's 100-Day Mark, on the Insights & Ideas page at www.schwab.com.

Europe mostly higher despite lingering uncertainties

European equities finished mostly higher, with markets shrugging off another round of softer-than-expected Chinese economic data, a global cyber-security attack, and global trade concerns. Oil & gas issues lent support amid a rally in crude oil prices on optimism about extended global oil production cuts. Political uncertainty remained, with Germany holding regional elections ahead of a national election later this year, while Brexit negotiations continue and as an election looms in Italy 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?, while Director of International Research, Michelle Gibley CFA, offers her article, Europe Votes: Could More Countries Reject the EU? on the International Investing page at www.schwab.com. The euro and British pound were higher as the U.S. dollar saw some pressure, while bond yields in the region gained ground.

Stocks in Asia finished mostly higher, with oil prices rallying sharply on optimism of extended production cuts. The markets showed some relative resiliency in the face of heightened geopolitical concerns in the face of another missile test by North Korea, along with another round of softer-than-expected Chinese economic data. The markets also appeared to shrug off lingering trade concerns and news of a global cyber-security attack. China's industrial production, fixed asset investment and retail sales al missed expectations for April. The data followed late-Friday's stronger-than-expected reads on new yuan loans and aggregate financing—a gauge of total credit issued—with mainland Chinese stocks and those traded in Hong Kong both gaining ground, aided by that nation's release of infrastructure spending plan. Markets in India rose, with some cooler-than-anticipated inflation figures late-Friday boosting optimism that the Reserve Bank of India may have room to cut rates, per Bloomberg. Meanwhile, securities in Japan dipped, paring losses as the yen showed some weakness, while South Korean equities moved higher and those listed in Australia finished flat,. 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.

Tomorrow's international economic calendar will include the Tertiary index and retail sales from Japan, CPI from France, GDP from Italy, the Zew Economic Sentiment Survey from Germany, GDP and the trade balance from the Eurozone, and CPI, PPI, the Retail Price index and housing prices from the U.K.

Markets Mixed, IBM Weighs on Dow

Charles Schwab: On the Market

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

Markets Mixed, IBM Weighs on Dow

U.S. equities finished mixed, with IBM applying most of the pressure to the Dow following another revenue miss by the tech giant. Furthermore, an uptick in Treasury yields and upbeat results from Morgan Stanley weren't able to lend much support to financials, who tried to battle back from a plunge yesterday. Energy issues faltered amid a drop in crude oil prices, despite a decline in oil inventories that matched estimates. Meanwhile, the U.S. dollar bounced back, and gold was lower, while markets had little reaction to today's release of the Fed's Beige Book report.

The Dow Jones Industrial Average (DJIA) declined 119 points (0.6%) to 20,404, the S&P 500 Index lost 4 points (0.2%) to 2,338, while the Nasdaq Composite increased 14 points (0.2%) to 5,863. In moderate volume, 821 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil fell $2.00 to $50.85 per barrel and wholesale gasoline was $0.05 lower at $1.66 per gallon. Elsewhere, the Bloomberg gold spot price decreased $9.76 to $1,280.00 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—rose 0.3% to 99.81.

Morgan Stanley (MS $42) reported 1Q earnings-per-share (EPS) of $1.00, above the $0.89 FactSet estimate, as revenues rose 25.1% year-over-year (y/y) to $9.7 billion, topping the projected $9.3 billion. The company said all its businesses performed well in improved market conditions, while it recognized that the environment remains uncertain. Shares gained solid ground.

International Business Machines Corp. (IBM $162) posted 1Q EPS of $1.85, or $2.38 ex-items, versus the expected $2.35, as revenues declined 3.0% y/y to $18.2 billion, below the forecasted $18.4 billion. This was the 20th consecutive quarterly revenue decline. IBM reaffirmed its full-year earnings outlook. Shares fell.

Lam Research Corp. (LRCX $136) announced fiscal 3Q profits of $3.10 per share, or $2.80 ex-items, compared to the estimated $2.55, with revenues rising 63.9% y/y and 14.0% quarter-over-quarter (q/q) to $2.2 billion, north of the expected $2.1 billion. The semiconductor equipment and services company issued 4Q guidance that exceeded the Street's forecasts. Shares rallied.

Beige Book shows continued growth, mortgage applications decline

In afternoon action, the Federal Reserve released its Beige Book report, a look at business activity across the nation used as a preparation tool for the Fed's next two-day monetary policy meeting set to conclude on May 3rd. Within the report, the Fed noted that all 12 Districts reported modest-to-moderate economic growth, with the uptick evident to varying degrees across all economic sectors. In addition, wages increased modestly, but broadened out, as the labor market remains tight, with a large number of businesses indicating higher turnover rates and difficulties in retaining employees. On the inflation and housing fronts, the report showed that prices climbed only slightly, while a lack of inventory was restraining demand for homes, despite accelerated growth in residential construction.

The MBA Mortgage Application Index declined 1.8% last week, following the previous week's 1.5% increase. The decrease came as a 0.2% gain for the Refinance Index was met with a 3.4% drop for the Purchase Index. The average 30-year mortgage rate declined 6 basis points (bps) to 4.22%.

