Stocks Mixed in Final Trading Session of First Half of 2017

Charles Schwab: On the Market

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

Stocks Mixed in Final Trading Session of First Half of 2017

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

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

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

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

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

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

Personal income and spending tick higher, Chicago PMI jumps 

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

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

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

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

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

Europe dips and Asia mixed following recent tech slide

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

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

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

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

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

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

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

Bears Dominate on Tuesday

Bears Dominate on Tuesday

4:25 PM ET, 06/27/2017 - Briefing.com

[BRIEFING.COM] Wall Street took it to the chin on Tuesday as equities sold off into the closing bell, leaving the major averages at their worst marks of the day. The tech-heavy Nasdaq (-1.6%) was hit the hardest as technology and biotechnology stocks weighed. Meanwhile, the S&P 500 and the Dow settled with losses of 0.8% and 0.5%, respectively.

There was a notable jump in long-term rates on Tuesday as sovereign bond markets came under selling pressure in the wake of a morning remark from ECB President Mario Draghi that the threat of deflation is gone. The yield on the 10-yr Treasury note jumped six basis points to 2.20%, which contributed partly to the selling activity in richly-valued technology stocks and the underperformance of rate-sensitive areas like the S&P 500 utilities sector (-1.3%).

However, the heavily-weighted financial sector (+0.5%) benefited from the activity in the Treasury market as it resulted in a steepening of the yield curve, which is a positive for the financial industry's bottom line. The win marks the second in a row for the financial group and comes ahead of tomorrow's capital return plans, which will be released after the close.

Like financials, the energy sector (-0.2%) finished ahead of the broader market as crude oil cruised to its fourth-consecutive advance. Underpinned by a weaker dollar, the energy component jumped 2.0% to $44.25/bbl. Meanwhile, the U.S. Dollar Index (96.07, -1.04) tumbled 1.1% to a fresh nine-month low in reaction to the aforementioned remark from Mr. Draghi.

However, in the end, the bulls were just no match for the bears on Tuesday as ten of the eleven sectors finished in the red. The top-weighted technology group (-1.7%) finished at the very bottom of the leaderboard amid broad weakness. Alphabet (GOOGL 948.09, -24.00) was one of the sector's weakest components, dropping 2.5%, after European antitrust regulators hit the company with a $2.7 billion fine for skewing search results in favor of its own shopping site. Chipmakers also displayed notable weakness, sending the PHLX Semiconductor Index lower by 2.7%.

The lightly-weighted telecom services space (-1.4%) finished just a tick ahead of the technology group following news that Sprint (S 8.18, +0.17) has entered into exclusive talks with Charter Communications (CHTR 329.87, -2.78) and Comcast (CMCSA 39.25, -0.34) regarding a wireless deal. Wireless heavyweights Verizon (VZ 44.84, -0.91) and AT&T (T 37.70, -0.45) declined 2.0% and 1.2%, respectively, following the news.

Biotechnology stocks also exhibited notable weakness, leaving the iShares Nasdaq Biotechnology ETF (IBB 310.89, -8.65) lower by 2.7%, as investors took some money off the table following last week's biotech rally. However, the health care sector (-0.9%) held up relatively well, settling just a tick below the benchmark index.

Outside of real estate (-0.4%), the remaining laggards--consumer discretionary (-0.7%), industrials (-0.8%), materials (-0.7%), and consumer staples (-0.9%)--finished roughly in line with the broader market.

Also of note, the Senate decided to push back a vote on the Republican healthcare bill until after Congress returns from the July Fourth recess, as most expected. 

Reviewing Tuesday's economic data, which included the June Consumer Confidence Index and the April Case-Shiller 20-city Index:

The consumer confidence reading for June rose to 118.9 from the prior month's revised reading of 117.6 (from 117.9). The Briefing.com consensus expected the survey to hit 116.7.The key takeaway from the report is that consumer expectations for the short-term have been reined in some, but are still upbeat overall.The April Case-Shiller 20-city Index hit 5.7% (Briefing.com consensus 5.9%) to follow last month's unrevised 5.9% increase.

