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Stocks Mixed on Diverging Data and Trade Focus

U.S. stocks are mixed following some diverging economic data that showed personal income rose but spending registered the slowest pace in six months, and a read on business spending unexpectedly dipped, though consumer sentiment was revised higher than anticipated. The markets continue to focus on next month's expected resumption of trade talks between the U.S. and China, which CNBC reported are set to begin October 10th. Treasury yields and the U.S. dollar are little changed, while crude oil and gold prices are lower. Micron Technology is seeing pressure following its disappointing guidance. Asia finished mixed and Europe is gaining ground amid some speculation of a rate cut in the U.K.

At 10:51 a.m. ET, the Dow Jones Industrial Average is up 0.3% and the S&P 500 Index is advancing 0.2%, while the Nasdaq Composite is dipping 0.1%. WTI crude oil is declining $0.35 to $56.06 per barrel and Brent crude oil is decreasing $0.59 at $61.15 per barrel, and wholesale gasoline is off $0.01 at $1.61 per gallon. The Bloomberg gold spot price is falling $13.14 at $1,491.61 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is little changed at 99.16.

Micron Technology Inc. (MU $44) reported fiscal Q4 earnings-per-share (EPS) of $0.49, or $0.56 ex-items, versus the $0.51 FactSet estimate, as revenues fell 42.3% year-over-year (y/y) to $4.9 billion, topping the expected $4.6 billion. MU issued full-year EPS guidance that had a midpoint below estimates and its gross margin outlook came in well below the Street's forecasts, noting continued near-term macroecono-mic and trade uncertainties. Shares are dropping.

Wells Fargo & Company (WFC $51) announced that it has named Charles W. Scharf as the company's Chief Executive Officer (CEO) and President, and a member of the Board of Directors, effective October 21st. Scharf was Chairman and CEO of Bank of New York Mellon Corporation (BK $44). WFC is nicely higher and BK is falling.

Personal income and spending results mixed, along with durable goods orders data

Personal income (chart) rose 0.4% higher month-over-month (m/m) in August, matching the Bloomberg forecast, and versus July's unrevised 0.1% rise. Personal spending ticked 0.1% higher, below estimates of a 0.3% increase, and following July's downwardly revised 0.5% gain. The August savings rate as a percentage of disposable income was 8.1%. The PCE Deflator was flat m/m, below expectations of a 0.1% gain and compared to the prior month's unrevised 0.2% advance. Compared to last year, the deflator was 1.4% higher, in line with expectations to match July's unrevised increase. Excluding food and energy, the PCE Core Index was 0.1% higher m/m, south of expectations calling for it to be in line with July's unadjusted 0.2% gain. The index was 1.8% higher y/y, matching estimates and above July's upwardly revised 1.7% increase.

August preliminary durable goods orders (chart) rose 0.2% m/m, compared to estimates of a 1.1% decline and July's unrevised 2.0% gain. Ex-transportation, orders increased 0.5% m/m, versus forecasts of a 0.2% rise and compared to July's downwardly-adjusted 0.5% decrease. Moreover, orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, dipped 0.2%, compared to projections of a flat reading, and the prior month's figure was downwardly-revised to a flat reading.

The final September University of Michigan Consumer Sentiment Index (chart) was upwardly-adjusted to 93.2, from the preliminary figure of 92.0, compared to estimates of 92.1. The index was above August's 89.8 level, which was the lowest level since October 2016. Both the current conditions and expectations components of the index were revised higher and rose compared to the prior month. The 1-year inflation forecast ticked higher to 2.8% from August's 2.7% rate, and the 5-10 year inflation outlook declined to 2.4% from 2.6%.

Global economic data continues to paint a mixed picture and Schwab's Chief Investment Strategist Liz Ann Sonders offers her latest article, Take Me to Your Leader: Analyzing the Latest Leading Indicators, noting that leading indicators are at a record high, but in a relatively flat trend over the past year. Liz Ann adds that manufacturing remains weak, while services/consumer remains healthy; with confidence/employment likely defining whether the divergence persists. She concludes that Citi's Economic Surprise Index has shot up, but Bloomberg’s Economic Surprise Index of Leading Indicators has not confirmed.

Treasuries are little changed, with the yields on the 2-year and 10-year notes, along with the 30-year bond, flat at 1.65%, 1.70% and 2.14%, respectively. For a look at the volatility in the fixed income markets on the heels of last week's highly expected Fed rate cut and as a host of global interest rates remain in negative territory, see Schwab’s Liz Ann Sonders' article, The Final Cut … or More to Come?, as well as Schwab's Chief Fixed Income Strategist Kathy Jones' latest commentary, Could Negative Bond Yields Come to America?.

Europe higher on relatively buoyed trade optimism

European equities are higher in late-day action, with U.S.-China trade optimism remaining relatively positive following a CNBC report that the two sides are set to resume trade talks in the U.S. on October 10th. The trade optimism is countering exacerbated U.S. political turmoil and lingering global growth concerns following continued soft data out of China and as reports showed French consumer spending missed forecasts for August and Eurozone economic confidence fell more than expected in September. Brexit uncertainty remains elevated, prompting a Bank of England policymaker to suggest the next move for the central bank may be a rate cut. U.K. stocks are rising following the comments and Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers his latest article, Q&A on Brexit: The Options and Implications for Investors, discussing how we see five main options for Brexit in the coming months; three result in a near-term resolution while two options result in a further delay or "no deal" Brexit. The euro is ticking higher versus the U.S. dollar and the British pound is dipping, while bond yields in the region are mixed.

The U.K. FTSE 100 Index is up 0.7%, France's CAC-40 Index and Italy's FTSE MIB Index are ticking 0.1% higher, Germany's DAX Index is gaining 0.6%, Spain's IBEX 35 Index is advancing 0.4%, and Switzerland's Swiss Market Index is increasing 0.2%.

Asia mixed to close out the week

Stocks in Asia finished mixed following the dip in the U.S. markets yesterday as investors weighed an improvement in trade optimism, ramped-up political noise in Washington and global growth uncertainties. With the trade and geopolitical fronts exacerbating global growth concerns and garnering heightened scrutiny in the currency and interest rate markets, check out Schwab's Director of International Research, Michelle Gibley's, CFA, article, Currency Wars: Is a Weaker Currency Good or Bad?, as well as Schwab's Jeffrey Kleintop's, CFA, 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. Trade optimism was relatively buoyed by reports from CNBC that U.S-China trade talks are set to begin in the U.S. on October 10th. Japan's Nikkei 225 Index declined 0.8%, with the yen choppy, while September consumer price inflation data in Tokyo came in a bit cooler than expected. China's Shanghai Composite Index ticked 0.1% higher and the Hong Kong Hang Seng Index declined 0.3%, with the markets digesting late-yesterday's August trade data, which showed exports and imports continued to fall in August, and today's China industrial profits report that posted a decline in August. South Korea's Kospi Index fell 1.2% and India's S&P BSE Sensex 30 Index decreased 0.4%, while Australia's S&P/ASX 200 Index rose 0.6%.

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