Market Update: Thursday, June 1, 2017

MarketUpdate_header

Yesterday’s Market Activity

  • Stocks flat, with the S&P 500 finishing barely red
  • Tight range continued as the past three days the S&P 500 moved less than 0.15% each day
  • WTI crude oil down 2.8% to a new three week low, energy stocks lagged as a result
  • Financials fell 0.9% on concerns of weak bank trading results
  • 10-year Treasury yield stayed flat at 2.21%
  • Utilities higher as the defensive group continued leadership, with the sector up 0.6%
  • Economic data was light, but May Chicago Purchasing Managers Index (PMI) hit its best level since November 2014, April pending home sales missed

Overnight & This Morning

  • US equities near flat amid light volume
  • ADP Employment report slightly better than expected, 181k jobs in May versus 173.5k expected (details below)
  • Jobless claims ticked up to 248k vs 239k expected. Though slightly elevated, no signal of shifting labor market conditions.
  • European stocks up, STOXX Europe 600 up 0.4% after Eurozone manufacturing PMI in line
  • UK polls showing much narrower lead for Conservatives heading into the UK election
  • Asia is mixed, Japan up 1% on stronger Q1 capex spending, China slipped on surprise contraction in Caixin manufacturing PMI
  • US Dollar firmer versus other major currencies
  • Commodities lower on US dollar strength, WTI crude oil ($48.31/bbl) flat after a bigger-than-expected stockpile in API inventory
  • President Trump widely expected to announce the exit from the Paris climate agreement

 

MacroView_header

Key Insights

  • With June upon us, you may hear how this is one of the worst months historically for the S&P 500 Index. Some summertime volatility could be perfectly normal and with three central bank interest rate decisions due near the middle of this month, the odds of more volatility is no doubt higher, but we continue to recommend a diversified approach that focuses on clients’ long-term goals.
  • Lack of volatility continues as the S&P 500 hasn’t closed up or down more than 0.15% for three consecutive days. As we noted last week, after 100 trading days the S&P 500 has closed up or down more than 1% four times, the least since 1972. But it’s important to remember this increases the odds of higher volatility later this year, and also note that some of the best bull markets ever have taken place amid the least volatility.

Macro Notes

  • ADP employment report signals possible improvement in job growth. ADP, the nation’s largest payroll processing firm, estimated the economy added 253,000 new jobs in May, well ahead of consensus expectations of 170,000. While the report points to potential upside for Friday’s jobs report, ADP’s jobs number has become a less reliable forecaster following methodological changes. The consensus estimate for Friday’s jobs report stands at non-farm payroll growth of 185,000 (versus 211,000 last month) with the unemployment rate holding steady at 4.4%.
  • 2017 Retirement Environment Index released. The LPL Research Retirement Environment Index seeks to discover the complicated answer to the simple question: Which state is most desirable for pre-retirees? Based on six categories, the index ranks states on their preparedness and desirability for the pre-retiree cohort. No single state ranked in the top across all categories and the index can be used as financial planning tool to help address state attributes that are most important to pre-retirees. This year, Nebraska took the top spot, while New York anchored the bottom. Review the details behind the rankings, as well as regional trends, in the full publication.

 

MonitoringWeek_header

Click Here for our detailed Weekly Economic Calendar

Thursday

  • ADP Employment (May)
  • Non-Farm Productivity (Q1)
  • Initial Jobless Claims (May 27)
  • Markit Mfg. PMI (May)
  • ISM (May)
  • Eurozone: Markit Eurozone Mfg. PMI (May)
  • Italy: GDP (Q1)
  • Brazil: GDP (Q1)
  • South Korea: GDP (Q1)
  • Canada: Markit Canada Mfg. PMI (May)
  • Japan: Vehicle Sales (May)

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 # 1-613605