Market Update: Thursday, January 26, 2017

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  • Equities little changed in early trading. (10:00am ET) U.S. markets are flat to modestly higher this morning following yesterday’s session, which saw the Dow (+0.8%) finally cross and close above the 20,000 mark. The S&P 500 also closed higher by 0.8% as interest rate sensitivity drove sector performance; the heavily-weighted financials sector (+1.7%) outperformed while real estate (-0.7%) and telecom (-0.2%) lost ground. Asian equities advanced overnight, led by Japan’s Nikkei (+1.8%) after Prime Minister Shinzo Abe said that a bilateral trade deal with the U.S. was possible despite President Donald Trump’s withdrawal from the Trans-Pacific Partnership earlier this week. European markets are modestly positive in the afternoon session; the STOXX Europe 600 is up 0.2%. Finally, the yield on the 10-year Treasury is continuing to move higher, now at 2.52%, WTI crude oil ($53.74) is up 1.9%, and COMEX gold ($1189/oz.) is down 0.7% after shedding 1.1% yesterday.

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  • Initial claims fell sharply in mid-to-late December and early January. Early auto plant shutdowns, unusual weather, and the year-end holidays played havoc with the notoriously hard to seasonally adjust weekly claims data. In the latest week, claims rose 22,000 to 259,000, but the readings in the mid-230,000s in the prior weeks matched 43+ year lows. The labor market is still tightening and wages are still accelerating. The January jobs report is due out Friday, February 3, 2017.
  • Dow 20k is finally here. After flirting with it for over a month, the Dow finally closed above the 20,000 level. As expected, this event brought much fanfare and media attention, but in reality it is not much more than another reminder of the ongoing bull market. It took only 42 days to go from 19,000 to 20,000–the second-fastest 1,000-point interval ever. Of course, the percentage difference between 1,000-point milestones is smaller the higher you go. Looking at the median returns following these new milestone levels, the near-term equity returns can be slightly weaker than the average at-any-time returns. But going out a year, returns are closer to normal. Today on the LPL Research blog we will take a closer look at this event and what it could mean.
  • Amid Dow 20K hoopla, earnings season rolls along. With 20% of the S&P 500 having reported, fourth quarter earnings growth is now tracking to 6.8%. The minimal upside at this stage is a bit disappointing, although we are encouraged by the performance of three widely held sectors: financials, industrials, and technology, which have generated the most upside compared with year-end expectations. The marginal drop in consensus 2017 earnings growth forecasts is encouraging (Thomson-tracked consensus down from +12.5% to +12.3% year to date) and, we believe, partly reflects expected pro-growth policy measures out of Washington. Estimates for the second half of 2017 have actually risen slightly since January 1. Look for more on earnings from us on Monday.
  • Look under the surface. The Dow is getting all the headlines, but it was very encouraging that small caps and financials led for the second day in a row. Not to mention the S&P 500 made a new all-time high for the second day in a row. Speaking of the S&P 500, it has now gone an incredible 27 consecutive days without a 1% intraday move, the longest streak in nearly 22 years. Going around the globe: Austria, Argentina, and Mexico all saw their stock markets close at or very near all-time highs, while Germany, Greece, and Italy all closed at or new 52-week highs. In other words, it is nice that the U.S. stock market is at new highs, but the global strength is even more impressive.

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Thursday

Friday

Saturday

Sunday

  • Japan: Retail Trade (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.

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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.

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Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

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