Market Update: Wednesday, April 20, 2016


  • Indexes split as financials outperform again. Tuesday’s trading saw the S&P 500 and Dow Jones both close at 2016 highs, while declines in technology and consumer discretionary stocks led the Nasdaq lower. Materials was the best performing sector on the day, up 2.1% on broad commodity strength, while energy finished up more than 1%. The move in energy stocks was led by WTI crude oil prices, which ended 2.8% higher at $42.34/barrel. Likewise, COMEX gold jumped 1.6%, while 10-year Treasury yields rose 0.02% to 1.79%. Final tallies: Dow +49.44 to 18053.60, Nasdaq -19.69 to 4940.33, S&P 500 +6.46 (+0.31%) to 2100.80.
  • Stocks shrug off oil news, move higher. Major U.S. and European equities turned positive earlier this morning, breaking with crude prices, which are down after Kuwait oil workers ended a three-day strike and a report on U.S. stockpiles showed a larger than expected inventory build. Asian markets were mixed overnight as major indexes slid throughout the session, though the Nikkei managed to hold small gains, while the Shanghai Composite ended 2.3% lower. Gold prices are easing after yesterday’s run-up, while silver is holding on to prior day gains, and Treasuries are little changed.


  • Surprisingly strong materials revisions. Although it’s very early, earnings estimates for the materials sector–buoyed by rebounding commodity prices–have risen early in first quarter earnings season, supporting the sector’s very strong relative performance versus the S&P 500 since mid-February. Estimates for healthcare and the two consumer sectors have also been resilient. Keep in mind that just 27 S&P 500 companies have reported across these four sectors, so this trend could reverse over the coming weeks.
  • Back to 2,100. A day after the Dow closed above the 18,000 level for the first time since July 2015, the S&P 500 closed above 2,100 yesterday. With the all-time high of 2130.82 now only 1.4% away, the question is, will it be able to break out to new highs? One thing to note is the 2,100 level has been very firm resistance since it was first breached on February 17, 2015. It last was above this level in early December, ahead of the 13% drop the following two months. Looking specifically at the 2,100 level, the S&P 500 has closed above that level 95 times, but on 56 of those days it also traded beneath 2,100 before closing above it. In other words, this level has been extremely sticky and the S&P 500 hasn’t been able to separate from it much.
  • Kuwait oil strike ends after just three days. Oil is down this morning to near $40 on the news that striking Kuwaiti oil workers are back on the job, as well as Tuesday’s bearish private inventory data. A return to prior production levels (about 3 million barrels/day) is expected within a few days for OPEC’s fourth-largest producer, though these headlines serve as a reminder of the risk to foreign oil supply. Supply disruptions in Nigeria and Iraq, and even risk in Venezuela and elsewhere, may limit the near-term downside for oil, but we believe the lack of a freeze agreement in Doha last weekend and continued oversupply globally will limit oil’s near-term upside.
  • Japanese exports fall, increasing prospects for further stimulus. A 6.8% year-over-year decline in exports in March, the sixth consecutive month of declines, and 14.9% decline in imports will likely renew calls for increased monetary and fiscal stimulus in Japan. A strengthening yen this year has added to other factors weighing on Japan’s economy, including slower growth in China, earthquakes near a major manufacturing center, and soft demand growth for electronics. One bright spot in the report was growth in exports to the European Union. We continue to focus our attention on U.S. equities while watching for opportunities in international developed and emerging markets.



  • Turkey: Central Bank Meeting (Rate Cute Expected)



  • Markit Mfg. PMI (Apr)
  • Eurozone: Markit Mfg. PMI (Apr)

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Important Disclosures

Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Stock investing involves risk including loss of principal.

Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

Treasury inflation-protected securities (TIPS) help eliminate inflation risk to your portfolio, as the principal is adjusted semiannually for inflation based on the Consumer Price Index (CPI)—while providing a real rate of return guaranteed by the U.S. government. However, a few things you need to be aware of is that the CPI might not accurately match the general inflation rate; so the principal balance on TIPS may not keep pace with the actual rate of inflation. The real interest yields on TIPS may rise, especially if there is a sharp spike in interest rates. If so, the rate of return on TIPS could lag behind other types of inflation-protected securities, like floating rate notes and T-bills. TIPs do not pay the inflation-adjusted balance until maturity, and the accrued principal on TIPS could decline, if there is deflation.

Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk.

Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.

Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards.

High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors.

Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply.

Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained.

Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged.

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