In an all-to-familiar theme, U.S. equities shed early gains to finish mixed, adding to the volatility that has sent the major indices to levels not seen in over a year. The moves came following another inflation report that showed wholesale prices continued to rise, and expectations of an aggressive Fed amid the backdrop of slowing economic growth has been a major contributor to the volatility, along with the lockdowns in China, the ongoing war in Ukraine, rising interest rates, and a strong U.S. dollar. Earnings season continued to head into the sunset, with Dow member Walt Disney posting mixed results and offering cautious guidance, while Tapestry topped profit projections on strong North American sales, and Rivian Automotive posted a smaller-than-expected loss and reaffirmed its full-year targets. In other economic news, initial jobless claims ticked higher but continuing claims fell to a new low not seen in 50 years. Treasuries rose to put downside pressure on yields, and the U.S. dollar was back in rally mode, while crude oil prices were modestly higher in choppy action, and gold traded to the downside. Europe finished with widespread losses and Asia was broadly lower amid the uneasy global backdrop.

The Dow Jones Industrial Average fell 104 points (0.3%) to 31,730 and the S&P 500 Index decreased 5 points (0.1%) to 3,930, while the Nasdaq Composite nudged 7 points (0.1%) higher to 11,371. In heavy volume, 6.2 billion shares of NYSE-listed stocks were traded, and 6.6 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.42 to $106.13 per barrel. Elsewhere, the gold spot price traded $30.60 lower to $1,823.10 per ounce, and the Dollar Index rallied 1.0% to 104.82.

Dow member Walt Disney Company (DIS $104) reported adjusted fiscal Q2 earnings-per-share (EPS) of $1.08, compared to the $1.19 FactSet estimate, though the comparison is unclear as the company said it saw a $1.0 billion reduction due to an early termination from a customer of license agreements for film and television content delivered in previous years. Revenues rose 23.0% year-over-year (y/y) to $19.3 billion, versus the Street's forecast of $20.1 billion. DIS said it added 7.9 million Disney+ subscribers in the quarter, and total subscriptions across all its direct-to-consumer (DTC) offerings exceeded 205 million, with both figures topping forecasts.

Revenue and operating income out of its parks, experiences and products more than doubled as its domestic parks and resorts are generally operating without significant COVID-related capacity restrictions, while certain international parks and resorts and cruise ship operations continue to be impacted. The company said growth in the second half of the year may not be as fast as previously expected and that it is carefully watching content spending as it lowered its projection for such. DIS traded lower. 

Tapestry Inc. (TPR $31) posted adjusted fiscal Q3 EPS of $0.51, above the expected $0.41, with revenues rising 13.0% y/y to $1.4 billion, roughly in line with forecasts. The parent of Coach and Kate Spade brands saw strong North American sales, which helped it offset weakness due to the COVID-related lockdowns in China, while its operating margin declined but came in well above estimates.

The company lowered its full-year guidance, noting headwinds from the COVID-related pressure in China, and the current expectation that the Generalized System of Preferences (GSP) with retroactive benefit will not be adopted in the company's fiscal year. The GSP is a U.S. trade program aimed at providing opportunities for many of the world's poorest countries to use trade to grow their economies by eliminating duties on thousands of products when imported from one of 119 designated beneficiary countries and territories. Additionally, the company announced a $1.5 billion increase of its share repurchase program. Shares of TPR rallied over 15%.

Rivian Automotive Inc. (RIVN $24) reported an adjusted Q1 loss of $1.43 per share, compared to the forecasted shortfall of $1.48 per share, on revenues of $95 million, which came in below the estimated $133 million. The electric vehicle maker reaffirmed its full-year operating income, capital expenditures, and vehicle production targets. Shares surged nearly 20%.     

The markets remained choppy as they grappled with the ultimate implications of persisting inflation pressures and expectations of an aggressive Fed monetary policy tightening campaign. Schwab's Chief Investment Strategist Liz Ann Sonders discusses the volatile market action in her latest article, When the Levee Breaks, Panic Is Not a Strategy. She notes that April was the worst month for the S&P 500 since March 2020, and that it's been a mixed-to-weaker bag in terms of macro drivers and we expect significant bouts of volatility to persist.

She concludes that this is not a time for investors to take on risk outside the parameters of their strategic asset allocations. It is a time for investors to employ traditional disciplines around diversification (across and within asset classes), to focus on quality in terms of stocks' fundamentals, and to stay in gear via periodic rebalancing. You can follow Liz Ann on Twitter: @LizAnnSonders.

Read all our market commentary on our Market Insights page, and you can follow us on Twitter at @SchwabResearch.