Treasuries finished lower, as the yield on the 2-year note increased 1 bp to 1.17%, the yield on the 10-year note rose 4 bps to 2.21%, and the 30-year bond rate gained 3 bps to 2.87%.

Bond yields and the U.S. dollar have rebounded somewhat from recent drops that have come courtesy of flared-up geopolitical concerns, along with increased political uncertainty as the U.K. approved a snap election in June. Also, President Donald Trump recently commented that he thought the greenback was getting "too strong," while on the economic front "hard" data has continued to lag the "soft" data (confidence/survey-based), notably some cooler-than-expected inflation figures.

For a look at the data, see our latest article, Data Divide: Are People Too Enthusiastic About the Economy? on the Insights & Ideas page at www.schwab.com, and follow Schwab on Twitter: @schwabresearch.

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 on the Insights & Ideas page at www.schwab.com. Follow Randy and Kathy on Twitter: @randyafrederick and @kathyjones.

Finally, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers a look at investing amid heightened geopolitical tensions in his article, Missiles and Markets: An investor guide to geopolitical risks on the Markets & Economy page at www.schwab.com. Follow Jeff on Twitter: @jeffreykleintop.

Tomorrow's economic calendar will give investors a mix of data to peruse, including weekly initial jobless claims, with forecasts calling for an increase to a level of 240,000 from the prior week's 234,000, as well as the Index of Leading Economic Indicators (LEI), with economists anticipating a 0.2% m/m increase for March following the 0.6% rise posted in February. Finally, the Philly Fed Manufacturing Index will round out the day, expected to have moved lower during the month to a level of 25.5 from the 32.8 registered in March.

Europe mostly higher as financials rebound, Asia mostly lower as concerns linger

European equities finished the day mostly higher, courtesy of a rebound in financials from yesterday's drop, as Morgan Stanley's upbeat earnings report eased concerns from yesterday's surprise miss by Goldman Sachs Group Inc. (GS $214) in the U.S. Also, shares of Banco Popular SA (BPESY $3) extended yesterday's solid rebound as reports suggesting the Spanish lender divested some non-performing assets appeared to soothe concerns about the company's capital position, while a relative reprieve in the recent drop in bond yields likely offered support. Carmakers also rallied on the heels of a report showing March European auto sales rose to the highest level on record, per Bloomberg. However, oil & gas issues saw some pressure and U.K. markets remained hamstrung by heightened political uncertainty as yesterday the nation's Prime Minister Theresa May surprisingly called for a snap election in June, which received parliamentary approval today. The increased U.K. political uncertainty comes as Brexit negotiations have begun, France is expected hold the first round of its key Presidential election this weekend, and a German election later this year looms. For more on the political front in the region, 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? on the Insights & Ideas page at www.schwab.com. Also, check out our article, Brexit Begins: What's Next for the U.K., on the Insights & Ideas page at www.schwab.com, while Director of International Research, Michelle Gibley CFA, offers her article, Europe Votes: Could More Countries Reject the EU? on the International Investing page at www.schwab.com.

Eurozone consumer price inflation rose in line with forecasts and the region's trade surplus widened more than expected. The euro and British pound gave back some of yesterday's gains versus the U.S. dollar and bond yields in the region were mixed but mostly higher.

Stocks in Asia finished mostly lower, with geopolitical concerns aimed at North Korea festering, while political uncertainty ramped up after U.K. Prime Minister May surprised the markets by calling for an election in June. Resource-related issues were lower as crude oil prices slipped yesterday and metals prices have come under recent pressure, though financials were a big drag following yesterday's unexpected earnings miss from Dow member Goldman Sachs and the recent drop in bond yields. As such, stocks in Australia fell, as well as those in South Korea. Chinese equities continued to be hampered by the heightened geopolitical and political uneasiness, along with concerns about stricter regulations, which have overshadowed some recent upbeat economic data in the nation, with listings in both the mainland and Hong Kong declining. For more on China, see Schwab's Michelle Gibley's, CFA, article, 5 Big Risks Posed by China (And Why They Shouldn't Crash Global Markets in 2017) and for analysis of the global landscape, see Jeffrey Kleintop's, CFA, article, Top Five Trade Issues Investors Should Be Watching. Get both these articles on the International Investing page at www.schwab.com. However, equities in India and Japan both ticked modestly higher, rebounding slightly from pullbacks as of late from a record run for the former and as the yen's recent rally weighed on the latter. The yen showed some late-day weakness to likely help Japanese markets.

Tomorrow's international economic calendar will hold trade data from Japan and PPI from Germany.

Stocks Finish Lower as Earnings Season Looms

Charles Schwab: On the Market

Posted: 4/12/2017 4:15 PM ET

Stocks Finish Lower as Earnings Season Looms

U.S. stocks closed lower as the holiday-shortened week continued to supply pressure amid persistent geopolitical concerns. Financials were among the worst performers on the heels of a slide in Treasury yields and ahead of tomorrow's unofficial kick off to 1Q earnings season. Crude oil prices trimmed some recent gains despite a bullish oil inventory report. Gold ticked higher and the U.S. dollar dropped sharply after President Trump commented that he thought the currency was getting "too strong." In equity news, Delta Air Lines topped the Street's profit forecasts, while BlackBerry received a boost after the conclusion of an arbitration proceeding with Qualcomm.

