Market Update: Thursday, May 4, 2017

MarketUpdate_header

  • U.S. Stocks are mixed in early trading despite good earnings, another positive jobs report (weekly claims were down) and a narrowing of the trade deficit. Politics may be weighing on sentiment pending House vote on healthcare.
  • Europe. Stocks are up (~+0.5% to +1.0%) due to combination of strong earnings and Emmanuel Macron’s performance in a televised debate last night in France. As his poll advantage widens, worst-case scenarios previously priced in to European equities have reversed.
  • Asia. Stocks in Asia were mostly lower (Shanghai Composite -0.3%, Hang Seng -0.1%) as hawkish Fed comments weighed on the largely export-driven markets. Investors must balance the fears of potentially higher U.S. rates and a stronger U.S. dollar vs. the impact relative to currency differentials, capital outflows, debt-service payments and food/energy costs throughout the developing world. Keep in mind, though, that nominal GDP in China is in excess of +11.0% year over year, providing some solace to investors. The Nikkei is closed until Monday, while Korea’s KOSPI hit a new record high.
  • Treasuries. Yield on the 10-year Treasury note climbed to 2.33% and the U.S. dollar rose +0.5%.
  • Commodities. “Dr. Copper” plunged >-3.0% on fears of excess inventories in China, and gold weakness (-0.7%) suggests a global risk-on trade.

MacroView_header

  • Productivity falls in first quarter. Labor productivity (output per worker hour) fell 0.6% in the first quarter of 2017, missing expectations of flat productivity growth, although the miss was offset by a solid upward revision to fourth quarter 2016 data. Weak productivity growth has been one of the main factors limiting economic activity in the current expansion and improvement would be an important part of any pick-up in growth. There are some potential signs of improvement–a solid rise in business spending in the first quarter may have marked a shift in business priorities that could give productivity a boost, although the impact will not be immediate.
  • Trade balance steady but trade activity falls. The trade balance was near flat at $-43.7 billion in March, nearly the same as the prior quarter but better than consensus expectations. However, both imports and exports fell, signaling a decline in trade activity. There was some good news in the report. Services trade activity was strong, exhibiting the continued value of good old American know-how as a national resource, as was exports of capital goods.
  • Another small move. The S&P 500 lost only 0.13% yesterday, making it six consecutive days with a gain or loss of less than 20 basis points (0.20%). That hasn’t happened since December 2010 and it hasn’t made it to seven in a row since 1972. What makes this current streak so interesting is it is happening near all-time highs, as the S&P 500 has closed within 0.5% of the all-time high the past seven days in a row.
  • Happy Star Wars Day. May 4th is universally known as Star Wars Day. In honor of the timeless movies, today on the LPL Research blog we show how some of the most famous lines from the movies are actually investment advice.

 

MonitoringWeek_header

Click Here for our detailed Weekly Economic Calendar

Thursday

Friday

 

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 # 1-605690