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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: 9/16/2019 4:15 PM EDT

Increased Geopolitical Worries Hamper Stocks

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U.S. equities began the new week on a down note amid heightened geopolitical concerns after a Saudi Arabian oil facility was attacked over the weekend, which in turn sent crude oil prices soaring. Market participants also awaited the monetary policy decisions out of the U.S., the U.K. and Japan, and global growth concerns persisted following some disappointing Chinese economic data. Treasury yields fell, giving back some of a recent jump, and the U.S. dollar was higher, with a read on regional manufacturing activity slowing more than expected but remained in expansion territory, while gold gained ground. In equity news, GM was in focus after the United Auto Workers announced a strike, while Burlington Stores announced the resignation of its CFO.

The Dow Jones Industrial Average (DJIA) fell 143 points (0.5%) to 27,077, the S&P 500 Index lost 10 points (0.3%) to 2,998 and the Nasdaq Composite declined 23 points (0.3%) to 8,154. In moderately-heavy volume, 909 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil rallied $8.04 $62.90 per barrel and wholesale gasoline jumped $0.20 to $1.75 per gallon. Elsewhere, the Bloomberg gold spot price increased $11.19 to $1,499.72 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was up 0.4% at 98.61.

General Motors Company (GM $37) fell after the United Auto Workers (UAW) announced plans for a national strike at the automaker's plants, as it tries to secure better wages, affordable better health care and job security. GM noted that it presented a strong offer that improves wages, benefits and grows U.S. jobs in substantive ways and it is disappointed that the UAW leadership has chosen to strike.

Burlington Stores Inc. (BURL $192) announced the resignation of its Chief Financial Officer (CFO), Marc Katz, effective immediately, to pursue other professional opportunities. BURL announced that John Crimmins, Executive Vice President, Finance and Chief Accounting Officer has been appointed interim CFO. Shares were lower.

New Relic Inc. (NEWR $58) declined after the cloud-based application performance management solutions company cut its full-year revenue guidance, and announced management changes.

Regional manufacturing activity slows more than expected to start the week

The Empire Manufacturing Index showed output from the New York region decelerated more than expected but remained in expansion territory (a reading above zero) for September. The index declined to 2.0 from August's unrevised 4.8 level, with the Bloomberg forecast calling for a decline to 4.0.

Treasuries rose after last week's drop, as the yield on the 2-year note declined 4 basis points (bps) to 1.75%, while the yields on the 10-year note and the 30-year bond dropped 6 bps to 1.84% and 2.31%, respectively. For a look at the volatility in the fixed income markets, see Schwab's Chief Fixed Income Strategist Kathy Jones' latest article, Bond Market: Why Is Everything Upside Down?

Stocks pulled back a bit ahead of the Fed's decision and as an attack on Saudi Arabian oil facilities over the weekend fostered a surge in crude oil prices amid flared-up geopolitical concerns. Schwab’s Chief Investment Strategist Liz Ann Sonders offers her latest article, Chop, Chop, Chop: Stocks' Choppy Behavior Around Trade News, noting that it continues to be a difficult environment in which to trade around short-term news; even if short-term news is having an outsized impact on day-to-day and month-to-month market behavior. As she often says, investing should always be a process over time; never about a moment in time. Liz Ann concludes that there are no free lunches in the business of investing; but sticking to the tried-and-true disciplines around diversification and periodic rebalancing is as close as it gets.

Tomorrow, the economic calendar will begin to heat up, as the Federal Open Market Committee (FOMC) will begin its two-day monetary policy meeting, while the Fed's industrial production and capacity utilization report is slated for release, forecasted to show production increased 0.2% m/m for August and utilization nudged higher to 77.6%. The September NAHB Housing Market Index will also be released, expected to remain at August's 66 reading, with 50 the demarcation point between good and poor conditions.

As noted in our latest Schwab Market Perspective: Confusion or Conviction?, U.S. equity indexes have emerged out of their recent tight range, but persistent economic and trade uncertainties have not dissipated. The economic picture is mixed, as manufacturing continues to weaken but the consumer/services segments remain strong. The European Central Bank eased again, but there are doubts as to whether monetary policy is losing its effect and if a fiscal response is necessary.

Europe lower, Asia mixed on heightened geopolitical tensions, Chinese data and Brexit focus

European equities finished lower, though the energy sector rallied as crude oil prices surge amid heightened geopolitical concerns after an attack on Saudi Arabian oil facilities over the weekend. Global growth worries were also bolstered by some softer-than-expected industrial production, retail sales and fixed asset investment data out of China. Brexit uncertainty continued to fester with Prime Minister Boris Johnson expected to meet face-to-face for the first time with European Commission President Jean-Claude Junker today. The euro and British pound were down versus the U.S. dollar, with the markets awaiting this week's monetary policy decisions out of the U.S., the U.K. and Japan. Bond yields were lower and several key interest rates remain in negative territory. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers his latest article, Negative Interest Rates And The Future Of Investing, discussing how investors' increasing focus on income may lead to long-term shifts in portfolios that favor international stocks.

Stocks in Asia finished mixed with oil prices spiking in the wake of the weekend's attack on Saudi Arabia's oil facilities, while the markets digested some disappointing Chinese economic data for August and awaited monetary policy decisions out of the U.S., Japan and the U.K. Schwab's Jeffrey Kleintop, CFA, offers his latest video, Are Central Banks Guardians of the Economy?, discussing how he believes investors think central banks are guardians of the economy with all these superpowers to defeat any threats to the economy, but he discusses how that's not really how it works. China's industrial production rose at the slowest pace in over 17 years, while its retail sales and fixed asset investment were also softer than expected. Stocks in mainland China finished little changed, while those traded in Hong Kong fell. Indian equities declined, but Australian securities ticked higher and South Korean listings advanced. Japanese markets were closed for a holiday.

The international economic calendar tomorrow will be fairly light and include the minutes from the Reserve Bank of Australia's last monetary policy meeting and the Zew Economic Sentiment Survey from Germany.

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