On Wednesday, investors will receive the weekly MBA Mortgage Applications Index and May Pending Home Sales (Briefing.com consensus 0.5%). The two reports will be released at 7:00 ET and 10:00 ET, respectively. 

Nasdaq Composite +14.2% YTDS&P 500 +8.1% YTDDow Jones Industrial Average +7.8% YTDRussell 2000 +3.4% YTD

Stocks Diverge Amid Economic Data, Uncertainty

Charles Schwab: On the Market

Posted: 6/26/2017 4:15 PM ET

Stocks Diverge Amid Economic Data, Uncertainty

U.S. equities finished mixed and near the unchanged mark, as a rise in financials, despite a decline in Treasury yields, were offset by continued volatility in technology issues that hamstrung the Nasdaq. Crude oil prices moved higher and gold was lower, while the U.S. dollar was unchanged. On the economic front, durable goods orders missed forecasts, while some regional manufacturing activity remained in expansion territory.

The Dow Jones Industrial Average (DJIA) rose 15 points (0.1%) to 21,410, the S&P 500 Index was nearly a point higher to 2,439, while the Nasdaq Composite lost 18 points (0.3%) to 6,247. In moderate volume, 795 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq. WTI crude oil gained $0.37 to $43.38 per barrel and wholesale gasoline was $0.01 higher at $1.43 per gallon. Elsewhere, the Bloomberg gold spot price decreased $12.77 to $1,243.94 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 97.43.

Nestle SA (NSRGY $88) got a boost to help the European markets move higher amid the disclosure that hedge fund Third Point, ran by activist investor Dan Loeb, has accumulated a $3.5 billion stake in the company. Third Point is encouraging Nestle to sell its stake in cosmetics maker L'Oreal SA (LRLCY $44), increase leverage for share buybacks and adopt a formal profitability target, among other suggestions, per Bloomberg.

Avis Budget Group Inc. (CAR $28) jumped on the announcement that it has entered into an agreement regarding self-driving car fleet management with Google parent Alphabet Inc. (GOOGL $972).

Durable goods orders miss

May preliminary durable goods orders (chart) dropped 1.1% month-over-month (m/m), compared to the Bloomberg estimate of a 0.6% decline, and April's 0.8% decrease was revised to a 0.9% fall. Ex-transportation, orders were 0.1% higher m/m, compared to forecasts of a 0.4% gain and versus April's unrevised 0.5% decline. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, decreased 0.2%, versus projections of a 0.4% increase, and the upwardly revised 0.2% rise posted in the month prior.

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

The Dallas Fed Manufacturing Activity Index declined more than expected but remained at a level depicting expansion (a reading above zero). The index decreased to 15.0 in June, from 17.2 in May, and compared to the expected decline to 16.0.

The political front remains in focus amid this week's Senate healthcare bill battle, while Capitol Hill continues to debate the debt ceiling and the markets are looking for any developments on tax and regulatory reforms. As such, Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, Washington Midyear Update: 4 Key Issues for Investors to Watch, on the Insights & Ideas page at www.schwab.com.

Treasuries finished higher, as the yield on the 2-year note fell 2 basis points (bps) to 1.33%, the yield on the 10-year note dipped 1 bp to 2.13% and the 30-year bond rate is decreased 2 bps to 2.70%. Bond yields remain depressed amid the economic confusion and political uncertainty and Schwab's Chief Fixed Income Strategist, Kathy Jones delivers her Bond Market Mid-Year Outlook: Redefining the Borders of 'Lower for Longer' on the Fixed Income page at www.schwab.com. Follow Kathy on Twitter: @kathyjones.

Tomorrow's economic calendar will begin with the S&P/Case-Schiller Home Price Index, forecasted to show the 20-city composite rose 5.9% year-over-year and 0.45% on a seasonally-adjusted basis month-over-month in April, as well as the Consumer Confidence Index, with economists expecting a slight downtick to a level of 116.0 for June from the 117.9 posted in May, and the Richmond Fed Manufacturing Index will round out the day.

