Market Update: Wednesday, December 28, 2016

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  • Stocks reverse early gains. (10:05am ET) U.S. equities are edging lower this morning, after all three major indexes initially opened in the green. The Dow will make another try for 20,000 after closing at 19,945 yesterday; the S&P gained 0.2%, led higher by the heavily weighted technology sector (+0.4%). Overnight in Asia, the Nikkei closed flat, the Shanghai Composite dropped 0.4% and the Hang Seng gained 0.8% in its first session of the week. European equities are mixed in afternoon trading; while the STOXX Europe 600 is up 0.2% and the U.K.’s FTSE 100 trades higher by 0.5% following yesterday’s holiday, many other exchange are flat to modestly lower. Finally, WTI crude oil ($54.15/barrel) and COMEX gold ($1,140/oz.) are both higher while the yield on the 10-year Treasury is unchanged at 2.56%.

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  • Consumer confidence rises. Echoing the University of Michigan’s consumer survey last week, the Conference Board’s Consumer Confidence Index for December rose to 113.7, a 13-year high and well above the consensus estimate of 108.5. The increase came entirely from improving expectations, with consumers’ assessment of current conditions declining slightly. Growing consumer confidence may help contribute to better economic growth in 2017.
  • Home prices continue to push higher. Home prices rose 5.1% year over year in October, according to the most recent data from the S&P CoreLogic Case-Shiller Home Price Index, approximately the pace at which they have held for the past year. Tight supply continues to push prices slowly higher, with low unemployment and consumer confidence supporting demand. Rising mortgage rates would have an increasing impact on affordability, but even with recent increases, rates still remain very low compared to historical data.
  • The small ranges continue. The S&P 500 had another small intra-day range on Tuesday, as it has now traded six consecutive days in a range of less than 0.5%. Using reliable intra-day data going back to 1970, this has happened only three other times, with the most recent being December 2014. It has never made it to seven days in a row, but that could happen today with another small move. This time of year historically has light volume and slow activity, but 2016 is taking that to an extreme.
  • New highs for the Nasdaq. The tech-heavy index made another new all-time high yesterday, while other indexes just missed new highs. This was the 17th new all-time high this year, on top of nine from 2015. The Nasdaq went 15 years without new highs from March 2000 till April 2015, so new highs are a rather new thing. Lastly, the 17 new highs this year tops the 16 made in early 2000, before the tech bubble popped.

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Wednesday

  • Pending Home Sales (Nov)

Thursday

  • Initial Claims (12/24)

Friday

  • Chicago Area PMI (Dec)

Saturday

  • China: Official Mfg. PMI (Dec)
  • China: Official Non-Mfg. PMI (Dec)

Sunday

  • China: Caixin Mfg. PMI (Dec)

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.

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