Market Update: Monday, October 31, 2016


  • U.S. equities begin week positive, bucking global trend. Boosted by continued mergers and acquisitions activity, domestic markets are slightly higher this morning; this in contrast to foreign markets that pulled back as developments over the weekend spurred renewed U.S. election uncertainty. Looking back, the S&P 500 shed 0.3% on Friday, bringing its weekly decline to 0.7%, as the healthcare sector plunged 2.2% on renewed fears surrounding drug pricing regulation; industrials (+0.7%) and consumer staples (+0.5%) were the outperformers. The Dow closed near flat while the Nasdaq lost over 1% for the week. In overnight trading, the Nikkei, Hang Seng, and Shanghai Composite all lost 0.1%, while European indexes are lower across the board in afternoon trade despite Eurozone Q3 gross domestic product (GDP) data that was in line with estimates. Elsewhere, WTI crude oil ($47.90/barrel) is down over 1.3% as talks between OPEC and non-OPEC countries over the weekend resulted in little progress toward a production cut agreement, COMEX gold ($1275/oz.) is modestly lower, and the yield on the 10-year Treasury note has slipped two basis points to 1.83%


  • Another big week of earnings on tap. With about 60% of S&P 500 companies having reported, third quarter 2016 S&P 500 earnings are tracking to a 3% year-over-year increase, solidly above the 0.7% decline expected when earnings season began and marking the end of the earnings recession. Financials and technology remain the standouts with the most upside above prior estimates. Estimates one year out continue to hold up well with just a 0.5% decline in consensus S&P 500 estimates since October 1. This week (October 31-November 4) is another very busy earnings week with 134 S&P 500 companies reporting third quarter results.102116_earningsdashboard-01-for-wp
  • Wow, what a week. Any week that has the jobs report (Friday, November 4) and ISM (Tuesday, November 1) is important. But add in the Federal Open Market Committee (FOMC) meeting (Wednesday, November 2) key data in China (Purchasing Managers’ Indexes (PMI)) for October as well as rate decisions from the Bank of Japan and Bank of England, and you have the makings of a critical week for markets ahead of the November 8, 2016 elections in the U.S. Add in 134 earnings announcements from S&P 500 companies just for fun.
  • Personal income, spending and inflation data for September keep the Fed on track to tighten in December. The September personal income and spending report was already baked into the Q3 GDP report released on Friday, October 28. While personal income (+0.3%) rose less than expected (+0.4%) in September, the 0.5% gain in personal spending exceeded expectations (0.4%). The Fed’s preferred measure of inflation-the personal consumption deflator excluding food and energy-posted a 1.7% year-over-year increase in September, matching the August increase.  Both personal income and personal spending are running about 3-3.5% ahead of their year-ago level, a sign that consumers are not overborrowing to fund consumption. Today’s data does little to change our view that the Fed remains on track to raise rates by 25 basis points in December.
  • Eurozone data as expected. Two key pieces of data for the Eurozone came in as expected early this morning. Core consumer prices are rising at 0.8% annually. GDP was 1.6% for the past twelve months, and 0.3% for the latest quarter. Neither data point suggests moving the European Central Bank from its anticipated course of extending its quantitative easing program scheduled to end in March 2017, but doing so in a way that tapers its bond buying on a monthly basis.
  • This week’s Weekly Market Commentary: Market concerns. In the spirit of Halloween, we discuss what might scare markets. We know from the financial media, measures of investor sentiment, and mutual fund outflows out of equities and into bonds that investor nervousness is widespread. Some concerns are related to the presidential election, now just eight days away. Other concerns are related to the age of the bull market, central bank activities, Brexit, and China’s debt problem, and there are certainly others. We discuss these in our latest Weekly Market Commentary due out later today.
  • This week’s Weekly Economic Commentary: The Chinese yuan. We look at the inclusion of the Chinese yuan in the International Monetary Fund’s Special Drawing Rights (SDR) program. This inclusion was important to the Chinese government for public relations purposes, but has minimal real impact. Though the Chinese government has been actively promoting the use of the yuan in global trade, its use has actually been decreasing due to the yuan’s weakness against other global currencies.



  • Personal Income and Spending (Sep)
  • Chicago Area PMI (Oct)
  • UK: Bank Lending and Money Supply (Sep)
  • Eurozone: CPI (Oct)
  • Eurozone: GDP (Q3)
  • China: Official Mfg. PMI (Oct)
  • China: Official Non-Mfg. PMI (Oct)


  • ISM Mfg. (Oct)
  • Vehicle Sales
  • Japan: Bank of Japan Meeting (No Change Expected)



  • ISM Non-Mfg. (Oct)
  • UK: Bank of England Meeting (No Change 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.

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 # 1-550463