Weekly Market Drivers | LPL Financial Research

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Global Growth Anxiety Overshadows Trade Progress

US: S&P 500 Index -1.3%, Dow -1.2%, Nasdaq -0.8%
Europe: STOXX Europe 600 +0.5%, German DAX +0.7% France CAC 40 +0.8%, U.K. FTSE 100 +1.5%
Asia: Japan Nikkei -1.4%, China Shanghai Composite -0.5%, Korea KOSPI  -0.3%
Rates/Commodities: 10-Year Treasury yield +2 basis points to 2.89%, WTI crude oil -0.2%, COMEX gold: -0.5%

Stocks appeared headed for weekly gains after some headway was made in U.S.-China trade negotiations, but a Friday selloff erased the advances. Continue reading →

Market Update: Fri, Dec 14, 2018 | LPL Financial Research

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Still range-bound. While markets are moving lower in early trading today, this week’s action has been relatively muted compared to the past several months. We remain encouraged by the S&P 500 Index’s ability to hold support and continue to believe that a potential triple bottom is in play, as discussed earlier this week in our Weekly Market Commentary. This retest of the lows is typically an important part of the bottoming process, and the bullish momentum divergence (as measured by Relative Strength Index 14) strengthens the case that the S&P 500 will have another shot at resistance near 2817. In order to finally break out to the upside, we will be looking for strong buying interest in equities, specifically a surge in one-month highs for individual stocks and leadership from more beaten-up, cyclical sectors such as financials and industrials.

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United States-China Trade Deal Follow-up

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Investor confidence got a boost after President Donald Trump declared his meeting with Chinese President Xi Jinping at the G-20 summit December 1 “an amazing and productive meeting.” Both parties agreed to return to the negotiating table in earnest, with President Trump suspending planned increases in tariff rates from 10% to 25%, which had been slated to take effect on roughly $200 billion of Chinese imports at the start of 2019.

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Market Update: Thurs, Dec 13, 2018 | LPL Financial Research

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Trade tensions cooling. China has resumed soybean purchases for the first time since tariffs were put in place, and more corn shipments could be next according to a Bloomberg report overnight. China also indicated it would provide greater market access to foreign companies, consistent with the Trump administration’s goal to level the playing field. These developments follow reports earlier in the week that China would lower tariffs on imported autos, contributing to cooling tensions and increased optimism the two sides can find middle ground and reach a deal even as the conflict over the arrested Huawei executive escalates.
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Stocks Tend to Ignore Shutdowns

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Next week could bring the third government shutdown of 2018, especially after the fireworks out of Washington yesterday. In a widely watched live TV debate, President Trump sparred with Senate Minority Leader Schumer and House Minority Leader Pelosi regarding funding for the proposed wall on the Mexican border and potentially shutting down the government.

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Market Update: Wed, Dec 12, 2018 | LPL Financial Research

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May to face confidence vote on Brexit. UK Prime Minister Theresa May will face a vote of confidence after the required 48 letters of “no confidence” were received from MPs following her three-stop tour across Europe yesterday. The meetings were an attempt to seek changes to her existing deal after she was forced to abandon a planned Parliamentary vote due to a lack of support. She could be replaced as early as mid-January if a simple majority of 158 Conservative MPs vote in favor. With the March 29 deadline looming for the UK to break from the EU, with or without a Brexit deal, along with Italy’s ongoing budget scuffle with EU officials and broader European economic data trending in the wrong direction, we continue to suggest avoiding or minimizing tactical exposure to the region.
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Bond Sector Swings

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Yields on two-year and three-year Treasury notes remain higher than five-year yields after both spreads turned negative last week, known as an inverting of the yield curve. However, as we discussed last week, it’s the spread between yields on longer dated Treasuries, such as the 10-year note and the two-year note, which historically has been accurate in predicting recessions. That gap remains positive, and we still see reasons to remain optimistic on the U.S. economy into 2019.

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Market Update: Tue, Dec 11, 2018 | LPL Financial Research

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Another big reversal off the lows. The S&P 500 Index once again found support near the bottom end of its recent range, this time bouncing significantly off the intraday lows. At its low’s, the S&P 500 was down 1.9%, but managed to finish in the green. You have to go back to February 6th the last time that happened. This comes on the heels of last Thursday, when the S&P 500 bounced nearly 3% off of the intraday lows – the largest intraday reversal since February 9. Don’t forget, February 9 was also the intraday low for 2018. Bottoms are a process and we are encouraged by these reversals off of support.
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