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Market Update

Schwab clients get the latest in-depth U.S. market news as well as analysis and commentary from respected sources, both proprietary and third party.

Posted: 12/11/2017 9:00 AM EST

Stocks Nudge Higher

U.S. stocks are ticking higher in early action, coming off the rebound late last week as global economic optimism appeared to be preserved by data, though the markets are eyeing the tax reform reconciliation process and awaiting this week's monetary policy decisions by the Fed, ECB and BoE. Treasury yields and the U.S. dollar are dipping, along with gold, while crude oil prices are ticking higher. Asia finished mostly higher and Europe is mixed.

As of 8:50 a.m. ET, the March S&P 500 Index future is 3 points above fair value, the DJIA future is 40 points above fair value, and the Nasdaq 100 Index future is 5 points north of fair value. WTI crude oil is increasing $0.10 to $57.46 per barrel and Brent crude oil is up $0.22 to $63.62 per barrel. The Bloomberg gold spot price is trading $0.70 lower at $1,247.79 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is dipping 0.1% to 93.82.

Juno Therapeutics Inc. (JUNO $59) and Celgene Corp. (CELG $106) are trading higher after the companies release favorable results from a trial of their treatment for a type of non-Hodgkin lymphoma.

Job openings report set to kick off busy week

Treasuries are slightly higher in early action with the economic calendar void of any major releases before the opening bell. The yield on the 2-year note is flat at 1.80%, while the yield on the 10-year note is dipping 1 basis point (bp) to 2.37% and the 30-year bond rate is declining 2 bps to 2.75%.

Later this morning, we will get the release of the Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, forecasted to show 6.1 million jobs were available to be filled in October, roughly in line with the figure posted in September.

Treasury yields and the U.S. dollar are dipping with U.S. tax reform remaining a key focus for the markets, as the House and Senate try to reconcile their bills with a goal of trying to get one bill on President Donald Trump's desk for a signature by the end of the year.

Schwab's Director of Tax and Financial Planning, Hayden Adams, CPA, offers analysis of this process and what investors should be paying attention to, in his article, Tax Reform: What Investors Should Know, while also addressing questions regarding how the potential tax overhaul may affect you as an investor in his article, Tax Reform: Frequently Asked Questions. Moreover, as you conduct your year-end tax planning, check out our latest article, Tax Reform: 11 Questions to Ask Your Advisor.

However, this 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%. 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 Fed's meeting will be followed by monetary policy decisions from the European Central Bank (ECB) and Bank of England (BoE) on Thursday. Other economic releases this week include: 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.

Europe mixed amid political focus and ahead of monetary policy decisions

European equities are mixed in afternoon action, with the euro ticking higher versus the U.S. dollar and technology issues remaining under pressure, while the markets are likely treading cautiously ahead of monetary policy decisions this week from the Fed, ECB and BoE. Politics are also garnering attention as the U.S. tax reform reconciliation process continues and traders look to see if U.K. Brexit talks will move to the next stage after late last week's agreement that appeared to break the negotiation impasse between the U.K. and European Union. 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 British pound is lower versus the U.S. dollar and bond yields in the region are moving to the downside.

The U.K. FTSE 100 Index is up 0.5%, Italy's FTSE MIB Index and Switzerland's Swiss Market Index are little changed, while France's CAC-40 Index, Germany's DAX Index and Spain's IBEX 35 Index are dipping 0.1%.

Asia mostly higher amid resurfacing global economic optimism

Stocks in Asia finished higher on the heels of the gains in the U.S. on Friday, with a relatively favorable labor report bolstering global economic optimism, while the markets keep an eye on the U.S. tax reform reconciliation process. Also, looming monetary policy decisions this week out of the U.S., eurozone and U.K. are in focus, along with a host of economic data in the region, commencing with inflation figures out of China that showed wholesale inflation rose in line with forecasts, but consumer inflation came in slightly cooler than expected. After the closing bell, China reported lending statistics for November that came in above forecasts. The global stock markets remain nicely higher for the year, bolstered by the broadest economic growth in a decade, which is expected to continue in 2018 as discussed by Schwab's Jeffrey Kleintop, CFA, discusses in his article, 5 Reasons Investors Should Give Thanks. Japan's Nikkei 225 Index advanced 0.6%, with the yen's recent weakness aiding the markets, while China's Shanghai Composite Index rose 1.0% and the Hong Kong Hang Seng Index increased 1.1%. Australia's S&P/ASX 200 Index ticked 0.1% higher and South Korea's Kospi Index increased 0.3%, while India's S&P BSE Sensex 30 Index gained 0.6%.

Schwab Center for Financial Research - Market Analysis Group

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