The Dow Jones Industrial Average (DJIA) declined 59 points (0.3%) to 20,592, the S&P 500 Index lost 9 points (0.4%) to 2,345, and the Nasdaq Composite declined 31 points (0.5%) to 5,836. In moderate volume, 761 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq. WTI crude oil shed $0.29 to $53.11 per barrel and wholesale gasoline was $0.02 lower at $1.74 per gallon. Elsewhere, the Bloomberg gold spot price was $6.90 higher at $1,281.76 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.5% lower at 100.16.

Delta Air Lines Inc. (DAL $45) reported 1Q earnings-per-share (EPS) of $0.82, or $0.77 ex-items, compared to the $0.75 FactSet estimate, as revenues declined 1.1% year-over-year (y/y) to $9.2 billion, roughly in line with forecasts. The company noted that it expects the entirety of its 2017 margin pressure to have occurred in 1Q from higher fuel prices. DAL added that it is on track to expand margins for the balance of the year, due to an improving revenue profile and further improvement as its cost growth moderates in the second half. Shares finished higher.

BlackBerry Ltd. (BBRY $9) jumped after receiving a binding interim arbitration award requiring Qualcomm Inc. (QCOM $53) to refund a sum of $814.9 million, plus interest and attorney's fees to the company, related to royalties for certain past sales of subscriber units. QCOM said it does not agree with the decision, which is binding and not appealable. The arbitration decision was limited to prepayment provisions unique to BlackBerry's license agreement with Qualcomm and has no impact on agreements with any other licensee. QCOM traded lower.

Tractor Supply Co. (TSCO $65) preannounced that it anticipates 1Q EPS to be below the Street's expectations, and its same-store sales to unexpectedly decline. The company cited decreases in comparable transaction count and average ticket, along with lower sales of seasonal merchandise and the impact of deflation. Shares fell.

Neurocrine Biosciences Inc. (NBIX $52) surged after announcing that it got approval from the U.S. Food and Drug Administration (FDA) of its treatment for movement disorder.

Import prices dip, mortgage applications rise

The Import Price Index (chart) declined 0.2% month-over-month (m/m) for March, matching the Bloomberg projection and compared to February's upwardly revised 0.4% gain. Compared to last year, prices were higher by 4.2%, above forecasts calling for a 4.0% rise, and following February's upwardly revised 4.8% increase.

The MBA Mortgage Application Index rose 1.5% last week, following the previous week's 1.6% decline. The increase came as a flat reading for the Refinance Index was met with a 2.9% gain for the Purchase Index. The average 30-year mortgage rate declined 6 basis points (bps) to 4.28%.

Treasuries were higher, with the yields on the 2-year note and the 30-year bond dipping 2 bps to 1.21% and 2.91%, respectively, while the yield on the 10-year note was 3 bps lower at 2.27%.

Bond yields have fallen as of late, amid the backdrop of heightened geopolitical uncertainty and concerns about "hard data" lagging "soft data," while the markets grapple with Fed rate hikes and the potential for sooner-than-expected normalization of its balance sheet.

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 at www.schwab.com/marketinsight, 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 www.schwab.com/insights. Follow Randy and Kathy on Twitter: @randyafrederick and @kathyjones.

Finally, with the markets choppy after a strong rally since late-2016, Schwab’s Chief Investment Strategist Liz Ann Sonders notes in her latest article, One of These Things … Market's Moves Not All About Trump, much of the pick-up in economic growth, as well as the earnings turn, pre-dated the election and shouldn't be fully credited to President Trump. Liz Ann concludes that growth has accelerated globally; while nominal growth in the United States is under-appreciated and the recent consolidation in stocks is likely about sentiment having gotten a tad too frothy. Read more at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders.

The U.S. economic calendar for tomorrow will commence with the Producer Price Index (PPI), with economists expecting no change month-over-month (m/m) for March, while excluding food and energy, the core rate is anticipated to have moved 0.2% higher, and weekly initial jobless claims, forecasted to have increased by 9,000 to a level of 245,000. The docket will round out the day with the release of the preliminary University of Michigan Consumer Confidence Index, anticipated to have ticked lower to 96.5 in April, after rising to 96.9 for March's final read.

Europe and Asia mixed on earnings and geopolitics

European equities finished mixed, with auto stocks getting modest support from upbeat results from Mercedes-Benz maker Daimler AG (DDAIY $74), while tensions toward North Korea and last week's U.S. missile strike in Syria kept geopolitical concerns elevated and 1Q U.S. earnings season looms. Political uncertainty in the region remained as Brexit negotiations continue and a key French Presidential election draws near. For analysis of the European political front, see Schwab's Chief Global Investment Strategist 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. Follow Jeff on Twitter: @jeffreykleintop. 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. In economic news, U.K. employment change rose by a smaller-than-expected amount, the euro and the British pound ticked higher versus the U.S. dollar and bond yields in the region finished mixed.

