Market Update: Thursday, August 18, 2016

MarketUpdate_header

  • Stocks start lower after yesterday’s pullback. U.S. markets are little changed in early trading following Tuesday’s session saw all three of the major averages fall near half a percent, with telecom (-2.1%) leading the way down. Energy was the only sector to close higher as WTI crude oil rallied for the fourth consecutive day, though WTI is slipping this morning following yesterday’s mixed inventory data. In Asian markets, the Nikkei staged a slight relief rally, up 0.9%, while the Shanghai Composite closed flat despite official approval linking the Hong Kong and Shenzhen stock exchanges, further opening investment in mainland Chinese companies to foreigners. In afternoon trading, European stocks are lower across the board after the release of a string of disappointing earnings reports. Finally, the dollar is inching higher, COMEX gold is down more than half a percent below $1350/oz., and the yield on the 10-year Note is little changed near 1.57%.

MacroView_header

  • Another alternating streak. The S&P 500 dropped 0.55% yesterday, which was actually the second largest drop the past 30 trading days. That right there sums up how strong things have been recently. It also closed only a penny away from the lows; only May 11 (which closed at the lows) was worse in 2016. At the same time, yesterday was the 8th day in a row that the S&P 500 alternated between higher and lower. It had a streak of 11 alternating days earlier this year, making this the second eight day alternating streak this year. 2007 and 2008 are the only other years since 1950 to have two separate eight day streaks.
  • Why August 17 is a special day. Turns out today is one of the most bullish days of the year, up 76.6% of the time since 1950. That comes out to higher 36 out of the past 47 times. Incredibly only November 24th at 78.9% and December 26 at 83.8% are up more often. Of course, both of those take place around holidays and could explain some of the upward bias. Why August 17 is higher is a much tougher question to answer, and probably has no real reason other than being totally random. Nonetheless, we will take a closer look at this and a few other interesting phenomena happening today on the LPL Research blog.

MonitoringWeek_header 

Wednesday

  • FOMC Minutes
  • Bullard (Hawk)
  • China: Property Prices (Jul)

Thursday

Friday

  • Indonesia: Central Bank Meeting (Rate Cut Expected)

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

Member FINRA/SIPC
Tracking # 1-526915