Market Update: Friday, August 26, 2016


  • Markets react little to Q2 GDP revision, await Yellen comments. Equities opened slightly higher this morning after the first revision to Q2 U.S. GDP was in line with estimates and as market participants awaited Federal Reserve Bank (Fed) Chair Yellen’s speech at 10am ET. The S&P 500, Dow and Nasdaq all posted modest losses Thursday; the healthcare sector led to the downside for the second day in a row. Overseas, the Nikkei Index fell 1.2% after Japan reported its fifth straight monthly decline in its core Consumer Price Index (CPI). Other Asian markets finished little changed, and stocks in Europe are near flat in afternoon trade. WTI crude oil is up modestly to $47.50/barrel, COMEX gold has gained over half a percent to $1334/oz., and the 10-year Treasury yield has inched lower to 1.55%.


  • Very busy last week of August. The August data on employment, Institute for Supply Management ISM manufacturing release and vehicle sales highlight a very busy week for data and events next week ahead of the Labor Day weeend. There are a handful of Fed speakers as well, but aside from Brazil, there are no major central bank meetings next week. China will release its August manufacturing ISM, and there are a few key reports in Europe as well, notably, the August CPI reading for the Eurozone. In addition, Japan will release most of its key economic data for August.
  • Q2 GDP revised modestly lower. Based on new and updated data collected since the initial release of Q2 gross domestic product (GDP) in late July, Q2 GDP is now reported at 1.1%, down from the initially reported 1.2%. The modest downward revision came despite an upward revision to consumer spending-which accounts for 2/3 of GDP (from 4.2% to 4.4%).  There were significant downward revisions to Q2 readings on business capital spending, net exports, housing construction and government spending. Q3 GDP is due out in late October. We continue to expect a pickup in GDP growth in 2H 2016 after the tepid 1.0% reading in 1H 2016.
  • July merchandise trade deficit narrower than expected; Q3 GDP estimates likely to move higher. The nation imported $59 billion more goods than it imported in July. The reading was better than expected (-$63 billion) and an improvement from the $65 billion deficit in June and the $61 billion monthly deficit recorded , on average in Q2. The better than expected trade data in July, along with the downward revisions to inventory investment noted in the bullet above, suggest that Q3 GDP is tracking to between 3.5 and 4.0%. Q3 GDP is due out at the end of October 2016.
  • U.K. Economic Growth strong pre-Brexit. U.K. GDP came in as expected, growing .6% for Q2 and 2.2% year over year. While not outstanding, those are solid numbers, especially compared to most of the rest of Europe. Looking through the numbers, exports only increased .1%, much worse than expected, while imports grew 1%, better than expected. This data confirms that the U.K. itself seems to be doing better than the rest of the region. As this data is all pre-Brexit, there is not a lot of market impact on this data. However, it should be noted that there has been some strength in the British pound since the middle of the month as data has generally been better than expected.
  • Calm before the Yellen storm? The S&P 500 had another small daily range yesterday ahead of Yellen’s speech in Jackson Hole, WY. In fact, the S&P 500 has now gone 34 straight days without closing higher or lower by 1%, the longest streak since 62 straight days during the summer of 2014. On an intraday basis, the S&P 500 hasn’t moved more than 0.75% for an incredible 17 straight days. That is the longest streak in 45 years. Lastly, the S&P 500 is currently down two days in a row and hasn’t been down three straight days for 50 days in a row, the longest streak in two years.



  • Goods Trade Balance (Jul)
  • GDP (Q2 – Revised)
  • Fed Chair Yellen speaks at Jackson Hole Policy Symposium

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) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better.

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 # 1-529913