Stocks Extend Recent Gains

Charles Schwab: On the Market

Posted: 12/8/2017 4:15 PM EST

Stocks Extend Recent Gains

 

U.S. stocks advanced during the regular trading session to extend recent gains and finish the week mostly higher. The advance for equities was aided by a relatively upbeat read on the domestic labor market which followed favorable economic reports out of China and Japan. Treasury yields were mixed and the U.S. dollar was higher, while gold was little changed and crude oil prices rallied. 

The Dow Jones Industrial Average (DJIA) increased 119 points (0.5%) to 24,329, the S&P 500 Index was 15 points (0.6%) higher at 2,651, and the Nasdaq Composite advanced 27 points (0.4%) to 6,840. In moderate volume, 740 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil increased $0.67 to $57.36 per barrel and wholesale gasoline gained $0.02 to $1.72 per gallon. Elsewhere, the Bloomberg gold spot price moved $0.71 higher to $1,247.93 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% higher at 93.90. Markets were mixed for the week, as the DJIA and the S&P 500 Index increased 0.4% and the Nasdaq Composite declined 0.1%.

United Continental Holdings Inc. (UAL $64) increased its Q4 passenger revenue outlook after reporting a 5.1% increase in November traffic, and it announced a new $3 billion share repurchase program. Shares traded higher.

Western Digital Corp. (WDC $81) is gained solid ground amid media reports that the company and Toshiba Corp. (TOSYY $16) have reached a deal in principle to settle their chip dispute and could announce a formal agreement next week. Neither company commented on the report.

Cooper Companies Inc. (COO $227) reported fiscal Q4 earnings-per-share (EPS) of $1.78, or $2.65 ex-items, versus the $2.64 FactSet estimate, with revenues rising 8.0% year-over-year (y/y) to $562 million, above the projected $559 million. The medical device company issued 2018 EPS guidance that had a midpoint below expectations. Shares finished solidly lower.

November labor report shows job growth tops forecasts, consumer sentiment slips

Nonfarm payrolls (chart) rose by 228,000 jobs month-over-month (m/m) in November, compared to the Bloomberg forecast of a 195,000 increase. The rise of 261,000 seen in October was revised to a gain of 244,000 jobs. The total upward revision to the job gains in October and September was 3,000.

Excluding government hiring and firing, private sector payrolls increased by 221,000, versus the forecasted gain of 195,000, after rising by 247,000 in October, revised from the 252,000 increase that was initially reported. The Department of Labor said employment continued to trend up in professional and business services, manufacturing and healthcare.

The unemployment rate remained at 4.1%, matching estimates, while average hourly earnings were up 0.2% m/m, below projections of a 0.3% increase and versus October's downwardly revised 0.1% decrease. Y/Y, wage gains were 2.5% higher, versus estimates of a 2.7% increase and October's downwardly revised 2.3% rise. Finally, average weekly hours ticked higher to 34.5 from October's unrevised 34.4 rate, where it was forecasted to remain.

Rate hike expectations for when the Fed concludes its meeting next week remained elevated following the relatively favorable employment report but the softer-than-expected wage growth and downward revision to the prior month may have caused some uncertainty regarding the pace of rate hikes in 2018. As we head toward the New Year, Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, offers a look at the key issues to watch in his latest, Schwab Sector Views: 18 Thoughts Heading into '18, pointing out that business optimism is elevated, which could bolster already rising capital investments. This could help support a continuation of the strong labor market.
Schwab's Chief Investment Strategist Liz Ann Sonders points out that capital spending (capex) is likely to be an economic highlight in 2018 and coupled with the continued rebound in productivity is good news for wages in her articles, Takin Care of Business: Several Important Kickers for a Strong Capex Cycle and One Thing Leads to Another: Productivity's Rebound.

The preliminary University of Michigan Consumer Sentiment Index (chart) declined to 96.8 in December, from 98.5 in November, and compared to expectations of an improvement to 99.0. The current economic conditions component of the survey improved but was more than offset by a decline in the expectations part of the report. The 1-year inflation forecast rose to 2.8% from November's 2.5% rate, while the 5-10 year inflation outlook ticked higher to 2.5% from the prior month's level of 2.4%.

