Market Update: Thursday, April 13, 2017

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  • Stocks unchanged despite upbeat bank earnings. (10:29am ET) U.S. equities are poised for a quiet session today as investors head into the long weekend. Traders are focusing on comments from President Trump, who suggested the dollar is “getting too strong” and that he would like to see interest rates stay low, and generally positive earnings from a string of financial firms as Q1 earnings season kicks off. Yesterday, the S&P 500 failed to hold onto early gains as losses in industrials (-1.3%) and financials (-0.9%) stocks more than offset gains in the lightly-weighted utilities (+0.7%) and telecom (+0.6%) sectors. In Asia, markets were mostly lower overnight; the Nikkei (-0.7%) fell as the yen continued to strengthen while the Shanghai Composite (+0.1%) and Korea’s KOSPI (+0.9%) advanced. Europe is trading in the red with the STOXX 600 off 0.3% as banks lead to the downside. Also, WTI crude oil ($53.34/barrel) is recouping some of yesterday’s losses, COMEX gold ($1285/oz.) continues to rise, and the 10-year Treasury yield is down another 2 basis points (0.02%) to 2.26%.

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  • Mixed batch of bank earnings. Results from the three big banks reporting this morning were varied but positive signs included strong trading results, particularly in fixed income, and solid underwriting results. Net interest margin and loan growth performance were mixed for the group (though JPMorgan produced year-over-year loan growth of 9% and an increase in net interest margins), but we expect loan growth to pick up over the course of the year for the banks overall as policy uncertainty clears and recent strong confidence readings (soft data) is followed by better economic activity (hard data). We maintain our positive view of financials. After 6% of the market cap of the S&P 500 reported results this week, next week 16% will report, followed by nearly 40% the following week (April 24-28).
  • Weekly jobless claims largely unchanged. Data released this morning on initial jobless claims for the week ending April 8 showed the number of people seeking unemployment benefits dipped 1,000 to 234,000, better than the 245,000 consensus forecast and at 40-year lows. The prior week was revised to 235,000 from 234,000, meaning the week-over-week level was unchanged. Continuing claims fell 7,000 to 2.03 million while the four-week average dipped from 250,250 to 247,250. Job data continues to point toward a gradual tightening of the labor market. Claims have fallen below 300,000 for 110 weeks in a row, consistent with a healthy labor market and continued economic growth.

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Thursday

Friday

  • Banks Open, Markets Closed
  • CPI (Mar)
  • Retail Sales (Mar)

 

 

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.

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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.

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