Market Update: Wednesday, March 8, 2017

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  • Appetite for risk held in check with jobs report, ECB meeting on the horizon. (10:15am ET) U.S. stocks are treading water this morning as traders remain wary of adding risk to portfolios ahead of Friday’s monthly nonfarm payrolls report, the first containing a full month’s data since President Trump was sworn into office. This comes after major indexes notched a second day of losses on Tuesday to post their first back-to-back declines since January; technology (+0.2%) was the best performer and one of only two sectors to gain ground. Overseas, trading in Asia led to mixed performance overnight with attention largely on North Korea’s missile test. The Nikkei (-0.5%) and Shanghai Composite (-0.1%) fell while the Hang Seng (+0.4%) moved higher. European equities are moving in and out of positive territory (Euro STOXX 600 +0.1%) as the banking and energy sectors are helping and hurting, respectively. The European Central Bank meeting wraps up tomorrow, though expectations are the status quo will be maintained. Elsewhere, COMEX gold ($1209/oz.) is eyeing a seventh straight decline, WTI crude oil ($52.45/barrel) is off more than 1%, and the 10-year Treasury yield is up sharply 6 basis points (0.06%) to 2.57%.

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  • Booming ADP employment report for February enhances case for March rate hike. However, ADP’s new methodology remains a concern. Until recently, ADP, the nation’s largest payroll processing firm, used only its proprietary database of payroll data to make its estimate of private sector employment each month. A few years ago, ADP started adding publicly available data on employment to supplement its forecast. Effective as of the October 2016 report, ADP added oil prices, initial claims, consumer sentiment, and the Conference Board Leading Economic Index (LEI), so there is very little “new information” about the labor market in the ADP report. The February 2017 report found that the private sector economy created 298,000 private sector jobs, 109,000 more than expected by the consensus of economists as polled by Bloomberg (+187,000). The January 2017 reading on ADP was revised higher to show an increase of 261,000 (originally reported as a 246,000 gain). The ADP report, once a key input for making forecasts of the U.S. Bureau of Labor Statistics’ jobs report, has faded recently as a forecasting tool, as it no longer relies on only its own, proprietary information. The U.S. Department of Labor will release the Employment Situation report on Friday, March 10. The consensus expectation is a job gain of 195,000 and an unemployment rate of 4.7%.
  • Over the last month, the LPL Financial Current Conditions Index (CCI) rose 11 points to 255. The CCI is now near the top of the range it has held since 2010. Accelerating retail sales and a decline in jobless claims were the largest positive contributors to the CCI this month, while an increase in the VIX (a measure of stock market volatility) and weaker business lending were the main detractors.
  • Make that 100. The S&P 500 might have closed lower for the second consecutive day yesterday, but it has now gone 100 days in a row without a one percent close lower. That is the longest such streak since 105 in late 1995 (interestingly, that year had two streaks of more than 100 days). Taking another look at the back-to-back losses, the S&P 500 had gone 25 trading sessions without two red days in a row, the longest run since 25 last summer.
  • Bull birthday. Eight years ago tomorrow, the S&P 500 closed at its lowest level of the financial crisis, marking the end of the worst bear market since the Great Depression (down 57% from the highs). Going back to WWII, this is now the second-longest bull market ever at 97 months, with only the bull market during the 1990s longer. The S&P 500 is up 250.0% since the 2009 lows. This ranks as the third-best return during a bull market since WWII, with only the 1950s[1] and 1990s bull markets up more. Today on the LPL Research blog we will take a closer look at this bull market and how it compares to other long bull markets. [1] Please note: The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of predecessor index, the S&P 90.

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Click Here for our detailed Weekly Economic Calendar

  Wednesday

Thursday

  • Initial Claims (3/5)
  • Challenger Job Cut Announcements (Feb)
  • Household Net Worth and Flow of Funds (Q4)
  • European Union leaders Summit in Brussels Begins
  • Eurozone: European Central Bank Meeting (No Change Expected)

Friday

  • Employment Report (Feb)
  • European Union leaders Summit in Brussels Continues

 

 

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.

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