Yesterday’s Market Activity
- Listless session. Stocks tried to pare early losses but failed; the S&P 500 ended down 0.3% and about where it started. Similar loss for the Dow (-0.2%) and Nasdaq (-0.3%). Small caps and emerging markets (EM) suffered smaller losses.
- WTI crude oil rebound fueled energy sector rebound. Energy (+1.2%) stopped the S&P 500 sector rankings on a nearly 2% jump in crude oil. The sector is still off to its worst start to a year, on a relative basis, since the S&P sectors were created in 1990.
- Lower dollar supported COMEX gold, up 1.2% on the day.
- Strong day for Treasuries. 10-year yield dropped 0.03% to 2.15% and near post-election lows. Lower rates and a flat yield curve weighed on financials which underperformed and are, we believe, in oversold territory.
Overnight & This Morning
- S&P 500 up marginally, consistent with thesis that traders don’t want to make big moves ahead of a busy Thursday. Talk in financial media about how broad the rally has been across asset classes and types and the central bank driven bull market is long in the tooth (we continue to expect it to last another year and probably more).
- European markets mostly higher in midday trading overseas, led by banks after news of a troubled Spanish bank acquisition. German DAX +0.3%, French CAC +0.9%.
- Asian markets mixed but China stood out as Shanghai Composite rose 1.2% on reports of easing liquidity concerns and potential addition of A shares to the MSCI Index. Nikkei and Hang Seng were flat.
- Oil down slightly, giving back some of Tuesday’s gains after private sector inventory data revealed a buildup in gasoline inventories. Gold slightly lower on strong dollar and weak euro.
- Treasuries marginally weaker. 10-year yield up 0.01% to 2.16%.
- OECD raised its global economic growth forecast this year to 3.5% from 3.3% in March.
- Today’s economic calendar includes government energy inventory data, consumer credit, and mortgage applications.
- President Donald Trump nominates Christopher Wray for FBI director.
- Markets in wait and see mode. Thursday is a big day with ex-FBI director Comey’s testimony, the European Central Bank (ECB) decision, and the U.K. election. Any big moves today ahead of all that would be surprising.
- Record job openings. Yesterday’s JOLTs report (Job Openings Labor Turnover Survey) indicated job openings topped 6 million for the first time, rising 4.5% to 6.04 million. But a relatively slow hiring pace continues to point to a skills gap between the labor pool and employer needs. Data suggests wage pressures may build.
- Optimism abounds. The Business Roundtable CEO Economic Outlook Index rose 0.6 points in Q2 to 93.9, a three-year high, above the historical average of 80.0. Despite slow progress with policy implementation, CEOs expressed confidence in prospects for deregulation and tax reform. Small businesses and consumers remain optimistic as well, providing support for a durable business cycle.
- Is this just like 1987? Once again some charts are making the rounds that compare the current S&P 500 price action with that of the period before 1987. Here’s the catch: we also saw this in 2013, 2014, and last October. Yesterday on the LPL Research blog we took a closer look and showed why a large crash is highly unlikely. Additionally, today on the blog we will take a look at June seasonality and show which sectors tend to do the best and worst this month.
- Eurozone: GDP (Q1)
- Japan: GDP (Q1)
- Japan: Current Account Balance (Apr)
- Japan: Trade Balance (Apr)
- Germany: Industrial Production (Apr)
- UK: General Election, 2017
- ECB: Draghi
- Japan: Machine Tool Orders (May)
- China: CPI & PPI (May)
- Wholesale Sales & Inventories (Apr)
- France: Industrial Production (Apr)
- UK: Industrial Production (Apr)
- UK: Trade Balance (Apr)
- China: Money Supply and New Yuan Loans (May)
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.
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