Market Update: Friday, January 13, 2017

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  • Stocks up as earnings season kicks off. (10:15am ET) Domestic indexes are advancing in early trading after a string of financial firms, including JP Morgan and Bank of America, released fourth quarter earnings that topped estimates. This follows another session for the S&P 500 (-0.2%) that left the index fighting to rebound from a morning selloff, though it failed to move back into positive territory. In the end, rate-sensitive telecom (0.6%) and utilities (0.1%) logged modest gains as Treasury yields continued to inch lower; financials (-0.7%) led to the downside ahead of this morning’s earnings releases. Overseas, Asian stocks finished mixed; a rebound in the dollar boosted the Nikkei (0.8%), while China’s Shanghai Composite dipped 0.2% after disappointing export data. European markets are higher in afternoon trading with the STOXX 600 up 0.8%. Elsewhere, WTI crude oil ($52.90/barrel) is pulling back after two days of gains, COMEX gold($1191/oz.) is off 0.8%, and 10-year Treasury yields are up 6 basis points (0.06%) to 2.42%.

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  • Was Friday the 13th lucky for the banks? Certainly banks have been the recipients of some good fortune, surging 31% since the start of the fourth quarter of 2016 compared with just a 5.4% gain for the S&P 500. The group, which unofficially kicks off earnings season today, has benefited from rising interest rates and related steepening of the yield curve, along with prospects for deregulation by the Trump administration. Results for the banks this morning were mostly positive, but on the surface may have slightly missed the market’s lofty expectations. Regardless, strong loan growth, higher trading revenue, and net interest margin trends are positive and we maintain our positive bias toward the sector.
  • Chinese trade disappoints. Chinese exports declined in dollar terms (though slightly improved when calculated in yuan), figures generally considered disappointing by financial markets. Weakening exports are signs of slowing global demand, but may also be tied to the yuan, which has strengthened against some of its Asian competitors even as it has weakened against the dollar. Even with these factors, the weakness in exports still has surprised many global economists. Overall, the Chinese trade surplus contracted unexpectedly.
  • Fear Triskaidekaphobia? Today is Friday the 13th and it always bring with it talk of how unlucky this day is. We did a fun blog post taking a closer look at whether you should indeed worry. For starters, the S&P 500 hasn’t been up on this day for nearly two years – although there have been only three instances. Nonetheless, we found that since 1928[1], the average Friday the 13th for the S&P 500 is actually weaker than both the average Friday and average day, but it is higher 57% of the time, better than the average Friday which is higher 54.4% of the time. For an entertaining read, please be sure to see our blog here.
  • The tight range continues. The S&P 500 had another nice late-day surge for the second day in a row. It looked like the streak of days without a 1% close lower could be in trouble, but after the afternoon bounce, it is now at 64 consecutive days – the longest streak since 66 in the summer of 2014. The real action, or should we say lack of action, is in the Dow. Over the past month (21 trading sessions), using closing prices, the Dow has traded in a range of only 1.07%. Going back to 1900, that is the tightest monthly range for the Dow ever! What does it mean? Muted periods like now are extremely rare and they don’t last forever. With earnings season heating up next week and the inauguration on Friday, things are ripe for more volatility.
  • The breakout no one is mentioning. The British FTSE 100 has broken out to new highs and in the process is up a record 13 days in a row and a record 11 new all-time highs in a row. It has also formed a picture-perfect breakout of a 17-year range. Although this is significant, we haven’t heard many investors mentioning it. Later today on the LPL Research blog we will take a closer look at this important development and what it could mean for European and global equities.

[1] Please note: The modern design of the S&P 500 stock index was first launched in 1928. Performance back to 1957 incorporates the performance of predecessor index, the S&P 90.

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Friday

Saturday

Sunday

  • Japan: Machine Orders (Nov)
  • Japan: PPI (Dec)

 

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