Market Update: Thursday, March 9, 2017

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  • Stocks’ losing streak continues, oil breaks below $50. (9:50am ET) Major U.S. indexes are continuing a three-day losing streak this morning after a 5% slide in oil prices, the largest sell-off in over a year, weighed on markets Wednesday. A 2.5% decline in energy stocks helped push the S&P 500 down 0.2%, while the consumer discretionary (+0.2%) and healthcare (+0.2%) sectors posted modest gains. Overseas markets again traded cautiously with Asian stocks moving lower on a jump in Chinese manufacturing prices (Shanghai Composite -0.7%, Hang Seng -1.2%); the Nikkei (+0.3%) bucked the trend as the yen weakened for a third consecutive session. In Europe, traders showed little reaction to the European Central Bank’s (ECB) policy decision as the STOXX Europe 600 (-0.1%) continues to trade in the red. Elsewhere, WTI crude oil’s ($49.77/barrel) woes are continuing, COMEX gold ($1206/oz.) is down modestly, and the yield on 10-year Treasury notes is little changed (2.58%) after touching its highest level of the year on Wednesday.

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  • Announced layoffs drop 40% from February 2016. U.S.-based firms announced plans to lay off 37,000 workers worldwide in February 2017, a 40% drop from the 62,000 layoffs announced in February 2016. Layoff announcements in the energy sector totaled just 4,000 in February 2017, down from 25,000 a year ago. Economy-wide over the past 12 months, there have been 477,000 announced layoffs, a large absolute number, but still the fewest announced layoffs in any 12-month period since the late 1990s. At the worst of the Great Recession and its aftermath, there were more than 1.6 million announced layoffs in a one-year period. The layoff data corroborate many other data points that show the labor market still tightening.
  • No signal from claims. Initial claims for unemployment insurance remained pinned close to 40-year-plus lows in the latest week, and continue to suggest that the labor market is tightening. Our work has found that claims do provide a recession signal when they rise between 75,000 and 100,000 over a six-month period. Six months ago, claims were running in the 260,000 per week level. Over the last four weeks, claims have averaged 236,000 per week, so claims are running roughly 15,000-20,000 below six-month-ago levels and are not signaling a recession.
  • ECB leaves policy unchanged. As expected, the ECB looked past higher inflation, leaving monetary policy unchanged and stating that rates will remain low past the end of its bond buying program, which is anticipated to be December 2017 at the earliest. When the purchases are completed, the ECB is expected to own bonds worth approximately 2.25 trillion euros, roughly 25% of the Eurozone economy. There was little reaction to this announcement, as it was widely expected. The euro remains slightly elevated (about +0.6%) from where it began the year.
  • Down three in a row. The S&P 500 closed lower for the third consecutive day for the first time since late January. That losing streak reached four in a row, and the S&P hasn’t been down five days in a row since the nine-day losing streak ahead of the U.S. election. Of course, the past three days all had modest losses at 0.3%, 0.3%, and 0.2%. In fact, even after the recent weakness, the S&P 500 is still only 1.4% away from the all-time high set on March 1, 2017.
  • Big drop in crude. Crude oil dropped 5.4% yesterday for its worst day of the year and largest slide since July. The weakness has continued this morning, as it is beneath $50/barrel for the first time since December. Record U.S. inventories and strength in the U.S. dollar are two reasons for the recent weakness.
  • Happy 8th birthday. The S&P 500 bottomed eight years ago today, after the worst bear market (down 57%) since the Great Depression. As we noted on the LPL Research blog yesterday, this is now the second-longest bull market since World War II and the third-largest percentage gain during a bull market. Be sure to read our blog for more color on this important event.

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Click Here for our detailed Weekly Economic Calendar

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

 

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