Europe higher on eased Italian bank concerns, Asia mostly higher as oil stabilizes

European equities finished broadly higher, with financials getting a boost from news that Italy has moved to bailout two ailing regional banks, while a read on German business confidence unexpectedly improved for June. Oil & gas issues gave up a modest advance as crude oil prices were choppy in the wake of a recent tumble. The euro and British pound ticked higher versus the U.S. dollar, while bond yields in the region finished mixed. The markets shrugged off festering political turmoil overseas, including upcoming elections in Italy and Germany later this year and as the U.K. preps for intensified Brexit negotiations. For more on the political front, 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?. Follow Jeff and Randy on Twitter: @jeffreykleintop and @randyafrederick.

Stocks in Asia finished mostly higher to begin the week, with crude oil prices stabilizing after last week's drop, while Chinese markets led the way amid optimism about MSCI inclusion of mainland shares and speculation that state-backed funds were helping support the markets, per Bloomberg. Both mainland Chinese stocks and those traded in Hong Kong advanced. Japanese equities ticked higher, with the yen nudging lower, while securities in Australia and South Korea finished higher. Markets in India were closed for a holiday. For a look at the global landscape, see the video from Schwab's Jeffrey Kleintop, CFA, What's the Current State of the Global Economy? on the Insights & Ideas page at www.schwab.com.

Tomorrow's international economic calendar will include consumer sentiment from South Korea as well as business and consumer confidence from Italy.

Dow Unable to Hold Gains

Charles Schwab: On the Market

Posted: 6/23/2017 4:15 PM ET

Dow Unable to Hold Gains

The U.S. equity markets finished out the week mixed, with early gains for the Dow fading in the final hour of trading, and the S&P 500 and Nasdaq posting only modest gains. Technology and energy stocks were the day’s winners, with crude oil prices stabilizing, but a fall in consumer discretionary issues put a lid on the gains. Treasuries were mostly flat following reads that showed services and manufacturing activity missed expectations, but remained at levels depicting expansion, while the new home sales report for May topped forecasts. Gold was higher and the U.S. dollar was unchanged.

The Dow Jones Industrial Average (DJIA) declined 1 point to 21,396, the S&P 500 Index moved 4 points (0.2%) higher to 2,438, and the Nasdaq Composite gained 29 points (0.5%) to 6,265. In heavy volume, 2.0 billion shares were traded on the NYSE and 3.8 billion shares changed hands on the Nasdaq. WTI crude oil gained $0.27 to $43.01 per barrel and wholesale gasoline was unchanged at $1.42 per gallon. Elsewhere, the Bloomberg gold spot price increased $5.35 to $1,255.86 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 97.25. Markets were higher for the week, as the DJIA inched 0.1% higher, the S&P 500 Index rose 0.2%, and the Nasdaq Composite jumped 1.8%.

Global software company BlackBerry Ltd. (BBRY $10) announced Q1 results of $0.02 per share, topping the FactSet consensus estimate of a flat reading, while revenues were short of estimates and dropped 42.5% year-over-year (y/y) to $244 million. Shares of BBRY were sharply lower.

In the latest Schwab Sector Views: From the Top Down, Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, provides us with a fresh method to view the 11 major sectors of the stock market. Brad explains that with our sector views we often zero in on individual sectors or industries by looking at them from a “bottom up” perspective. By that we mean, focusing on fundamental factors such as industry-specific order trends or changes to the regulatory environment in a bid to determine whether a given sector may outperform or underperform the market. However, “top-down” issues, such as the state of the economy, large-scale political or geopolitical change, or the interest rate environment, can also have a major impact on performance. Read the whole article on the Markets & Economy page at www.schwab.com and follow Schwab on Twitter: @schwabresearch.

New home sales beat expectations, manufacturing and services data miss slightly

New home sales (chart) increased 2.9% month-over-month (m/m) in May to an annual rate of 610,000, above forecasts calling for 590,000 units, and compared to the upwardly revised 593,000 unit pace in April. The median home price jumped 16.8% y/y to a record $345,800. New home inventory remained at 5.3 months of supply at the current sales pace. Sales were down m/m in the Northeast and Midwest regions. Y/Y, sales were higher in the South and West, though lower in Midwest and flat in the Northeast. New home sales are based on contract signings instead of closings.