Wholesale inventories (chart) were revised lower to a 0.5% m/m decline for October from the preliminary estimate of a 0.4% decrease, where it was forecasted to remain and compared to September's 0.1% gain. Sales grew 0.7% m/m, compared to forecasts of a 0.3% increase and September's upwardly revised 1.4% rise. The inventory-to-sales ratio—the amount of time it would take to deplete inventories at the current sales pace—dipped to a 1.25 months pace from September's 1.26 rate.

Treasuries finished mixed, with the yield on the 2-year note dipping 1 basis point (bp) to 1.79%, the yield on the 10-year note remaining at 2.37%, and the 30-year bond rate increasing 1 bp to 2.76%.

The U.S. dollar is extended its weekly gain and Treasury yields are diverged on the heels of the employment data, which followed favorable Chinese trade and Japanese GDP figures. Moreover, the markets cheered a breakthrough in the U.K. Brexit impasse, and a short-term government funding bill late yesterday that should help avoid a U.S. government shutdown this weekend. However, tax reform continues to be a main focus for the markets as the House and Senate grapple with reconciling key differences in their bills.

Schwab's Director of Tax and Financial Planning, Hayden Adams, CPA, offers analysis of the reconciliation process and what investors should be paying attention to, in his article, Tax Reform: What Investors Should Know.

If you have questions regarding how the potential tax overhaul may affect you as an investor, see Hayden's Tax Reform: Frequently Asked Questions.

Europe and Asia higher

European equity markets moved higher, with the markets cheering upbeat economic reports out of the U.S., China and Japan, which overshadowed an unexpected drop in German exports and mixed industrial and manufacturing production figures in the region. Financials led the way, bolstered by a long-awaited deal by regulators to complete the final batch of post-crisis capital rules, which offered clarity for the industry. The U.K. and European Union (EU) reached a deal on three key issues, including the Irish border, that paves the way to break the Brexit negotiation deadlock and likely leads to talks moving to the next phase ahead of next week's EU summit. However, the next stage would revolve around trade and headlines suggested this could be a lengthy process in getting an agreement, which appeared to weigh on the British pound versus the U.S. dollar. The Brexit breakthrough joined the agreement in the U.S. on a short-term government spending bill that likely avoids a near-term shutdown, though the markets continued to eye the U.S. tax reform reconciliation process.

Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, and Vice President of Trading and Derivatives Randy Frederick point out in the video, Political Risk: How Should Investors Respond?, that a long history of these developments shows us that holding a well-diversified portfolio may buffer the short-term market moves that are often the result. So, investors should avoid overreacting to the political and geopolitical drama and stick to their long-term financial plans. The euro dipped versus the greenback and bond yields in the region finished mixed.

Stocks in Asia finished higher as the U.S. markets rose to break a string of sluggishness, while economic reports in the region fostered some optimism. Japan's Q3 GDP was revised to a 2.5% quarter-over-quarter annualized pace of growth, from the preliminary estimate of a 1.4% rise, and versus expectations of an adjustment to a 1.5% rate of expansion. China's November exports and imports rose much more than expected resulting in an unexpected widening of the nation's trade surplus. The yen lost ground for a second day amid some rejuvenated global economic optimism, helping lift Japanese share prices. Stocks trading in mainland China and Hong Kong advanced, while securities trading in Australia and India also gained ground and South Korean equities ticked to the upside. The markets rebounded after a recent stumble and Schwab's Jeffrey Kleintop, CFA, and Randy Frederick, discuss in the video, It's All Relative: Why Stocks May Not Be Overvalued.