Wholesale price inflation cools but remains highly elevated, jobless claims tick higher

The Producer Price Index (PPI) (chart), showed prices at the wholesale level in April rose 0.5% month-over-month (m/m), matching the Bloomberg consensus estimate, and below March's upwardly-revised 1.6% increase. However, the core rate, which excludes food and energy, gained 0.4% m/m, below estimates of a 0.7% rise and south of the prior month's upwardly-adjusted 1.2% increase. Y/Y, the headline rate was 11.0% higher, down from the prior month's upwardly-adjusted 11.5% rise, and above expectations of a 10.7% gain. The core PPI increased 8.8% y/y last month, south of estimates calling for an 8.9% gain and well below March's upwardly-adjusted 9.6% increase.

Weekly initial jobless claims (chart) came in at a level of 203,000 for the week ended May 7, versus estimates calling for 193,000, and versus the prior week's upwardly-revised 202,000 level. The four-week moving average rose by 4,250 to 192,750, and continuing claims for the week ended April 30 fell by 44,000 to 1,343,000, versus estimates of 1,372,000. The four-week moving average of continuing claims dropped by 32,750 to 1,385,000.

Treasuries are higher following the inflation and jobs data, with yields paring a recent spike and the markets anticipating tighter Fed monetary policy following last week's 50 basis point (bp) rate hike, which Schwab's Liz Ann Sonders discusses in her latest article, 50 Ways to Leave Your Mark.

As the Fed is set to launch a series of rate hikes to try to cool off inflation, check out the latest offering from Schwab's Director of Fixed Income Collin Martin and Director of Fixed Income Strategy Cooper Howard titled 8 Questions on the Bond Market and Rate Hikes, where they provide their insight into some of the most frequently asked questions they have received this year.

The yield on the 2-year Treasury note decreased 8 bps to 2.56%, the yield on the 10-year note declined 6 bps to 2.86%, and the 30-year bond rate was down 1 bp to 3.03%.

The week's economic calendar will come to a close tomorrow with the Import Price Index, forecasted to have increased 0.6% m/m during April, as well as the preliminary May University of Michigan Consumer Sentiment Index, estimated to move lower to a level of 64.0 from April's final reading of 65.2.

Europe falls amid data and lingering concerns

European equities were broadly lower amid festering uncertainty and uneasiness regarding monetary policy tightening implications after last week's rate increases from the Fed and the Bank of England. The markets continued to face rising inflation pressures, exacerbated by the energy crisis in the region due to the ongoing war in Ukraine, which is also hamstringing conviction. Also, increasing interest rates and the recent rally in the U.S. dollar have added more layers to stymie sentiment, along with the lockdowns in China. Amid the recent rise in global interest rates, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers his latest commentary, Hedging Stocks Against Rising Rates. Jeff notes how investors should consider hedging the possible risk of higher interest rates with the addition of short duration stocks, a potential way to manage risk while remaining invested in the markets. You can follow Jeff on Twitter: @JeffreyKleintop. U.K. economic news is dominating the day, with the region's monthly and Q1 GDP missing estimates, with the former unexpectedly contracting in March and the latter growing at a softer pace than expected. Also, U.K. construction output for March rebounded much more than expected, and its industrial and manufacturing production both surprisingly dipped. The euro saw noticeable pressure versus the U.S. dollar and the British pound dipped, while bond yields in the Eurozone and the U.K. fell.

The U.K. FTSE 100 Index fell 1.6%, France's CAC-40 Index was down 1.0%, Germany's DAX Index lost 0.6%, Switzerland's Swiss Market Index shed 0.4%, Italy's FTSE MIB Index was 0.7% lower, and Spain's IBEX 35 Index declined 1.4%.

Asia lower as global markets remain choppy

Stocks in Asia finished lower, with the global markets remaining skittish regarding the aggressive monetary policy tightening in the U.S. to combat persistent inflation pressures. Additionally, the markets continued to grapple with concerns regarding the global economic impact of the COVID-induced lockdowns in the world's second largest economy of China. However, recent pledges from the Chinese government regarding stimulus measures has seemed to offset some of the uneasiness in the region but not the concerns about the global economic impact. Schwab's Jeffrey Kleintop discusses in his latest article, Recession in China?, how China's economy and consumer market has likely slipped into a recession, at least by China's standards. Jeff takes a look at the short-term and long-term impacts of any extended disruption of the lockdowns on consumer spending and business output. In economic news, Japan's Leading Index for March preliminarily improved more than expected, and just as the markets were closing, India reported stronger-than-expected industrial production for March, though April consumer price inflation accelerated more than expected.

Japan's Nikkei 225 Index fell 1.8%, with the yen gaining ground late in the session and trimming a recent drop versus the U.S. dollar, and China's Shanghai Composite Index dipped 0.1%. The Hong Kong Hang Seng Index dropped 2.2%, and Australia's S&P/ASX 200 Index traded 1.8% lower. Finally, South Korea's Kospi Index declined 1.6%, and India's S&P BSE Sensex 30 Index decreased 2.1%.

Tomorrow's international economic calendar will hold new yuan loans from China, CPI from France and Spain, and industrial production from the Eurozone.