Stocks in Asia finished mixed with risk aversion boosting the yen as geopolitical tensions ramp up toward North Korea and in the wake of last week's missile strikes by the U.S. in Syria. For a look at the global landscape, see Schwab's Jeffrey Kleintop's, CFA, article, Top Five Trade Issues Investors Should Be Watching at www.schwab.com/oninternational. The yen's rally weighed on Japanese stocks, with additional pressure likely extended by a softer-than-expected read on the nation's machine orders, a gauge of capital spending, for February. Indian equities continued to pullback from a recent record run amid the geopolitical uneasiness and ahead of reports after the closing bell that showed industrial production surprisingly fell and consumer price inflation was slightly cooler than expected. Mainland Chinese shares declined after data showing consumer price inflation rose at a smaller pace than anticipated and producer price inflation decelerated by a smaller rate than projected. Stocks trading in Hong Kong staged a late-day rally to finish higher, South Korean listings rose and Australian securities ticked higher.

The international economic docket will include consumer inflation expectations and employment data from Australia, house price data from the U.K. and CPI from Germany, France and Italy.

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.

Markets Shrug Off Solid Jobs Report

Charles Schwab: On the Market

Posted: 3/8/2017 4:15 PM ET

Markets Shrug Off Solid Jobs Report

U.S. equities finished mixed, despite a much stronger-than-expected ADP employment report, as the data may have added to already-elevated Fed rate hike expectations. Meanwhile, political uncertainty here and abroad continued to be a drag on conviction. Treasury yields and the U.S. dollar moved higher and crude oil prices tumbled in the wake of a bearish government oil inventory report, while gold also finished lower.

The Dow Jones Industrial Average (DJIA) lost 69 points (0.3%) to 20,856, the S&P 500 Index declined 5 points (0.2%) to 2,363, while the Nasdaq Composite inched 4 points (0.3%) higher to 5,838. In moderate volume, 892 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil tumbled $2.86 to $50.28 per barrel and wholesale gasoline was $0.03 lower at $1.65 per gallon. Elsewhere, the Bloomberg gold spot price moved $7.64 lower to $1,208.22 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% higher at 102.09.

H&R Block Inc. (HRB $24) reported a fiscal 3Q loss of $0.50 per share, or $0.49 per share ex-items, compared to the $0.52 shortfall that was expected, as revenues declined 4.8% year-over-year (y/y) to $452 million, above the projected $428 million. The tax preparation company said it has seen market share gains in both assisted and do-it-yourself categories for the first half of tax season. Shares were sharply higher.

Shares of Dow member Caterpillar Inc. (CAT $93) saw pressure following a report from the New York Times (NYT) that said a report commissioned by the government accuses the company of tax and accounting fraud. The report follows last week's raid on the company's headquarters by Federal agents. No charges have been filed and the NYT said CAT told it that the company has not seen a copy of the report and declined further comment.

Urban Outfitters Inc. (URBN $25) reported 4Q earnings-per-share (EPS) of $0.55, below the estimated $0.56, as revenues rose 2.0% y/y to $1.0 billion, roughly in line with forecasts. 4Q same-store sales were flat y/y, versus the expected 0.1% increase. The retailer's gross margin was pressured, missing expectations, and the company said its 1Q gauge of profits is expected to see similar results as the quarter has started off weak. Shares dropped decisively.

Ciena Corp. (CIEN $24) posted fiscal 1Q EPS of $0.03, or $0.26 ex-items, compared to estimates of $0.29, with revenues rising 8.4% y/y to $622 million, below the forecasted $632 million. The network strategy and technology company reported gross margin that missed expectations. Shares were sharply lower.

ADP payroll report jumps, mortgage applications rise

The ADP Employment Change Report showed private sector payrolls jumped by 298,000 jobs in February, well above the Bloomberg forecast of a 187,000 gain, while January's increase of 246,000 jobs was revised to a 261,000 rise. Today’s ADP data, which does not include government hiring and firing, comes ahead of Friday's broader February nonfarm payroll report, expected to show an increase of 200,000 jobs, and private sector payrolls are estimated to rise by 195,000 jobs (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).

Final 4Q nonfarm productivity (chart) was unrevised at a 1.3% gain from the preliminary estimate on an annualized basis, below expectations of an adjustment to a 1.5% rise. 3Q productivity was revised lower to a 3.3% increase. Also, unit labor costs were unadjusted at a 1.7% increase, from the initial report, versus expectations of a 1.6% gain. Unit labor costs rose by a downwardly revised 1.6% in 3Q.

Wholesale inventories (chart) was adjusted to a 0.2% m/m decline for January, versus expectations of an unrevised 0.1% dip, and following December's 1.0% gain. Sales decreased 0.1% m/m, compared to forecasts of a 0.5% gain. The inventory-to-sales ratio—the amount of time it would take to deplete inventories at the current sales pace—remained at December's 1.29 months level.

The MBA Mortgage Application Index rose 3.3% last week, following the previous week's 5.8% gain. The increase came as a 5.2% jump for the Refinance Index was met with a 1.7% rise for the Purchase Index. The average 30-year mortgage rate rose 6 basis points (bps) to 4.36%.

Treasuries finished lower, as the yield on the 2-year note rose 2 bps to 1.35%, the yield on the 10-year note gained 4 bps to 2.56%, and the 30-year bond rate increased 3 bps to 3.15%.