Stocks nudge higher on week as tech rebounds and tax reform moves closer

U.S. stocks finished the week modestly higher with economic data continuing to paint a positive global backdrop, while the weekend passage of the Senate's tax reform bill fostered optimism that the most sweeping overhaul effort in decades was moving closer to President Donald Trump's desk. Moreover, the tech sector rollover that had pressured the markets as of late, reversed to the upside as the week matured to help nudge the markets into positive territory and the Nasdaq mostly recover early losses. Energy stocks lagged behind as crude oil prices moved to the downside. The U.S. dollar moved noticeably higher and Treasury yields ticked to the upside in choppy trading with political uncertainty in Europe also garnering attention.

Next week, fiscal policy focus will share the spotlight with monetary policy as the Federal Open Market Committee (FOMC) is highly expected to conclude its Wednesday meeting with a 25 bps increase to its target fed funds rate to 1.50% (economic calendar). However, the accompanying updated FOMC projections and Chairwoman Janet Yellen's final press conference shortly after the decision will likely garner the most attention as the markets try to gauge the pace of rate hikes in 2018. The decision will also be joined by releases next week including: JOLTS Job Openings report, the NFIB Small Business Optimism Index, the Consumer Price Index (CPI), the Producer Price Index (PPI), retail sales, Markit's business activity reports, and industrial production and capacity utilization.

As noted in the latest Schwab Market Perspective: The Big Picture Heading into 2018, a better-than-expected 2017 appears to be morphing into a solid start to 2018, but it is unlikely to be as smooth a ride. We believe the bull market still has room to run but it could shape up to be a bumpier ride as expectations and sentiment are elevated. U.S. economic growth appears to be picking up, but with the Federal Reserve tightening policy and inflation likely to heat up, we appear to be in the latter stages of the cycle. Global markets are also poised to have an unprecedented year of performance; which is unlikely to be repeated, but conditions around the world still look largely supportive of further gains.

International reports due out next week to look out for include: Australia—employment change. China—CPI and PPI, lending statistics, retail sales, and industrial production. India—CPI, industrial production, and trade balance. Japan—machine orders, industrial production and capacity utilization, and the Q4 Tankan Large Manufacturing Index. Eurozone—European Central Bank monetary policy decision, industrial production, Markit's business activity reports, and the trade balance, along with German investor sentiment and CPI. U.K.—the Bank of England monetary policy decision, CPI, employment change, and retail sales.

Stocks Mostly Flat, but Finish Week with Solid Gains

Charles Schwab: On the Market

Posted: 10/6/2017 4:15 PM EDT

Stocks Mostly Flat, but Finish Week with Solid Gains

U.S. equities closed the trading session nearly unchanged, holding onto solid weekly gains as the monthly labor report showed an unexpected drop in September job creation due to the recent hurricanes. Treasury yields modestly extended a fresh run amid bolstered December rate hike expectations, while the U.S. dollar reversed to the downside following rumors of a possible North Korean missile test this weekend. Crude oil was lower and gold advanced. In equity news, Costco and Yum China Holdings announced quarterly results. 

The Dow Jones Industrial Average (DJIA) decreased 2 points to 22,774, the S&P 500 Index dipped 3 points (0.1%) to 2,549, and the Nasdaq Composite ticked 5 points (0.1%) higher to 6,590. In moderate volume, 728 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil decreased $1.50 to $49.29 per barrel and wholesale gasoline was $0.05 lower at $1.56 per gallon. Elsewhere, the Bloomberg gold spot price added $6.86 to $1,275.08 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% lower at 93.81. Markets were nicely higher for the week, as the DJIA gained 1.7%, the S&P 500 Index added 1.2% and the Nasdaq Composite increased 1.5%.

Costco Wholesale Corp. (COST $157) reported fiscal Q4 earnings-per-share (EPS) of $2.08, above the $2.02 FactSet estimate, as revenues grew 15.8% year-over-year (y/y) to $42.3 billion, exceeding the $41.8 billion expectation. Q4 same-store sales rose 6.1% y/y, topping the forecasted 5.8% gain. However, the company's gross margin and membership renewal rates declined to disappoint the Street. Shares finished solidly lower.

Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, notes in his latest Schwab Sector Views: Consumer Staples: More than Meets the Eye, investors have grown nervous that already thin margins could collapse further as more shopping would potentially move online, and portions of the sector have taken a beating recently, which we think is a bit overdone. The staples group can be an important part of a portfolio, but without deteriorating economic conditions, a market weighting is the most we can justify. Read more on the Market Commentary page at www.schwab.com and follow us on Twitter: @schwabresearch.

Yum China Holdings Inc. (YUMC $41) posted Q3 EPS of $0.53, or $0.52 ex-items, versus the estimated $0.56, as revenues rose 8.0% y/y to $2.0 billion, roughly in line with forecasts. Q3 same-store sales grew 6.0% y/y, exceeding the 3.3% increase that was expected, reflecting solid growth at KFC and flat sales at Pizza Hut. The company approved an initial regular quarterly cash dividend of $0.10 per share, and increased its existing share repurchase program. YUMC traded higher.

September labor report shows wage growth may be gaining steam

Nonfarm payrolls (chart) declined by 33,000 jobs month-over-month (m/m) in September—the first decrease since September 2010—compared to the Bloomberg forecast of an 80,000 increase. The rise of 156,000 seen in August was revised to a gain of 169,000 jobs. The total downward revision to the job gains in August and July was 38,000. Excluding government hiring and firing, private sector payrolls decreased by 40,000, versus the forecasted gain of 75,000, after increasing by 164,000 in August, revised from the 165,000 rise that was initially reported.

The Labor Department noted that employment fell in food services and drinking places and showed below-trend growth in some other industries, likely reflecting major disruptions from hurricanes Harvey and Irma. Schwab's Chief Investment Strategist Liz Ann Sonders points out in her article, Trying to Reason with Hurricane Season: The Aftermath of "Harma", that a boost associated with the recovery/rebuilding efforts is likely. Read more on the Market Commentary page at www.schwab.com and follow Liz Ann on Twitter: @lizannsonders.

However, the unemployment rate fell to 4.2% from 4.4%, where it was forecasted to remain, with the Labor Department saying that there was no discernable effect of the hurricanes on the national unemployment rate. Average hourly earnings rose 0.5% m/m, above projections of a 0.3% increase and versus August's upwardly revised 0.2% increase. Y/Y, wage gains were 2.9%—the highest since 2009—versus estimates of a 2.6% increase, and versus August's upwardly 2.7% rise. Finally, average weekly hours remained at August's unrevised 34.4 rate, matching forecasts.

Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, points out in his article, Inflation May Be The Biggest Question For Investors In 2018, central banks are behaving as if wages and inflation will revive in the year ahead. If they don't, and central banks don't alter their policy path, the global stock markets could be in for a rough 2018. We expect central banks may get the big question of 2018 right, or at least mostly right, leading to gradually tighter monetary policy that doesn't derail the bull market or disrupt economic and earnings growth. But, there is a lot riding on it for investors and we will be watching the relationship between unemployment and wages closely. Read more on the Market Commentary page at www.schwab.com and follow Jeff on Twitter: @jeffreykleintop.

Wholesale inventories (chart) were revised slightly lower to a 0.9% m/m gain for August, versus forecasts calling for an unrevised preliminary 1.0% increase and July's 0.6% gain. Sales jumped 1.7% m/m, compared to forecasts to match July's upwardly revised flat reading. The inventory-to-sales ratio—the amount of time it would take to deplete inventories at the current sales pace—dipped to a 1.28 months pace from July's 1.29 rate.

Consumer credit, released in the final hour of trading, showed consumer borrowing expanded by $13.1 billion during August, below the $15.5 billion forecast of economists polled by Bloomberg, while July's figure was adjusted lower to an increase of $17.7 billion from the originally reported $18.5 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, rose $7.3 billion y/y, while revolving debt, which includes credit cards, increased by $5.8 billion.

Treasuries dipped but finished off the worst levels of the day that initially followed the employment report, with the yields on the 2-year and 10-year notes, as well as the 30-year bond rate, rising 2 basis points (bps) to 1.51%, 2.37% & 2.91%, respectively.

