Adding to recent record highs, U.S. stocks showed resiliency amid lingering geopolitical and monetary policy uncertainty, buoyed by upbeat reads on domestic business spending and jobless claims, while the trade balance narrowed more than expected. Tomorrow, the key nonfarm payroll report for September will be in focus. Treasury yields, crude oil prices and the U.S. dollar were higher and gold experienced a minor decline. In equity news, Constellation Brands topped Q2 earnings expectations, Bloomberg reported that Amazon is testing its own delivery service and Netflix announced it will raise prices for its popular services.

The Dow Jones Industrial Average (DJIA) increased 114 points (0.5%) to 22,775, the S&P 500 Index advanced 14 points (0.6%) to 2,552, and the Nasdaq Composite rallied 51 points (0.8%) to 6,585. In moderate volume, 746 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil increased $0.81 to $50.79 per barrel and wholesale gasoline was $0.03 higher at $1.61 per gallon. Elsewhere, the Bloomberg gold spot price dipped $6.37 to $1,268.48 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.5% higher at 93.96.

Constellation Brands Inc. (STZ $209) reported fiscal Q2 earnings-per-share (EPS) of $2.48, or $2.47 ex-items, versus the $2.17 FactSet estimate, as revenues rose 3.1% year-over-year (y/y) to $2.1 billion, roughly in line with expectations. The company's beer shipments rose solidly y/y, while its wine and spirits shipments declined. STZ raised its full-year EPS outlook. Shares traded nicely higher.

United Parcel Service Inc. (UPS $118) saw pressure and FedEx Corp. (FDX $222) dipped in early action before finishing flat, on a Bloomberg report that Amazon.com Inc. (AMZN $981) is testing its own delivery service to rival these companies, according to people familiar with the matter. AMZN and FDX did not comment on the report. A spokesman from UPS told Bloomberg that Amazon is a valued customer and it supports all its customers with industry-leading e-commerce solutions and expect to expand these relationships further in the future.

Netflix Inc. (NFLX $194) rallied after announcing that it will raise prices for its most popular service by 10% as it adds more exclusive TV shows and movies.

Jobless claims decline, trade balance shrinks, factory orders rise

Weekly initial jobless claims (chart) decreased by 12,000 to 260,000 last week, below the Bloomberg forecast of a decline to 265,000, with the prior week’s figure being unrevised at 272,000. The four-week moving average fell by 9,500 to 268,250, while continuing claims rose 2,000 to 1,938,000, south of estimates of 1,950,000.

The trade balance (chart) showed that the deficit came in at $42.4 billion in August, compared to estimates of $42.7 billion. July's deficit was downwardly revised to $43.6 billion. Exports gained 0.4% month-over-month (m/m) to $195.3 billion, while imports dipped by 0.1% to $237.7 billion.

Factory orders (chart) rose 1.2% m/m in August, above expectations of a 1.0% gain, while July's figure was unrevised at a 3.3% drop. Stripping out the volatile transportation component, orders advanced 0.4% and July's 0.5% rise was unrevised. August durable goods orders—preliminarily reported last week—were positively revised to a 2.0% increase versus forecasts of an unadjusted 1.7% rise. Also, nondefense capital goods orders excluding aircraft, a gauge of business spending, were revised higher to a 1.1% gain from the initially-reported 0.9% increase, posting the second-straight monthly gain of over 1.0%.

Treasuries were lower, with the yields on the 2-year and 10-year notes, as well as the 30-year bond rising 2 basis points (bps) to 1.49%, 2.35% and 2.89%, respectively.

Treasury yields and the U.S. dollar have rebounded noticeably in the past month, with the 10-year rate off of levels not seen since November 2016 and the greenback from multi-year lows. Expectations have jumped that the Fed will announce another rate hike in December as signs of an uptick in inflation joined a positive global economic background, while the Central Bank is set begin to shrink its behemoth balance sheet this month. Also, the recently released tax reform framework appeared to foster some fiscal policy optimism but faces a long road that began with today's House approval of its budget resolution.

However, the stock markets continue to grind out record highs and amid this backdrop, see Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend's article, Tax Reform Framework Released, But The Road Ahead Is Long. Also, Schwab's Chief Investment Strategist Liz Ann Sonders offers her article on the stock market resiliency in the face of a plethora of things to worry about titled, Comfortably Numb? An Update on Investor Sentiment. Read these articles and other timely commentary from our Schwab experts on the Market Commentarypage at www.schwab.com. 

This bring us to tomorrow's September nonfarm payroll report, expected to show jobs grew by 80,000, after August's 156,000 gain, while private sector job growth is projected at 72,000 on the heels of the prior month's 165,000 increase (economic calendar). The unemployment rate is expected to remain at 4.4%. The noticeable decline in job growth figures to below the 176,000 monthly average thus far this year is likely to be discounted by the expected impact of last month's hurricanes. However, the wage component of the release is likely to remain a key focus giving the uncertain inflation backdrop. Average hourly earnings are expected to rise 0.3% m/m, after August's 0.1% increase, and remain at a 2.5% y/y growth rate.

Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, analyzes the relationship between inflation and unemployment in his article, Inflation May Be The Biggest Question For Investors In 2018, on the Market Commentary page at www.schwab.com. Jeff notes that global labor markets may now be at a point where wages may finally rise more rapidly and if central banks move too aggressively in anticipation of a tightening global labor market reviving inflation, the impact of their actions on financial conditions could undermine the bull market in stocks. 

Wholesale inventories and consumer credit are other reports due out tomorrow.
Europe mostly higher, Asia little changed

European equity markets finished mostly to the upside, shrugging off a plethora of remaining uncertainties, with Spanish stocks rebounding noticeably after a bout of volatility as Catalonia's fight for independence fostered political uncertainty after its weekend secession vote was deemed illegal. Also, the euro and British pound lost ground on the U.S. dollar to help the markets, with the U.S. dollar extending a rebound on some upbeat economic data. Bond yields in the region finished mixed. In economic news, growth in German retail and construction sectors decelerated, while U.K. new car registrations fell. The minutes from the European Central Bank's (ECB) monetary policy meeting last month showed the central bank sees any reassessment of the monetary policy stance as needing to proceed in a very gradual and cautious manner, while maintaining sufficient flexibility.

U.K. Brexit and political uncertainty continued to linger, exacerbated by yesterday's mishaps at a speech by Prime Minister Theresa May. 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,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. festers 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.

Stocks in Asia finished near the unchanged mark but tilted to the downside despite another round of record highs in the U.S., with Japanese stocks pausing at levels not seen in more than two years, while Indian shares snapped a four-session winning streak and Australian markets were hamstrung after an unexpected drop in August retail sales. However, volume remained lighter than usual, with markets in mainland China, Hong Kong and South Korea all closed for holidays. 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?

Tomorrow, the international economic docket will include labor cash earnings and the Leading Index from Japan, factory orders from Germany and house prices and unit labor costs from the U.K.