The preliminary Markit U.S. Manufacturing PMI Index unexpectedly declined to 52.1 for June, below May's final read of 52.7, and compared to estimates calling for an improved level of 53.0. The preliminary Markit U.S. Services PMI Index showed growth for the key U.S. sector this month dipped to 53.0 from May's reading of 53.6, versus forecasts of slight decline to 53.5. Readings above 50 for both reports denotes expansion in activity.

Treasuries were nearly unchanged following the data, as the yields on the 2-year and 10-year notes, along with the 30-year bond, were flat at 1.34%, 2.14% and 2.72%, respectively. In the Bond Market Mid-Year Outlook: Redefining the Borders of 'Lower for Longer', Schwab's Chief Fixed Income Strategist, Kathy Jones informs us that the bond market continues to confound the experts. Each year since the end of the recession in 2009, consensus expectations have called for higher bond yields and the death of the 35-year bond bull market. Yet 10-year Treasury yields are now nearly 200 basis points lower than in 2010. For Schwab's viewpoint on the second half of 2017 be sure to read the whole article on the Fixed Income page at www.schwab.com and follow Kathy on Twitter: @kathyjones.

Europe lower on Brexit vote 1-year anniversary, Asia mixed

European equities traded lower with food and beverage companies leading the decline following some reports that showed economic activity eased and as oil prices stabilized, while Brexit discussions continued. Yesterday, U.K. Prime Minister Theresa May told European Union (EU) leaders that EU citizens in Britain will be able to continue living there after the country leaves the bloc and the Prime Minister will be making this statement to the British Parliament on Monday when details of her proposal will be published by the government. In economic news in the region, flash Markit manufacturing and services PMI reads for the region diverged as a continued surge of manufacturing activity was offset by softer services growth, though job creation for the manufacturing base is near a ten-year high.

The euro and British pound moved higher versus the U.S. dollar and bond yields in the region were mostly to the upside. In his recent article, Are bonds signaling a major stock market peak?, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, informs us that by examining yield curves from around the world, the prognosis on the likelihood of a global recession and bear market is favorable. While the risk may be rising, the yield curves indicate that the risk of recession is currently modest—except for the United Kingdom—based on historical evidence but history doesn't guarantee future performance. Read the whole article on the Insights & Ideas page at www.schwab.com where you can also find Schwab's article, Brexit Begins: What's Next for the U.K.? and also follow Jeff on Twitter: @jeffreykleintop.

Stocks in Asia finished mixed as crude oil prices stabilized after recently entering bear market territory. Japanese equities rose modestly, snapping a string of losses, with the yen little changed versus its U.S. counterpart. Mainland Chinese stocks advanced after staging a late session rally that ensued amid speculation that government-backed funds were used to steady the market, per Bloomberg. Markets in the Asian nation had come under pressure late yesterday after reports surfaced that the China Banking Regulatory Commission had asked some lenders to review their exposure to Chinese firms involved in relatively recent large acquisitions. Meanwhile, listings in Hong Kong were nearly unchanged. Indian securities dropped, giving up early gains, which was largely attributed to profit-taking ahead of a long weekend, and Australian stocks gained ground despite being weighed down by financial stocks after a state-based version of the federal bank levy was introduced and as the Australian dollar traded lower versus the U.S. dollar. Finally, South Korean equities were also higher.

Equities squeak by with gains despite low oil

U.S. stocks finished the trading week higher, as the Nasdaq surged to reclaim some of the losses that it had accumulated the week prior, while the Dow and the S&P 500 saw modest weekly advances. A consistent decline in crude oil prices, which stabilized after reaching bear-market territory, weighed on equities throughout the remainder of the week and prices will likely continue to be eyed as market participants debate whether the slide was supply- or demand-driven. The U.S. economic calendar remained dormant until Wednesday and though the datapoints delivered were mostly in line or above expectations they were unable to provide any decisive direction for the broader markets. Healthcare stocks were standout winners this week after receiving a solid boost in the wake of the U.S. Senate introducing its bill aimed at replacing the Affordable Care Act on Thursday.

