Yesterday’s Market Activity
- S&P 500 +0.3%, Dow +0.5% on mostly well-received earnings news, though technology weakness kept the Nasdaq (unchanged) from matching the broader index.
- Solid day for small caps with Russell 2000 Index +0.9%.
- Earnings helped overall tone, but mixed results weighed on healthcare, industrials.
- Treasury yields +8 basis points (+0.08%) to 2.33%, yield curve steepened, driving financials (+1.3%) higher. Energy (+1.3%) stocks boosted by a more than 3% rally in crude ($47.89/bbl.) after Saudi announced export reductions.
- Consumer confidence for July rose to 121.1 from prior month’s revised 117.3, with improvement in current conditions, short-term outlook.
Overnight & This Morning
- Stocks up slightly (S&P 500 +0.2%), helped by gains in Europe, earnings results ahead of FOMC announcement that is unlikely to bring material new news. Impact of latest healthcare developments unclear.
- Key European markets ~0.5% higher, buoyed by strong German business sentiment data. Latest gains in euro being digested well it seems.
- Asian markets rallied overnight, following U.S. gains, with Hang Seng, Nikkei higher.
- Treasuries firm following yesterday’s yield backup. 10-year yield 2.32%.
- WTI crude oil ~1% higher ($48.19/bbl.) after biggest one-day rally of 2017 on Saudi cuts and inventory draws.
- Healthcare effort continues. Senate Republicans able to round up 50 votes to move forward with a debate on healthcare reform, with Vice President Mike Pence breaking a 50-50 tie. Senate now expected to vote on series of replacement (or straight repeal) options over the course of the week. Long odds of passage remain, but possible.
- FOMC announcement coming today, along with new home sales data and government crude oil inventory data.
- Low expectations for Fed meeting. The policy arm of the Federal Reserve (Fed), the Federal Open Market Committee (FOMC), will end their two-day meeting with a prepared statement at 2 p.m. today. Markets are pricing in very low odds of a rate hike, but investors will be closely watching the language of the Fed statement for any hint on the start of balance sheet normalization and the future path of rate hikes. We will post our thoughts on the statement this afternoon on the LPL Research blog.
- Small cap opportunity? A near-term opportunity in small cap stocks may be developing should U.S. dollar weakness reverse and sentiment on Washington, D.C. policy prospects begin to improve, which we believe is likely over the coming months. We understand the near-term opportunity for pure stock market beta may not be particularly enticing, so it is increasingly important to look for alpha opportunities. We think small caps may be a timely idea.
- New Home Sales (Jun)
- FOMC Rate Decision
- UK: GDP (Q2)
- South Korea: GDP (Q2)
- Durable Goods Orders (Jun)
- Capital Goods Shipments & Orders (Jun)
- Wholesale Inventories (Jun)
- Advance Goods Trade Balance (Jun)
- Chicago Fed National Activity Report (Jun)
- Germany: Retail Sales (Jun)
- Eurozone: Money Supply (Jun)
- BOJ: Summary of Opinions at Jul 19-20 Meeting
- Japan: CPI (Jun)
- Japan: Jobless Rate (Jun)
- Japan: Retail Sales (Jun)
- GDP (Q2)
- Core PCE (Q2)
- France: GDP (Q2)
- France: CPI (Jul)
- Germany: CPI (Jul)
- UK: Nationwide House Prices (Jul)
- Eurozone: Consumer Confience (Jul)
- Canada: GDP (May)
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