Market Update: Wednesday, February 8, 2017

MarketUpdate_header

  • U.S. and European stocks lower as earnings roll in. (9:57am ET) The S&P 500 is off 0.3% in early trading as investors continue to process a wave of earnings reports, including those from Walt Disney and biotech giant Gilead. Major indexes were little changed yesterday, though the Nasdaq closed at a new record high, and the Dow hit a new intraday high. The S&P closed flat, with gains in consumer staples (+0.8%) being offset by losses in the energy sector (-1.4%) as crude oil prices fell 1.6%; the commodity is continuing its move lower this morning, now at $51.85/barrel. Overnight in Asia, stocks closed mostly positive, led by Hong Kong’s Hang Seng (+0.7%) and Japan’s Nikkei (+0.5%). Many European exchanges are modestly lower in the afternoon session; although the STOXX Europe 600 is flat, there is relative weakness from the financials sector. Elsewhere, COMEX gold ($1245/oz.) is moving upward, and the yield on the 10-year Treasury is down another 4 basis points (0.04%) to 2.34%.

 

MacroView_header

  • Chinese reserves drop. As expected, Chinese foreign currency reserves fell last month to just under $3 trillion. While this is still a huge stockpile, China’s reserves were roughly $4 trillion at their peak. The government has said it would be comfortable with reserves as low as $2 trillion, which would still make it the largest globally (Japan is second at $1.3 trillion). Nevertheless, the Chinese have been spending at a rapid rate to support both their economy and the yuan. Declining reserves call into question the government’s ability to continue to support the yuan.
  • Europe earnings rebound. European earnings growth for the fourth quarter is tracking in the mid-teens, ahead of the U.S. on rebounding energy sector profits and resilient economic growth in the face of political uncertainty. The macroeconomic outlook is still very much uncertain with elections coming up, particularly in France, and Greece back in the news. However, resumption of earnings growth is an encouraging step which, along with attractive valuations relative to the U.S. and the recent pullback in the U.S. dollar, suggests paying a bit more attention to opportunities in these markets in the coming months.

 

MonitoringWeek_header

Click Here for our detailed Weekly Economic Calendar

Wednesday

  • UK: House of Commons to Vote on Article 50
  • India: Reserve Bank of India Meeting (Rate Cut Expected)

Thursday

  • Mexico: Central Bank Meeting (Rate Hike Expected)
  • China: Money Supply and New Loan Growth (Jan)
  • China: Imports and Exports (Jan)

Friday

Saturday

 

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.

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.

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 #1-580238