- U.S. stocks little changed following yesterday’s rise. Equities are near flat this morning, as the market continues to be range bound. Yesterday’s session saw stocks stage a modest rally, with the S&P 500 moving out of negative territory early on to close up 0.3%. Utilities and telecom benefited from a 0.07% drop in the yield on the 10-year Treasury (1.54%), though energy was the top performer on the day, advancing 1.5% on the back of a 1% gain in the price of crude oil. Overnight, Asian markets finished mostly lower on little news, led down by Japan’s Nikkei, which lost 0.4% amid a strengthening yen; the Shanghai Composite closed flat. European markets are moving higher despite weak production data out of Germany; the STOXX Europe 600 is back near flat after hitting its highest level since January on Monday. Meanwhile, WTI crude oil is modestly higher while COMEX gold is flat. The dollar is also unchanged following a sharp drop yesterday, and the yield on the 10-year note is continuing to move lower.
- Service sector disappoints in August. At 51.4, the August reading on the non-manufacturing Purchasing Managers’ Index (PMI) was below expectations (54.9) and below the July reading of 55.5. In fact, the 4 point drop between July and August was the largest since 2008. Still, the reading was above 50, indicating expansion in services (80% of the U.S. economy), and the 54.4 reading over the past 3 months indicates a solid pace of activity. The relatively weak readings on the August manufacturing and non-manufacturing PMIs, along with the slightly weaker than expected (although still solid) August jobs report, reduce the odds that the Federal Reserve Bank (Fed) will raise rates at its September Federal Open Market Committee (FOMC) meeting. We continue to expect the Fed to raise rates in December, and put the odds of an additional hike in September at 1 in 3.
- ECB meeting upcoming. The European Central Bank (ECB) meets tomorrow during a period of economic uncertainty and mixed data. German industrial output for July (yes, these data are a little delayed) fell -1.5%, against market expectations of a 0.1% gain and a 0.8% gain last month. This weakness is probably not enough, by itself, to cause the ECB to ease monetary policy further. We’ll do a more in-depth meeting preview on today’s LPL Research blog.
- September isn’t so bad. The S&P 500 was up 0.3% yesterday for the second green day in a row; it hasn’t been up three days in a row for over a month. Energy and utilities led, while industrials and materials were slightly in the red. Even though September is historically a more volatile month, that hasn’t happened so far at least. In fact, the first three days of September look very similar to what we saw in August. Taking a bigger look at things, the S&P 500 hasn’t closed up or down 1% for an incredible 41 straight days, the longest streak in two years. It hasn’t had a 1% drop for 49 straight days (right after Brexit). This comes on the heels of a 54-day streak earlier this year.
- Another look at the tight range. We’ve talked a lot about the incredibly tight range the S&P 500 has been in recently. In fact, over the past 40 days the S&P 500 has traded in a range of only 1.77% (using closing prices)–the tightest range ever using data back to 1928. Here’s another way to look at the tight range though. The S&P 500 has closed 42 consecutive days within 1% of an all-time high. That is an extremely long time to hang around all-time highs; the last time it did that was in 1995 at 48 straight days, and 1965 was the time before at 47.
- JOLTS (Jul)
- Beige Book
- Germany: Industrial Production (Jul)
- Sweden: Riksbank Meeting (No Change Expected)
- Canada: Bank of Canada Meeting (No Change Expected)
- China: Imports and Exports (Aug)
- Eurozone: European Central Bank Meeting (No Change Expected)
- China: CPI (Aug)
- Japan: Economy Watchers Survey (Aug)
- Japan: Money Supply (Aug)
- European Union: Central Bankers and Finance Ministers Meeting in Bratislavia
- China: New Loan Growth and Money Supply (Aug)
- European Union: Central Bankers and Finance Ministers Meeting in Bratislavia
Click Here for our detailed Weekly Economic Calendar
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 # 1-532915