Market Update: Friday, January 6, 2017

MarketUpdate_header

  • Markets shrug off jobs report, up modestly. (10:17am ET) Major indexes are trading higher today despite a below-consensus U.S. nonfarm payrolls report. This follows a down-and-up trading session Thursday as stocks sold off early but recouped losses to finish near flat. The Nasdaq (+0.2%) outperformed the S&P 500 (-0.1%) and Dow Jones Industrial Average (-0.2%). Sector performance was mixed as healthcare stocks led to the upside, while financials fell more than 1% on declining yields. Overnight, the Shanghai Composite slid 0.4% while the Nikkei shed 0.3% on trade concerns and yen strength. While European markets are lower across the board, they recovered some losses after the jobs report; the STOXX Europe 600 is down just 0.1%. Elsewhere, WTI crude oil ($53.93/barrel) continues to find a bid, up 0.3% this morning, COMEX gold ($1177/oz.) is modestly lower after gains each day this week, and the yield on the 10-year Treasury note has reversed some of yesterday’s decline, now trading at 2.40%.

MacroView_header

  • December jobs report headline disappoints, but details solid and Fed still on track for 2-3 rate hikes in 2017. The economy created 156,000 net new jobs in December 2016, falling short of the consensus expectation (per Bloomberg News) of a 175,000 gain. Despite the headline miss, the rest of the report was solid with large upward revisions to prior months’ job counts, suggesting that the labor market continued to tighten as it approaches full employment. We’ve noted in the past that Federal Reserve Bank (Fed) officials have said that monthly job growth of as low as 80,000 per month would be sufficient to tighten the labor market as we approach full employment. The acceleration in average hourly earnings in December to 2.9% year over year from 2.5% in November is evidence of that.
  • Week ahead. The consumer is in focus next week with reports on December retail sales and consumer confidence as well as November consumer credit highlighting an otherwise quiet week for data, as is typical for the week after the monthly jobs report is released. A handful of Fed speakers are on tap next week after a year-end and early-year lull, including an appearance by Fed Chair Janet Yellen on Thursday at a town hall event in Washington, D.C. Overseas, China will release its December economic data next week, and central bank meetings in Brazil, South Korea, and Poland are on tap, with Brazil expected to cut rates. In addition, the Q4 2016 earnings reporting season unofficially begins next week, as firms begin to report sales and earnings for Q4 2016 and guidance on 2017.
  • Where is the volatility? The S&P 500 has now gone 59 consecutive days without a 1% drop, one of the longest streaks going back 45 years and the longest such streak since 66 in a row during the summer of 2014. Additionally, the S&P 500 hasn’t had a 1% intraday move for 14 consecutive sessions. Over those past 14 sessions, the range on the S&P 500 has been 1.8%, one of the tightest 14-day ranges since 2013. Turning to the CBOE Volatility Index (VIX), it dropped nearly 17% in the first three days of 2017, for the second-largest drop to start a year ever (2013 was down 23.2%). Also, it has been lower each of the first three days of the new year for the first time since 2013 (which was eventually down five in a row). The all-time record to start a year is down six days in a row in 2010.

 

MonitoringWeek_header

Friday

Saturday

  • China: Imports and Exports (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.

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

Member FINRA/SIPC
Tracking #1-569620