Market Update: Wednesday, October 26, 2016


  • Stocks lower as traders turn cautious. The S&P 500 is weighed down this morning by Apple, its top-weighted component, as market participants expressed disappointment with the company’s outlook. Stocks moved lower in yesterday’s session as well; consumer discretionary (-1.2%) led to the downside, while defensive sectors utilities and consumer staples gained on the day. Overnight in Asia, markets lost ground as the Hang Seng fell 1%, its worst session in two weeks, and China’s Shanghai Composite shed 0.5%; although Japan’s Nikkei managed to inch higher by 0.2%. A below-consensus sentiment survey from Germany added pressure to European stocks, which are broadly lower in afternoon trading. Meanwhile WTI crude oil (-1.9%) has fallen back below $49/barrel, COMEX gold is little changed near near $1,270/oz., and the yield on the 10-year Treasury has increased to 1.79%.


  • Your tax dollars at work!! Starting a few months ago, the Bureau of Economic Analysis (BEA)- the U.S. government agency that compiles the data on gross domestic product (GDP)-began releasing more timely monthly data on wholesale and retail sales and inventories, and on imports and exports of merchandise (goods). In the past, these reports were released at a point in the quarter where they were much less useful to gauge how GDP was tracking for a particular quarter. The data released today for September suggest that net exports will be less of a drag than previously thought on Q3 GDP and that inventory building in wholesale and retail sectors will also add to growth. The Q3 GDP data is due out on Friday, and today’s data suggests that Q3 GDP is tracking close to 3.0%. View the data here.
  • Defense lends support to industrials. Results and guidance from defense companies have stood out in what continues to be a solid overall earnings season relative to consensus expectations. Although commodity weakness has impacted some industrial stocks (notably Caterpillar) and the sector has not produced upside to Q3 2016 estimates as of yet, the positive defense commentary, coupled with election-related optimism, suggests this segment of the sector may present an attractive investment opportunity. We maintain a cautiously optimistic view of the industrials sector overall and continue to expect a pickup in capital spending over the next several quarters off of low levels.
  • Major buy signal for the U.S. dollar? The U.S. dollar has been very strong so far in October, moving to its highest level since February. Technically, it just completed a Golden Cross formation – which is when the faster 50-day moving average moves above the 200-day moving average. This is considered a bullish technical formation. The U.S. dollar also had a Golden Cross also in July 2014, right before a huge 21% gain the next 12 months. Could this happen again? Of course anything is possible, but looking at the previous 11 times this happened dating back to 2001, the U.S. dollar has been lower six months later six of those times, with a modest 0.3% average return and median return of -1.3%. So this event might get a lot of press and excitement, but it might not be the bullish signal many make it out to be.



  • Advance Goods Trade Balance (Sep)
  • New Home Sales (Sep)
  • Fed quiet period begins



  • Employment Cost Index (Q3)
  • GDP (Q3)
  • Germany: CPI (Oct)

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.

A money market investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money markets have traditionally sought to preserve the value of your investment at $1 per share, it is possible to lose money by investing in such a fund.

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 # 1-549254