Market Update: Thursday, May 4, 2017


  • 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.


  • 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.



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