Market Update: Thursday, June 9, 2016

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  • Equities and oil lower; global growth back in focus. The three-day win streak for the S&P 500 is in jeopardy as investors weigh a surprise rate cut from the Bank of Korea and the jobless claims report. WTI crude oil and equities are moving lower in tandem this morning. This comes on the heels of a record high close for the year in both the S&P 500 (+0.3% to 2119.12) and crude oil. Investors seeking safety overnight boosted the yen; Japan’s Nikkei Index slipped 1% and the Shanghai Composite finished with a more modest loss. Weakness is also present in Europe with many exchanges down around 1% in afternoon trade. Elsewhere, COMEX gold sits unchanged after yesterday’s rally and the yield on the 10-year note has fallen to 1.67%.

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  • JOLTS provides more upbeat picture of labor markets. The Job Openings and Labor Market Turnover Survey (JOLTS) for April signaled the potential for continued labor market strength, although the one-month lag in the report’s release means that the survey took place before the period covered by last week’s weak May jobs report. Job openings (5.8 million) and wage growth both accelerated to post-recession higher, while quits as a percent of separations remained near highs. The report increases the likelihood that the Federal Reserve Bank’s (Fed) “dot plots” projection at next week’s policy meeting will remain at a forecast of two rate hikes in 2016.
  • Jobless claims signal still healthy labor market. New jobless claims for the period ending June 3 provided additional evidence of a potentially healthy labor despite the unusually weak May jobs report. Claims fell 4,000 to 264,000, below expectations (270,000) and a six-week low. Continuing claims, which are lagged a week, fell sharply and are now at the lowest level since October 2000. While the Fed watches a broad range of labor market indicators, claims data will help alleviate concerns about a deteriorating labor market and will likely keep the Fed on track for two rate hikes in 2016.
  • Over the last month, the LPL Financial Current Conditions Index (CCI) rose 8 points to 184. The CCI remains near the low end of its range for the current expansion, indicating the economy may still be experiencing below-trend growth. A rebound in shipping traffic and a declining VIX (a measure of market volatility) were the primary drivers of the increase, while a rise in jobless claims was the main detractor. View the CCI.

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Thursday

  • Flow of Funds (Q1)
  • ECB’s Draghi Speaks in Brussels
  • China: Money Supply and New Loan Growth (May)

Click Here for our detailed Weekly Economic Calendar

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.

Technical Analysis is a methodology for evaluating securities based on statistics generated by market activity, such as past prices, volume and momentum, and is not intended to be used as the sole mechanism for trading decisions. Technical analysts do not attempt to measure a security’s intrinsic value, but instead use charts and other tools to identify patterns and trends. Technical analysis carries inherent risk, chief amongst which is that past performance is not indicative of future results. Technical Analysis should be used in conjunction with Fundamental Analysis within the decision making process and shall include but not be limited to the following considerations: investment thesis, suitability, expected time horizon, and operational factors, such as trading costs are examples.

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