The markets continue to focus on the timing and details of President Donald Trump's policy plans, boosted expectations of a Fed rate hike next week in the wake of continued solid economic data, and the recent rally to all-time highs for the stock markets. As such, see our latest article, End of an Era: Why Volatility May Return to the Stock Market at www.schwab.com/insights.

As noted in the latest Schwab Market Perspective: "Phenomenal" Expectations, higher inflation and stronger economic data—and perhaps the stock market's rip higher—have led to more "hawkish" commentary from the Fed recently. March Fed hike expectations have risen considerably, now well over 80. 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.

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.

Tomorrow's domestic docket will provide investors a look at weekly initial jobless claims, forecasted to rise to a level of 238,000 from the prior week's 223,000, as well as the Import Price Index, with economists anticipating a 0.1% m/m increase during February following the 0.4% rise registered in January.

Europe nudges higher on data, Asia mixed as conviction remains constrained

European equities ticked higher, with the markets digesting some relatively upbeat earnings and economic data, though a highly-anticipated U.S. rate hike loomed as a possibility and political uncertainty continued to linger. The upcoming key French Presidential election remained in focus 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 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. Shares of Adidas AG (ADDYY $92) rallied after the German athletic gear maker posted stronger-than-expected earnings results and offered a favorable outlook. In economic news, German and Spanish industrial production rebounded more than expected in January, ahead of tomorrow's monetary policy decision from the European Central Bank, with forecasts calling for the central bank to leave its stance unchanged. The U.K. raised its economic growth forecast for 2017, but lowered its outlook for the next three years as the nation delivered its spring budget. The euro and British pound were lower versus the U.S. dollar, while bond yields in the region gained ground.

Stocks in Asia finished mixed amid heightened expectations of a rate hike in the U.S. next week, mixed economic data, and festering U.S. and European political uncertainty. Also, recently resurfaced geopolitical concerns may have contributed to a lack of conviction in the markets. Japanese equities declined, as the yen strengthened intra-day, while a report showed the nation's 4Q GDP growth came in at a 1.2% annualized quarter-over-quarter pace, revised up from the preliminary estimate of 1.0% growth, but below the projected 1.5% expansion. Stocks in China dipped slightly, but those traded in Hong Kong advanced, following data that showed the nation's exports missed expectations for February, resulting in the first trade deficit in yuan terms for the country in three years. However, the Lunar New Year holiday may have impacted the data. Meanwhile, markets in Australia finished flat, India's market saw a modest decline, while South Korean securities ticked higher. 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.

In addition to the aforementioned European Central Bank meeting, tomorrow's international economic calendar will hold CPI and PPI from China, machine tool orders from Japan, and employment data from France.