Due to positive and widespread global economic growth, with signs of an uptick in inflation, elevated expectations of a December Fed rate hike and the confirmation that the Central Bank will begin this month to shrink is massive balance sheet, Treasury yields and the U.S. dollar have rebounded noticeably in the past month. The yield on the 10-year Treasury note has recovered from levels not seen since late-2016 and the greenback has bounced off multi-year lows, also bolstered by the recently released tax reform framework, which appeared to foster some fiscal policy optimism despite facing a long road. The stock markets remain resilient, posting fresh record highs this week.

Amid this backdrop, Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his article, Tax Reform Framework Released, But The Road Ahead Is Long, and Schwab's Liz Ann Sonders discusses the stock market's resiliency in her article, Comfortably Numb? An Update on Investor Sentiment. Read these articles on the Market Commentary page at www.schwab.com.

Europe mostly lower, Asia advances to close out the week

European equity markets finished mostly lower, as the markets digested the noisy U.S. labor report and a sharp jump in German factory orders for August. Also, continued weakness in the British pound in the wake of the recent rally in the U.S. dollar and amid festering political uncertainty in the region may have buoyed the U.K. markets. The euro reversed to the upside as the U.S. gave up early labor-report-fueled gains and dipped on rumors of a potential missile test by North Korea over the weekend and amid elevated expectations the European Central Bank could begin to dial back stimulus measures. Spanish political uneasiness remained as Catalonia continues to fight for independence after this week's vote that national authorities have called illegal. U.K. political uncertainty also lingered in the wake of this week's speech by U.K. Prime minister Theresa May that was marred by some mishaps, while the Brexit negotiations appear to be getting complicated.

Meanwhile, U.S. rate hike expectations jumped on the employment report, while recent hawkish signals from the ECB and Bank of England added to the global monetary policy anxiety. Bond yields in the region mostly gained ground.

For analysis of political and Brexit uncertainties, see Schwab's Jeffrey Kleintop's, CFA, and Vice President of Trading and Derivatives, Randy Frederick's video, Political Risk: How Should Investors Respond?, and our article, Brexit Begins: What's Next for the U.K?, on the Insights & Ideas page at www.schwab.com. Follow Randy on Twitter: @randyafrederick. Uncertainty regarding who will be the Fed Chief in the U.S. is festering in the wake of the ECB and Bank of England signaling last month moves to tighten monetary policy. As such, Schwab's Jeffrey Kleintop, CFA, offers analysis in his article, How the Shift by Central Banks May Affect the Stock Market, on the Market Commentary page at www.schwab.com.

Stocks in Asia finished out the week in positive fashion, moving broadly higher on the heels of the continued record highs in the U.S., despite today's looming September labor report. However, volume remained lighter than usual, as mainland Chinese and South Korean markets remained closed for holidays. Japanese equities rose, with the yen extending recent weakness versus the U.S. dollar, while data showed wages rebounded slightly in August and Bloomberg pointed out that sentiment may have been supported by data showing foreigners turned to net buyers of Japanese equities last week for the first time since July. Shares trading in Hong Kong advanced, returning to action following yesterday's holiday break, while Indian stocks posted their first weekly gain in three. Australian securities gained ground, boosted by some dovish remarks by a Reserve Bank of Australia (RBA) member who said the RBA had not entirely ruled out further interest rate cuts in the wake of this week's disappointing retail sales figures and the central bank's unchanged monetary policy decision. Schwab's Jeffrey Kleintop, CFA, and Randy Frederick offer a look at global investing in the video, Is An Optimistic Outlook for Global Equities Warranted?, on the Insights & Ideas page at www.schwab.com.

Stocks begin Q4 in positive fashion

U.S. stocks began the final quarter of the year with a solid weekly gain and the U.S. dollar extended a recovery. Financials led the way as Treasury yields added to a recent rally that has taken the 10-year yield to highs not seen since July, with December rate hike expectations solidifying on a host of upbeat economic data. Leading up to Friday's labor report, a 13-year high in U.S. manufacturing activity followed upbeat reads out of China, Japan and eurozone, while growth in the key U.S. services sector was the strongest in 12 years. Both U.S. reports also showed inflation jumped.

