Yesterday’s Market Activity
- U.S. markets stabilized as traders looked for opportunities in tech and financial stocks Markets pared gains heading into the close; S&P 500 +0.4%, Nasdaq +0.7%, Dow +0.3%
- Dollar stabilized (+0.3%); 10-year Treasury yield up to 2.23%
- Investors’ focused on positive fundamentals supporting global economic growth, corporate profitability
- Emerging markets struggled following reports of a bribery scandal involving the President of Brazil
Overnight & This Morning
- Asian equities stabilized as most major equity indices held firm, MSCI EMG +0.3%
- Chinese corporate bonds under pressure as Beijing attempts to limit speculation with investors adjusting corporate spreads reflect possible increased default risk
- European equities up ~0.6% after three days of declines. Sovereign bond yields slipped as speculation mounting that the European Central Bank (ECB) will begin building the case for unwinding stimulus at its June meeting
- Commodities are mostly higher, WTI headed ($50.60/bbl.) for second consecutive weekly gain ahead of next week’s OPEC meeting (5/25) in Vienna; expectations for nine-month extension of production cuts
- Base metals (Copper -1.5%) outperforming precious metals (Gold -0.2%, $1250/oz.)
- Major domestic indexes up 0.7%; Treasury yields up (10yr note +3bp to 2.26%)
- U.S. dollar weakening; several research reports highlight political risks
- Brazil crashes. On Wednesday night, Brazilian newspapers ran a story implicating President Michel Temer directly in a bribery scandal. Brazilian stocks fell 10% on Thursday, with its currency, the real falling another 7%. Temer himself assumed power one year ago after the impeachment of then President Dilma Rousseff. Brazil is large component of emerging market indices, and will have an impact on index funds as well as managers who are highly index aware.
- Week ahead. Next week’s domestic economic calendar includes data on preliminary purchasing manager surveys (manufacturing and services) from Markit, housing, trade, durable goods, and revised first quarter gross domestic product (GDP). The Federal Reserve (Fed) will remain in focus with minutes from the May 3 Federal Open Market Committee (FOMC) meeting due out Wednesday (May 24) and several Fed speakers on the docket-a roughly even balance of hawks and doves. We believe the market is correctly pricing in a June 14 rate hike. Overseas economic calendars are busy with a series of data in Europe, including first quarter German and U.K. GDP, German business confidence, and Eurozone purchasing manager surveys; and in Japan (trade, manufacturing and inflation data).
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
Tracking # 1-610148