On the Market Posted: 2/7/2017 4:15 PM ET Investors Remain Unsure With a host of diverging earnings and economic data, as well as persistent political uncertainty on both sides of the pond in the mix, investors appeared skittish in today's action, with U.S. stocks finishing the day only modestly higher and near the flatline. Meanwhile, Treasuries finished modestly higher, crude oil prices fell, pressuring the energy sector, hawkish commentary from Fed voting member Harker helped the U.S. dollar rebound, and gold was lower. The Dow Jones Industrial Average (DJIA) increased 37 points (0.2%) to 20,090, the S&P 500 Index was a half-point higher at 2,293, and the Nasdaq Composite gained 11 points (0.2%) to 5,674. In moderate volume, 821 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil fell $0.84 to $52.17 per barrel and wholesale gasoline lost $0.02 to $1.49 per gallon. Elsewhere, the Bloomberg gold spot price lost $2.55 to $1,232.98 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% higher at 100.27 General Motors Co. (GM $35) reported 4Q earnings-per-share (EPS) ex-items of $1.28, above the FactSet estimate of $1.17, with automotive revenues rising 9.2% year-over-year (y/y) to $41.2 billion, versus the projected $40.3 billion. GM affirmed its 2017 EPS guidance that was well above expectations. Shares were lower despite the results, which were preliminarily reported in January and included y/y margin deterioration in its key North American segment, along with in China, appearing to cause some concern among analysts. Also, the political uneasiness in the U.S. and Europe may be fostering some uncertainty. Michael Kors Holdings Ltd. (KORS $37) posted fiscal 3Q profits of $1.64 per share, one penny above estimates, with revenues decreasing 3.2% y/y to $1.4 billion, roughly in line with expectations. 3Q same-store sales fell 6.9% y/y, versus the projected 4.1% drop. KORS issued 4Q and full-year guidance that severely missed the Street's forecasts. Shares fell sharply. Gap Inc. (GPS $23) raised its full-year EPS outlook after reporting stronger-than-expected 4Q revenues of $4.4 billion and providing a forecast for 4Q earnings that exceeded estimates. GPS traded to the downside as the report was accompanied by a smaller-than-expected rise in January same-store sales. Trade deficit shrinks more than expected The trade balance (chart) showed that the deficit came in at $44.3 billion in December, compared to the Bloomberg estimate of $45.0 billion. November's deficit was revised to $45.7 billion from the $45.2 billion posted earlier. Exports rose 2.7% month-over-month (m/m) to $190.7 billion, while imports gained 1.5% to $235.0 billion. The Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, dipped to a level of 5.50 million jobs available to be filled in December, from November's downwardly revised 5.51 million level, and below forecasts of 5.58 million. The hiring rate remained at November's 3.6% and the separation rate dipped to 3.4% from 3.5%. Consumer credit, released in the final hour of trading, showed consumer borrowing advanced by $14.2 billion during December, the smallest increase since 2013, compared to the $20.0 billion forecast of economists polled by Bloomberg, while November's figure was adjusted upward to an increase of $25.2 billion from the originally reported $24.5 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, climbed by $11.8 billion, while revolving debt, which includes credit cards, rose by $2.4 billion. Treasuries finished mostly higher, as the yield on the 2-year note was flat at 1.15%, while the yields on the 10-year note and the 30-year bond declined 3 basis points to 2.38% and 3.02%, 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. Treasury yields have moderated as of late but continue to hold onto their post-election jumps, the U.S. Dollar Index recently pulled back to more than a two-month low, and the stock markets are back near record highs after a recent pullback. U.S. political risk has ramped up with the global markets skittish toward President Donald Trump's global trade and immigration policies and the lack of details on his plans for infrastructure spending and tax cuts, while global economic data has been on the positive side and last week's Fed decision fostered a relatively dovish takeaway from the markets. For a look at these market drivers, see Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, 5 Themes to Watch as the Trump Era Begins, at www.schwab.com/insights. Also, Schwab’s Chief Investment Strategist Liz Ann Sonders offers analysis of the Fed's monetary policy decision in her latest article, Fed Leaves Rates Unchanged, while noting in Rise Up: Dow 20k Fails to Thrill Individual Investors, that individual sentiment has become less bullish, while other measures show highly elevated optimism. She adds that extremely low volatility isn't likely to persist, but the bull market is. Read more at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders. Also, 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 remains intact 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 turns mixed late in the session European equities finished mixed, with solid gains in basic materials, technology and healthcare issues being met with drops in oil & gas and financial stocks following some disappointing earnings reports. The euro came under pressure versus the U.S. dollar, but the British pound reversed sharply to the upside. The pound's wild ride came as Bank of England (BoE) member Kristin Forbes said if the U.K. economy continues on its current trajectory, accelerating inflation may push her to vote for a rate hike, per Bloomberg. The markets showed some resiliency for most of the session in the face of some disappointing economic data, as well as festering political uneasiness on both sides of the pond. For analysis of the U.S. and European political fronts, 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, article, Europe Votes: Could More Countries Reject the EU? at www.schwab.com/oninternational. German industrial production unexpectedly fell in December and U.K. housing prices surprisingly declined last month. Bond yields in the region finished mostly lower. 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 mostly lower following yesterday's declines in the U.S. and Europe as political uneasiness in both regions continued to foster global market uneasiness. Japanese securities declined, with the yen holding onto yesterday's rally amid increased risk aversion. Weakness in energy issues amid crude oil's decline, and lingering liquidity concerns hamstrung stocks in China and Hong Kong, while Australian equities ticked slightly higher, led by strength in industrials and basic materials issues, and as the Reserve Bank of Australia kept its monetary policy unchanged as expected. Stocks in South Korea and India traded to the downside. 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. Tomorrow's international economic calendar will be light, with reports slated for release to include Japan's trade balance and industrial production from Spain. Also on tap, the Reserve Bank of India will meet, with economists forecasting a 25 bp reduction to its benchmark interest rate.

On the Market

Posted: 2/7/2017 4:15 PM ET

On the Market

Posted: 2/7/2017 4:15 PM ET

Investors Remain Unsure

With a host of diverging earnings and economic data, as well as persistent political uncertainty on both sides of the pond in the mix, investors appeared skittish in today's action, with U.S. stocks finishing the day only modestly higher and near the flatline. Meanwhile, Treasuries finished modestly higher, crude oil prices fell, pressuring the energy sector, hawkish commentary from Fed voting member Harker helped the U.S. dollar rebound, and gold was lower.

The Dow Jones Industrial Average (DJIA) increased 37 points (0.2%) to 20,090, the S&P 500 Index was a half-point higher at 2,293, and the Nasdaq Composite gained 11 points (0.2%) to 5,674. In moderate volume, 821 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil fell $0.84 to $52.17 per barrel and wholesale gasoline lost $0.02 to $1.49 per gallon. Elsewhere, the Bloomberg gold spot price lost $2.55 to $1,232.98 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% higher at 100.27

General Motors Co. (GM $35) reported 4Q earnings-per-share (EPS) ex-items of $1.28, above the FactSet estimate of $1.17, with automotive revenues rising 9.2% year-over-year (y/y) to $41.2 billion, versus the projected $40.3 billion. GM affirmed its 2017 EPS guidance that was well above expectations. Shares were lower despite the results, which were preliminarily reported in January and included y/y margin deterioration in its key North American segment, along with in China, appearing to cause some concern among analysts. Also, the political uneasiness in the U.S. and Europe may be fostering some uncertainty.