Complementing the data, domestic business spending was stronger than initially-reported and September auto sales were mostly higher than projected. The House's passing of its budget resolution to start the long road to tax-reform bolstered fiscal policy optimism and most major sectors. However, crude oil prices fell decisively to give back a recent rally and pressure the energy sector.

Next week, the economic calendar will bring a plethora of releases that could drive volatility, headlined by the Producer Price Index (PPI) and Consumer Price Index (CPI), the minutes from the Fed's September meeting, retail sales and the preliminary October University of Michigan Consumer Sentiment Index. Other data next week to look out for include the NFIB Small Business Optimism Index and the JOLTS Job Openings report. However, the economic front will have to contend with the ramp up of Q3 earnings season, with the financial sector in focus as some banking heavyweights are slated to report.

As noted in the latest Schwab Market Perspective: Fourth Quarter Fun…or Folly?, the resiliency of stocks continues but risks of a pullback exist with signs of investor complacency and heightened political and geopolitical uncertainties. Earnings reporting season begins with elevated expectations and valuations, so the ability to hurdle the bar is getting tougher, but if surprises are biased to the upside, stocks should perform well. But that doesn't mean that there won’t be some Fed-induced volatility in the fourth quarter if inflation begins to kick in in earnest, it could push the Fed to be more aggressive than currently believed. Read more on the Market Commentary page at www.schwab.com.

International reports due out next week worth a mention include: Australia—consumer confidence. China—Caixin's PMI Services Index, trade balance and lending statistics. India—trade balance, CPI and industrial production. Japan—trade balance and core machine orders. Eurozone—investor confidence and industrial production, along with German trade balance and CPI. U.K.—industrial and manufacturing production and trade balance.

Please note: the U.S. bond markets will be closed on Monday in observance of the Columbus Day holiday.

Bulls Employ Strong Labor Report

Charles Schwab: On the Market

Posted: 8/5/2016 4:15 PM ET

Bulls Employ Strong Labor Report

Domestic stocks managed to retain solid session gains on Friday with the S&P 500 finishing at a record-high close in the wake of the stronger-than-expected July U.S. labor report. Treasuries were lower and the U.S. dollar was higher following the jobs data, while additional domestic reports showed that the trade deficit widened and consumer credit expanded by a smaller-than-forecasted figure. Meanwhile, gold was sharply lower and crude oil prices lost modest ground.

The Dow Jones Industrial Average (DJIA) increased 191 points (1.0%) to 18,544, the S&P 500 Index added 19 points (0.9%) to 2,183 and the Nasdaq Composite gained 55 points (1.1%) to 5,221. In moderately-heavy volume, 849 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq. WTI crude oil was $0.13 lower at $41.80 per barrel, wholesale gasoline added $0.01 to $1.38 per gallon and the Bloomberg gold spot price fell $24.71 to $1,336.44 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—gained 0.5% to 96.24. Markets were higher for the week, as the DJIA increased 0.6%, the S&P 500 Index ticked 0.4% to the upside and the Nasdaq Composite advanced 1.1%.

Kraft Heinz Co. (KHC $89) reported 2Q earnings per share (EPS) of $0.85, above the FactSet estimate of $0.71, on revenues of $6.8 billion, in line with forecasts. As well, the U.S. food giant upped its dividend by 4.5% to $0.60 per share. Shares finished solidly higher.

Priceline Group Inc. (PCLN $1,414) posted 2Q EPS ex-items of $13.93, well above the $12.67 that the Street was expecting. Revenues increased 12% year-over-year (y/y) to $2.6 billion, which were mostly in line with projections, even though it said it saw softer travel demand in markets affected by recent terrorist attacks, particularly France and Belgium. As well, PCLN said the search for a new Chief Executive Officer continues, and that it will take the time needed to find the right candidate. PCLN was nicely higher.

