Market Update: Friday, July 22, 2016


  • Global equities mixed following Eurozone data, earnings barrage. U.S. stocks look to bounce back as investors continue to sift through earnings reports from General Electric and Starbucks, among others. Yesterday, the Dow snapped a 9-day win streak, and the S&P 500 also lost ground, paced by a 1% decline in industrials, though healthcare and utilities managed to finish positive. European equities are mixed as post-Brexit Purchasing Managers’ Index (PMI) results missed expectations in the U.K., yet beat in the Eurozone. In Asia, the Nikkei Index (-1.1%) slipped as the yen strengthened and traders pared expectations for more stimulus out of next week’s central bank meeting. Weakness also spread throughout the region as markets in Taiwan, Korea, and Hong Kong also fell. Meanwhile, WTI crude oil is trading close to $44/barrel, COMEX gold is down over half a percent, Treasury yields are up across the curve with the 10-year note yield near 1.58%, and strength continues in the dollar.


  • Good start to earnings season overall. With just over 100 companies having reported results thus far, Thomson-tracked S&P 500 earnings growth is tracking to about -3%, more than 1% above the -4.5% estimate as of July 1. Technology has produced the most upside thus far (but is still expected to decline year over year), while second quarter earnings in energy, telecom, and utilities are tracking below prior estimates. Look for another earnings dashboard from us on Monday.
  • Some evidence of overseas weakness from corporate America. Although numbers overall have been good relative to expectations, a number of companies cited weakness overseas, largely in Europe, including companies in the airline, automotive, and even restaurant industries. The cautious tone has led analysts to reduce forward estimates, though by slightly less than recent quarterly trends.
  • The win streak is over. Equity markets pulled back slightly yesterday, with the Dow posting its first red day after a 9-day win streak. That was the longest win streak since 10 in a row in March 2013. Going back to 1900, this was the 31st 9-day win streak for the Dow. The longest ever streak of 13 was in January 1987. It is worth noting that the median return two weeks after a 9-day win streak is 1.0%, which is double the median 10-day return (at any time) since 1900 of 0.5%. Lastly, the S&P 500 is up 0.2% for the week with a day to go. This could mark the fourth consecutive week of higher equity prices after the Brexit vote.
  • Post-Brexit data: July PMI for manufacturing better than expected and better than June. At 52.9, the July PMI for manufacturing report, was better than expectations (51.5) and better than the June reading of 51.3. The report suggests that in the first month after Brexit, there was little impact on U.S. manufacturing from the political turmoil in Europe and the U.K.
  • EU and U.K. post-Brexit data. A number of indicators for the European Union and the United Kingdom were released this morning. For the most part, these figures came in better than expected. Most figures remain above 50, showing continued expansion in many sectors, though overall growth is unimpressive. The exception was the U.K., where both services and manufacturing PMIs declined sharply from the previous month and fell below 50. While the euro has been stable against the dollar this morning, the pound fell 1% after the figures were released.
  • Week ahead. In the U.S., the Federal Open Market Committee (FOMC) meeting, Q2 gross domestic product (GDP), and a slew of housing data and post-Brexit data on manufacturing highlight next week’s calendar. The peak week for Q2 earnings and the Democratic National Convention are also on the docket next week. Overseas, the Bank of Japan meeting and Q2 GDP reports in the U.K. and Eurozone will draw the most attention earlier in the week, and the Chinese PMI data for July are due out over the weekend of July 30-31.



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


  • G-20 Finance Ministers Meeting in China


  • Japan: Imports and Exports (Jun)

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.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor

Tracking # 1-518930