Michael Kors Holdings Ltd. (KORS $37) posted fiscal 3Q profits of $1.64 per share, one penny above estimates, with revenues decreasing 3.2% y/y to $1.4 billion, roughly in line with expectations. 3Q same-store sales fell 6.9% y/y, versus the projected 4.1% drop. KORS issued 4Q and full-year guidance that severely missed the Street's forecasts. Shares fell sharply.

Gap Inc. (GPS $23) raised its full-year EPS outlook after reporting stronger-than-expected 4Q revenues of $4.4 billion and providing a forecast for 4Q earnings that exceeded estimates. GPS traded to the downside as the report was accompanied by a smaller-than-expected rise in January same-store sales. 

Trade deficit shrinks more than expected

The trade balance (chart) showed that the deficit came in at $44.3 billion in December, compared to the Bloomberg estimate of $45.0 billion. November's deficit was revised to $45.7 billion from the $45.2 billion posted earlier. Exports rose 2.7% month-over-month (m/m) to $190.7 billion, while imports gained 1.5% to $235.0 billion.

The Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, dipped to a level of 5.50 million jobs available to be filled in December, from November's downwardly revised 5.51 million level, and below forecasts of 5.58 million. The hiring rate remained at November's 3.6% and the separation rate dipped to 3.4% from 3.5%.

Consumer credit, released in the final hour of trading, showed consumer borrowing advanced by $14.2 billion during December, the smallest increase since 2013, compared to the $20.0 billion forecast of economists polled by Bloomberg, while November's figure was adjusted upward to an increase of $25.2 billion from the originally reported $24.5 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, climbed by $11.8 billion, while revolving debt, which includes credit cards, rose by $2.4 billion.

Treasuries finished mostly higher, as the yield on the 2-year note was flat at 1.15%, while the yields on the 10-year note and the 30-year bond declined 3 basis points to 2.38% and 3.02%, 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.

Treasury yields have moderated as of late but continue to hold onto their post-election jumps, the U.S. Dollar Index recently pulled back to more than a two-month low, and the stock markets are back near record highs after a recent pullback. U.S. political risk has ramped up with the global markets skittish toward President Donald Trump's global trade and immigration policies and the lack of details on his plans for infrastructure spending and tax cuts, while global economic data has been on the positive side and last week's Fed decision fostered a relatively dovish takeaway from the markets.

For a look at these market drivers, see Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, 5 Themes to Watch as the Trump Era Begins, at www.schwab.com/insights. Also, Schwab’s Chief Investment Strategist Liz Ann Sonders offers analysis of the Fed's monetary policy decision in her latest article, Fed Leaves Rates Unchanged, while noting in Rise Up: Dow 20k Fails to Thrill Individual Investors, that individual sentiment has become less bullish, while other measures show highly elevated optimism. She adds that extremely low volatility isn't likely to persist, but the bull market is. Read more at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders.

Also, 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 remains intact 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 turns mixed late in the session

European equities finished mixed, with solid gains in basic materials, technology and healthcare issues being met with drops in oil & gas and financial stocks following some disappointing earnings reports. The euro came under pressure versus the U.S. dollar, but the British pound reversed sharply to the upside. The pound's wild ride came as Bank of England (BoE) member Kristin Forbes said if the U.K. economy continues on its current trajectory, accelerating inflation may push her to vote for a rate hike, per Bloomberg. The markets showed some resiliency for most of the session in the face of some disappointing economic data, as well as festering political uneasiness on both sides of the pond. For analysis of the U.S. and European political fronts, 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, article, Europe Votes: Could More Countries Reject the EU? at www.schwab.com/oninternational. German industrial production unexpectedly fell in December and U.K. housing prices surprisingly declined last month. Bond yields in the region finished mostly lower.

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 mostly lower following yesterday's declines in the U.S. and Europe as political uneasiness in both regions continued to foster global market uneasiness. Japanese securities declined, with the yen holding onto yesterday's rally amid increased risk aversion. Weakness in energy issues amid crude oil's decline, and lingering liquidity concerns hamstrung stocks in China and Hong Kong, while Australian equities ticked slightly higher, led by strength in industrials and basic materials issues, and as the Reserve Bank of Australia kept its monetary policy unchanged as expected. Stocks in South Korea and India traded to the downside. 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.

Tomorrow's international economic calendar will be light, with reports slated for release to include Japan's trade balance and industrial production from Spain. Also on tap, the Reserve Bank of India will meet, with economists forecasting a 25 bp reduction to its benchmark interest rate.
With a host of diverging earnings and economic data, as well as persistent political uncertainty on both sides of the pond in the mix, investors appeared skittish in today's action, with U.S. stocks finishing the day only modestly higher and near the flatline. Meanwhile, Treasuries finished modestly higher, crude oil prices fell, pressuring the energy sector, hawkish commentary from Fed voting member Harker helped the U.S. dollar rebound, and gold was lower.