Weyerhauser Co. (WY $33) announced 2Q earnings ex-items of $0.17 per share, below the expected $0.22, with revenues falling 5.5% y/y to $1.7 billion, versus the estimated $1.9 billion. Despite the miss, shares of WY gained ground.

Monster Beverage Corp. (MNST $163) achieved 2Q earnings of $0.99 per share, below the expected $1.03, on revenues of $827.5 million, which beat analysts' expectations for $804.2 million. The energy drink maker cited continued strength in the U.S. dollar and distributor transitions for the lower-than-expected results. Shares closed higher.

U.S. jobs jump, but unemployment remains steady

Nonfarm payrolls (chart) rose by 255,000 jobs month-over-month (m/m) in July, compared to the Bloomberg forecast of a 180,000 increase. The rise of 287,000 seen in June was upwardly revised to a gain of 292,000 jobs. The total upward revision to job gains in May and June was 18,000. Excluding government hiring and firing, private sector payrolls increased by 217,000, versus the forecasted gain of 171,000, after increasing by 259,000 in June, negatively revised from the 265,000 rise that was initially reported. Gains were seen in professional and business services, healthcare and financial services, while employment in mining continued to trend lower.

The unemployment rate remained at 4.9%, compared to expectations of a decline to 4.8%, while average hourly earnings grew by 0.3% m/m, above projections of a 0.2% increase, and June's 0.1% rise was unadjusted and average weekly hours ticked higher to 34.5 from June's unrevised 34.4 hours where it was expected to remain. Finally, the labor force participation rate increased slightly to 62.8% during July from June's 62.7%.

Consumer credit, released in the final hour of trading, showed consumer borrowing expanded by $12.3 billion during June, falling short of the $16.0 billion forecast of economists polled by Bloomberg, while May's figure was revised lower to $17.9 billion from the initially reported level of $18.6 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, rose $4.6 billion, while revolving debt, which includes credit cards, rose by $7.7 billion.

The trade balance (chart) showed that the deficit widened in June to $44.5 billion, compared to the $43.0 billion Bloomberg estimate. May's deficit was revised to $41.0 billion from the $41.1 billion posted earlier. Exports rose 0.3% m/m to $183.2 billion, and imports rose 1.8% m/m to $227.7 billion.

Treasuries were lower following the jobs report, with the yields on the 2-year and 10-year notes rising 8 basis points (bps) to 0.72% and 1.58%, respectively, while the 30-year bond rate was 6 bps higher at 2.31%. Bond yields have seen some pressure in the wake of the decision in the U.K. to cut rates and add to its asset purchases, the unchanged monetary policy stance from the Fed, and severe miss in 2Q GDP growth.

Schwab's Chief Investment Strategist, Liz Ann Sonders provides analysis of last week's Fed's decision in her commentary, A Hopeful Transmission: Fed Holds Rates Steady, But… and Schwab's Chief Fixed Income Strategist, Kathy Jones discusses in her article, With a Whimper Instead of a Bang: Is the Great Bond Bull Market Over?. Read both articles at www.schwab.com/marketinsight and follow Liz Ann and Kathy on Twitter: @lizannsonders and @kathyjones.

Europe sees gains on Bank of England and U.S jobs buoyancy, Asia mixed

European equities finished soundly higher, getting a boost from the better-than-expected U.S. July labor report. Meanwhile, yesterday's monetary policy decision by the Bank of England (BoE) to cut its benchmark interest rate and unexpectedly boost its asset purchase program also helped to further soothe uncertainty post-Brexit. Financials continued to be a point of focus amid attention on the Italian banking sector, as the Bank of Italy's governor said it cannot rule out public support for the nation's troubled banks.

