Yesterday’s Market Activity
- Stocks fell slightly Thursday. S&P 500 Index -0.2%, Nasdaq (-0.5%) and Russell 2000 (-0.5%) fared worse. Weakness stemmed from political uncertainty, slightly more hawkish than expected communication from the Federal Reserve (Fed).
- Defensive sectors mostly led. Industrials (+0.7%) topped rankings, but more lightly weighted defensive sectors outperformed; utilities (+0.6%), real estate (+0.5%) particularly strong. Resources were biggest decliners.
- Strong dollar weighed on international equities; MSCI EAFE (-1.5%) and EM (-1.0%) indexes both underperformed the U.S. major averages.
- Oil below $45/bbl., down 0.7% on ongoing inventory concerns, dollar strength
- Treasuries fell, 10-year Treasury yield +0.02% to 2.16%
- Initial jobless claims fell 8k from prior week to 237K. Empire State Manufacturing Index, Philadelphia Fed Index better than expected, industrial production missed.
Overnight & This Morning
- Stocks dip at the open. S&P 500 -0.2%. Nothing out of Washington, D.C. moving broad markets, though drug pricing executive order garnering attention (details below).
- European equity markets higher, led by U.K. and France, both up 0.7%. Financials appeared to like Greek debt agreement.
- Asian markets ended mixed. Bank of Japan (BOJ) decision to leave rates unchanged, maintain asset purchase program helped (details below). Nikkei +0.6%, Hang Seng +0.2%, Shanghai Composite -0.3%.
- Treasuries little changed. 10-year yield ~2.16%
- U.S. dollar down overall, but up versus the yen
- Oil (+0.6%) is recovering from year-to-date lows but still down for the week
- Today’s data calendar includes housing starts and permits (both missed expectations), consumer sentiment, weekly oil & gas rig counts
- Executive order on drug pricing expected soon. Though not necessarily unexpected, the order may trigger volatility in drug stocks today. Healthcare has somewhat quietly-produced the second best sector return year to date (+13.6%), and we still like the sector on valuations and expect modest government impact on prices, but are watching political developments, including Senate reform efforts closely.
- BOJ maintains current stimulus plan. The BOJ dovishly held rates unchanged overnight, and despite acknowledging improved economic conditions, maintained policy support in the form of $720bn of securities purchases per year. The central bank upgraded its assessment of private consumption for the first time in six months, signaling confidence in the Japanese economy. The announcement supported Japanese stocks overnight and put some pressure on the yen.
- Week ahead. Housing data and the leading economic indicators in the U.S. will get some attention (June 19-23) in what is otherwise a slow data week. Look for global purchasing managers’ surveys in Europe, Japan, and the U.S. to get some attention later in the week.
- Housing Starts (May)
- Building Permits (May)
- Eurozone: New Car Registration (May)
- Eurozone: CPI (May)
- Russia: GDP (Q1)
- Bank of Russia: Key Rate Decision
- China: New Loan Growth and Money Supply (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.
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 # 1-618193