The Dow Jones Industrial Average (DJIA) increased 37 points (0.2%) to 20,090, the S&P 500 Index was a half-point higher at 2,293, and the Nasdaq Composite gained 11 points (0.2%) to 5,674. In moderate volume, 821 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil fell $0.84 to $52.17 per barrel and wholesale gasoline lost $0.02 to $1.49 per gallon. Elsewhere, the Bloomberg gold spot price lost $2.55 to $1,232.98 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% higher at 100.27

General Motors Co. (GM $35) reported 4Q earnings-per-share (EPS) ex-items of $1.28, above the FactSet estimate of $1.17, with automotive revenues rising 9.2% year-over-year (y/y) to $41.2 billion, versus the projected $40.3 billion. GM affirmed its 2017 EPS guidance that was well above expectations. Shares were lower despite the results, which were preliminarily reported in January and included y/y margin deterioration in its key North American segment, along with in China, appearing to cause some concern among analysts. Also, the political uneasiness in the U.S. and Europe may be fostering some uncertainty.

Michael Kors Holdings Ltd. (KORS $37) posted fiscal 3Q profits of $1.64 per share, one penny above estimates, with revenues decreasing 3.2% y/y to $1.4 billion, roughly in line with expectations. 3Q same-store sales fell 6.9% y/y, versus the projected 4.1% drop. KORS issued 4Q and full-year guidance that severely missed the Street's forecasts. Shares fell sharply.

Gap Inc. (GPS $23) raised its full-year EPS outlook after reporting stronger-than-expected 4Q revenues of $4.4 billion and providing a forecast for 4Q earnings that exceeded estimates. GPS traded to the downside as the report was accompanied by a smaller-than-expected rise in January same-store sales. 

Trade deficit shrinks more than expected

The trade balance (chart) showed that the deficit came in at $44.3 billion in December, compared to the Bloomberg estimate of $45.0 billion. November's deficit was revised to $45.7 billion from the $45.2 billion posted earlier. Exports rose 2.7% month-over-month (m/m) to $190.7 billion, while imports gained 1.5% to $235.0 billion.

The Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, dipped to a level of 5.50 million jobs available to be filled in December, from November's downwardly revised 5.51 million level, and below forecasts of 5.58 million. The hiring rate remained at November's 3.6% and the separation rate dipped to 3.4% from 3.5%.

Consumer credit, released in the final hour of trading, showed consumer borrowing advanced by $14.2 billion during December, the smallest increase since 2013, compared to the $20.0 billion forecast of economists polled by Bloomberg, while November's figure was adjusted upward to an increase of $25.2 billion from the originally reported $24.5 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, climbed by $11.8 billion, while revolving debt, which includes credit cards, rose by $2.4 billion.

Treasuries finished mostly higher, as the yield on the 2-year note was flat at 1.15%, while the yields on the 10-year note and the 30-year bond declined 3 basis points to 2.38% and 3.02%, 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.

Treasury yields have moderated as of late but continue to hold onto their post-election jumps, the U.S. Dollar Index recently pulled back to more than a two-month low, and the stock markets are back near record highs after a recent pullback. U.S. political risk has ramped up with the global markets skittish toward President Donald Trump's global trade and immigration policies and the lack of details on his plans for infrastructure spending and tax cuts, while global economic data has been on the positive side and last week's Fed decision fostered a relatively dovish takeaway from the markets.

For a look at these market drivers, see Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, 5 Themes to Watch as the Trump Era Begins, at www.schwab.com/insights. Also, Schwab’s Chief Investment Strategist Liz Ann Sonders offers analysis of the Fed's monetary policy decision in her latest article, Fed Leaves Rates Unchanged, while noting in Rise Up: Dow 20k Fails to Thrill Individual Investors, that individual sentiment has become less bullish, while other measures show highly elevated optimism. She adds that extremely low volatility isn't likely to persist, but the bull market is. Read more at www.schwab.com/marketinsight and follow Liz Ann on Twitter: @lizannsonders.

Also, 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 remains intact 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 turns mixed late in the session

European equities finished mixed, with solid gains in basic materials, technology and healthcare issues being met with drops in oil & gas and financial stocks following some disappointing earnings reports. The euro came under pressure versus the U.S. dollar, but the British pound reversed sharply to the upside. The pound's wild ride came as Bank of England (BoE) member Kristin Forbes said if the U.K. economy continues on its current trajectory, accelerating inflation may push her to vote for a rate hike, per Bloomberg. The markets showed some resiliency for most of the session in the face of some disappointing economic data, as well as festering political uneasiness on both sides of the pond. For analysis of the U.S. and European political fronts, 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, article, Europe Votes: Could More Countries Reject the EU? at www.schwab.com/oninternational. German industrial production unexpectedly fell in December and U.K. housing prices surprisingly declined last month. Bond yields in the region finished mostly lower.

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 mostly lower following yesterday's declines in the U.S. and Europe as political uneasiness in both regions continued to foster global market uneasiness. Japanese securities declined, with the yen holding onto yesterday's rally amid increased risk aversion. Weakness in energy issues amid crude oil's decline, and lingering liquidity concerns hamstrung stocks in China and Hong Kong, while Australian equities ticked slightly higher, led by strength in industrials and basic materials issues, and as the Reserve Bank of Australia kept its monetary policy unchanged as expected. Stocks in South Korea and India traded to the downside. 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.

Tomorrow's international economic calendar will be light, with reports slated for release to include Japan's trade balance and industrial production from Spain. Also on tap, the Reserve Bank of India will meet, with economists forecasting a 25 bp reduction to its benchmark interest rate.