Schwab's experts believe the recent economic confusion may be contributing to investor skepticism as they detail in the latest Schwab Market Perspective: Shifting Sentiment?. We believe the pullback in both tech and the overall market was healthy and served to correct some overly optimistic sentiment conditions. But temper your enthusiasm for a sharp rebound like we’ve seen in the past. The new variable in the equation is a Fed that is more hawkish than the market in terms of the expected trajectory of rate hikes. A bit of volatility returned to Wall Street, with indexes pulling back from record highs and the leading sector performer to this point in the year, technology, experiencing a decent-sized pullback. Read more on the Markets & Economy page at www.schwab.com and follow us on Twitter: @schwabresearch.

Next week, the U.S. economic calendar will paint details of the broad economic landscape with the release of the third and final read for Q1 GDP. And unlike this week, the domestic docket will hit the Street running with the manufacturing sector likely to be in focus following Monday's release of May durable goods orders before opening the bell.

Other U.S. reports slated for next week include: the Chicago PMI Index, the S&P/Case-Schiller Home Price Index, the Consumer Confidence Index, pending home sales, personal income and spending, the final University of Michigan Consumer Sentiment Index for June, and wholesale inventories.

International reports due out next week include: Australia—new home sales and private sector credit. China—industrial profits, current account and manufacturing and non-manufacturing PMIs. Japan—PPI, Leading Index, retail sales, jobless rate, CPI, industrial production, vehicle production, housing starts and construction orders. U.K.—house prices, consumer credit, mortgage approvals, GDP, Index of Services, business investment and the GfK Consumer Confidence Index. Eurozone—consumer confidence and CPI and German CPI, Ifo business climate survey, retail sales, GfK Consumer Confidence and Index of Services.

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.

Tech Decline Continues to Weigh on Equities

Charles Schwab: On the Market

Posted: 6/12/2017 4:15 PM ET

Tech Decline Continues to Weigh on Equities

U.S. stocks traded lower, with technology stocks again leading the decline, while market participants appeared cautious ahead of this week's monetary policy decisions from the Federal Reserve, Bank of England, Bank of Japan and Swiss National Bank. Treasury yields ticked higher, crude oil prices recovered a bit of ground and the U.S. dollar and gold were little changed. In equity news, Dow member General Electric announced its CEO Jeff Immelt will retire.

The Dow Jones Industrial Average (DJIA) decreased 36 points (0.2%) to 21,236, the S&P 500 Index lost 2 points (0.1%) to 2,429, and the Nasdaq Composite shed 32 points (0.5%) to 6,175. In heavy volume, 951 million shares were traded on the NYSE and 2.6 billion shares changed hands on the Nasdaq. WTI crude oil increased $0.25 to $46.08 per barrel and wholesale gasoline was $0.01 lower at $1.49 per gallon. Elsewhere, the Bloomberg gold spot price decreased $1.42 to $1,265.34 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly 0.1% lower at 97.20.

Dow member General Electric Co. (GE $29) announced that Chairman and Chief Executive Officer (CEO) Jeff Immelt will retire and John Flannery, current President and CEO of GE Healthcare has been named CEO of the company, effective August 1, 2017. GE noted that Immelt will remain Chairman through his retirement on December 31, 2017 and the leadership change is the result of a succession plan that had been run by the Board since 2011. Flannery will become Chairman and CEO January 1, 2018. Shares traded nicely higher.

The technology sector remained in focus today, extending Friday's selloff that gave back some of a decisive rally that has led to a plethora of record highs for the stock markets. Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, notes in his latest Schwab Sector Views: Technology—Too Far or Room to Run?, the tech run likely won't go on forever—nothing does—but we don't see the unabashed enthusiasm for the group that would make us more concerned, and valuations aren't extended to the point that we believe investors should start to worry. That doesn't mean investors who have developed too large a position in tech relative to their risk tolerances shouldn't rebalance and take some profits. But we continue to see positive developments and believe the run in the tech sector still has further to go. Read more on the Markets & Economy page at www.schwab.com. Follow Schwab on Twitter: @schwabresearch.