The euro and the pound were lower versus the greenback following the U.S. labor report, while bond yields in the region were higher. Amid the continued elevated global volatility that has been amplified by economic growth uncertainty and divergent monetary policy actions, Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, offers Three Reasons Why Now is Not the Time to Retreat from Global Diversification and Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, provides an updated look at sectors in the aftermath of Brexit in the latest Schwab Sector Views: Brexit's Impact on Sectors, Part Two. Read both articles at www.schwab.com/marketinsight and be sure to follow Schwab and Jeff on Twitter: @schwabresearch and @jeffreykleintop.

Stocks in Asia finished mixed ahead of today's U.S. labor report and as investors continue to assess the divergent monetary policy around the globe. Japanese equities finished flat, unable to hang on to early gains and getting little help from some weakness in the yen as an upbeat wage report was met with lower-than-expected consumption figures and a flat read on the nation's Leading Index. Mainland Chinese stocks nudged lower, while securities trading in Hong Kong finished with solid gains. Indian listings ticked higher, with investors continuing to gauge the possible effects of the nation's largest tax reform in decades, per Bloomberg, with the goods-and-services tax bill passed by the upper house of parliament yesterday. Schwab's Director of International Research, Michelle Gibley, CFA, offers a look at the global political landscape in her article, Performing Reformers: How Political Change Can Affect Stocks, at www.schwab.com/oninternational. Meanwhile, Australian stocks advanced, led by energy and materials issues, while South Korean equities gained ground.

Stocks finish week higher despite slow start

After an initial sluggish start, the Dow was able to end its seven-session losing streak and U.S. equities finished the trading week higher. An end-of-week rally transpired on the heels of the better-than-expected July labor report amid the backdrop of 2Q earnings season, which continued to roll out results that, more often than not, topped analysts' forecasts. In the recent Schwab Market Perspective: Is the Recent Rally for Real?, our experts highlight that this doesn’t mean the economy is off to the races as the business community remains relatively cautious, despite a largely better-than-expected earnings season. In the article, Schwab's specialists dive deeper into the earnings scene and note that interestingly, when we step back from the seasonal pattern we can see that after about two years of declines a rising trend in earnings estimates appears to be emerging. Read the whole perspective at www.schwab.com/marketinsight, and be sure to follow Schwab on Twitter: @schwabresearch.

Dow members Pfizer Inc. (PFE $36) and Procter & Gamble Co. (PG $87) bested both top and bottom line expectations, CVS Health Corp. (CVS $98) beat on earnings and Time Warner Inc. (TWX $78) also topped per share profit forecasts, while MetLife Inc. (MET $40) reported figures that were well south of estimates. In the recent article Earnings estimates are rebounding: what it means for stocks, Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, discusses how analysts’ improving outlook for corporate earnings has tracked the trend of better-than-expected economic data, helping to support stocks in the face of negative geopolitical events. Read more of Jeff's insights at www.schwab.com/marketinsight, and be sure to follow him on Twitter: @jeffreykleintop.

Heavy dose of data expected

Next week's domestic economic docket will heat back up, with key releases of retail sales and the preliminary University of Michigan Consumer Sentiment Index for August. In the recent Schwab Market Perspective, our experts note that consumer confidence remains relatively healthy according to the Conference Board, likely due at least in part to a continued healthy job market. This has helped to move wages higher after years of largely tepid or nonexistent gains according to the Atlanta Fed Wage Tracker, which could have aided the recent move up in the retail sales estimates for 2016 by the National Retail Federation. Read more at www.schwab.com/marketinsight, and be sure to follow Schwab on Twitter: @schwabresearch.

Other significant U.S. reports next week include: preliminary 2Q nonfarm productivity and unit labor costs, the NFIB Small Business Optimism Index, wholesale and business inventories, the JOLTS Job Openings report, the Import Price Index, and the Producer Price Index.

International economic releases for next week are expected to include: China—trade data, CPI, PPI, industrial production and retail sales. Japan—trade data, machine orders, PPI and the Tertiary Industry Index. India—trade data, CPI and industrial production. U.K.—industrial and manufacturing production, construction output and trade data. Germany—the Wholesale Price Index, CPI, preliminary 2Q GDP, industrial production and trade data. Eurozone—industrial production and preliminary 2Q GDP.