Market Update: Thursday, December 29, 2016

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  • Equities, oil near flat after overseas declines. (10:15am ET) Investors are sifting through claims data and oil inventory reports on what is expected to be another light trading day, following a Wednesday during which stocks could not gain traction, drifting lower throughout the low-volume session. S&P 500 losses were relatively uniform as ten out of eleven sectors dropped between 0.6% and 1.0%; telecom’s outperformance (-0.3%) was the one exception. Overseas, the Nikkei (-1.3%) fell sharply on a stronger yen; moves were muted in the Shanghai Composite (-0.2%) and Hang Seng (+0.2%). Country indexes across Europe are modestly lower, in line with the 0.2% drop on the STOXX Europe 600. Meanwhile, WTI crude oil ($53.94/barrel) is down slightly, COMEX gold (1148/oz.) is up half a percent, and Treasuries are continuing yesterday’s advance, lowering the yield on the 10-year note another two basis points to 2.49%.

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  • The small-range streak is over. The S&P 500 dropped 0.8% yesterday, for the worst day of the month and largest drop since October 11. In the process, the six-day streak of intra-day ranges less than 0.5% is over. That was the longest stretch of small ranges since six in a row in December 2014. Still, the S&P 500 hasn’t closed lower by more than 1% for 54 straight days, tying a streak of 54 in a row ending in late June. Should today not close 1% lower, this will be the longest streak since 66 in a row from the summer of 2014.
  • Two days left. The final two trading days of 2016 have arrived. The past two years saw heavy selling these days, with the S&P 500 down 1.5% and 1.7%, respectively. Those are the two largest drops going back 20 years. The past 10 years, the last two days of the year have returned exactly flat at 0.0% with a positive return four out of 10 times. In other words, there doesn’t appear to be much outperformance late in the year recently.

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Thursday

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.

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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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