Fed monetary policy headlines heavy weekly economic calendar

Treasuries ticked lower as the economic calendar was void of any major release today. The yield on the 2-year note increased 2 basis points (bps) to 1.35%, while the yields on the 10-year note and the 30-year bond added 1 bp to 2.21% 2.87%, respectively.

Treasury yields modestly extended a recent rebound from heightened domestic and European political uncertainty, mixed economic data, the Fed's highly expected rate hike this week and the likelihood that the Fed could begin the process of shrinking its large balance sheet later 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 Knowon the Fixed Income page at www.schwab.com. Follow Kathy on Twitter: @kathyjones. Also, Chief Investment Strategist Liz Ann Sonders addresses the recent mixed economic data in her latest article, Turn Down For What: Why is Job Growth Slowing?, on the Markets & Economy page at www.schwab.com and follow Liz Ann on Twitter: @lizannsonders.

The markets are looking to this week's fully-loaded economic calendar, highlighted by the Consumer and Producer Price Indexes (CPI & PPI), NFIB Small Business Optimism, retail sales, industrial production and capacity utilization, the NAHB Housing Market Index, housing starts and building permits, and the preliminary University of Michigan Consumer Sentiment Index. However, the headlining event will likely be Wednesday's Federal Open Market Committee's (FOMC) monetary policy decision. A 25 bp hike to the target fed funds rate is highly expected, but the accompanying statement, updated economic projections and subsequent press conference by Chairwoman Janet Yellen are poised to garner heavy attention.

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.

Tomorrow, the U.S. economic calendar  will commence with the latest National Federation of Independent Business (NFIB) Small Business Optimism Index, forecasted to remain near historical record highs at a level of 104.5 for May, which will be followed by the Producer Price Index (PPI) for May, expected to have not changed m/m after increasing 0.5% in April, while excluding food and energy, the core rate is anticipated to have increased by 0.1%.

European equities down on politics, Asian stocks also see some pressure

European equities lost ground, with technology issues decisively lower on the heels of Friday's selloff in the sector in the U.S., while traders appeared cautious amid looming monetary policy decisions this week out of the U.S., U.K. Switzerland and Japan. The British pound extended late last week's slide versus the U.S. dollar, to lend some relative support to U.K. stocks. The markets grappled with the recent U.K. election that surprisingly resulted in a hung parliament and fostered uncertainty regarding the timing of Brexit negotiations and whether they will yield hard or softer exit terms. Political uncertainty was also supported by local elections in Italy, which faces a national election later this year, showing the populist Five Star Movement suffered a setback. Fallout from France's recent election remained in focus, with President Macron appearing set to gain a large parliamentary majority following this weekend's first round vote. Germany is also headed for an election later this year. For commentary on the political front check out 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?. Follow Jeff and Randy on Twitter: @jeffreykleintop and @randyafrederick. 

In economic news, French business sentiment held steady in May, while Italian industrial production missed expectations for April. The euro ticked higher versus the greenback and bond yields in the region were mostly lower. However, the oil & gas sector was the lone group in the green as crude oil prices rebounded somewhat from a recent tumble in the wake of last month's disappointing OPEC production cut extension and last week's noticeably bearish U.S. oil inventory data.

Stocks in Asia finished lower as Friday's selloff in the technology sector in the U.S. carried over to the region, causing a flare-up in uneasiness toward the group that has led the rally in the stock markets. The global markets are awaiting this week's key monetary policy decisions, with the Bank of England, Bank of Japan and Swiss National Bank set to deliver statements after Wednesday's highly-anticipated announcement from the Fed in the U.S., which is expected to deliver a rate hike. Moreover, political uncertainty remained on the heels of last week's U.K. election that led to a hung parliament. Japanese equities declined, with the yen gaining some ground and following a report that showed the nation's machine orders—a gauge of capital spending—unexpectedly fell in April. Stocks trading in mainland China and Hong Kong decreased, Indian securities traded lower and South Korean shares dropped. Australian markets were closed for a holiday. 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.

The international economic docket for tomorrow will deliver the BSI All Industry Index and a manpower survey from Japan, business confidence from Australia, CPI, PPI and housing data from the U.K., the Wholesale Price Index from Germany and non-farm payrolls from France.