Last Week’s Market Activity
- Stocks rose slightly Friday with S&P 500 up 0.19%, near all-time highs, after a solid jobs report. Financials led.
- Treasuries weakened on jobs news, pushing 10-year yield up 4 basis points (0.04%) to 2.26% and sending U.S. dollar higher.
- WTI crude oil rallied ~1% to $49.49/bbl. Strong dollar pressured COMEX gold (-0.8%) to $1265/oz.
- Russia probe accelerating? Special Counsel Mueller impaneled a grand jury in the Russia probe.
- Mixed week for stocks, S&P 500 +0.2%, Dow +1.2%, Russell 2000 -1.2%. Financials topped all sectors, while utilities also outperformed.
Overnight & This Morning
- Most major Asian markets up, modest decline in India as the exception. Mining companies especially strong on higher steel, iron ore prices. Australian market, weighted heavily to materials stocks (17%), +0.9%.
- China currency reserves up more than expected, nearing $3.1 trillion, Well below $4 trillion level at 2014 peak, but higher reserve supports Chinese yuan, which has gained 1.9% since June 2017 low.
- Chinese government voted to increase sanctions on North Korea over ballistic missile testing. This plus rise in currency reserves may help alleviate U.S.-China trade tensions.
- European markets modestly lower midday; STOXX Europe 600 -0.2%.
- Euro rose this morning, despite German industrial production coming in at -1.1% for last month vs. expectations of +0.2%; this has been one of the only negative pieces of news from Germany for months. DAX -0.4%.
- Commodities – WTI crude oil (-1.1%) near $49/bbl. as OPEC and non-members meet to discuss compliance with global supply cuts, COMEX gold -0.2%, copper +0.2%.
- U.S. stocks little changed to begin week as markets continue to digest Friday’s jobs report. 10- year Treasury yield higher by 1 basis point (0.01%) at 2.28%.
- Earnings continue to impress. With more than 80% of S&P 500 Index components reporting so far, corporate America is putting on a stellar performance. The S&P 500 has produced a solid 4% upside to June 30 estimates, is tracking to an impressive 12% year-over-year increase, forward estimates have fallen less than average, and revenue beat rates and the pre-announcement ratio (negative to positive) are as good as they have been in years. Earnings continue to support elevated stock valuations.
- Strong earnings season winding down. With 420 S&P 500 companies having reported second quarter results, the S&P 500 has produced 4% upside to June 30, 2017 estimates and is tracking to a 12% year-over-year increase. Revenue is tracking to a 5% increase, above the initial 4.6% estimate. The beat rates have been very impressive on earnings (73%) and revenue (69%). Estimates have fallen less than average, slipping just 0.5% (next four quarters) during reporting season. This week the calendar slows dramatically with just 36 companies reporting.
- Buy the dip? What dip? Beyond the double-digit gains in stocks this year and all of the all-time highs (29 already for those who are counting), perhaps the biggest story for the S&P 500 in 2017 is the absence of pullbacks. Whether you look at the number of trading days since the index has pulled back 5% (279 days), or just 3% (187 days), it has been an unusually calm and steady advance. In today’s Weekly Market Commentary, we use technical analysis to examine whether the next dip should be bought and discuss some potential catalysts for the next pullback.
- How accurate are advance GDP estimates? The advance estimate of real gross domestic product (GDP adjusted for inflation) was released on July 28, and showed the economy grew at an annualized rate of 2.6% in the second quarter, slightly missing consensus expectations of 2.7%, but accelerating from a downwardly revised 1.2% in the first quarter. This release also included revisions of quarterly GDP going back three years (to the beginning of 2014), which takes place every July. We take a look at these revisions, how close they were to previous estimates, and what it means for markets, in this week’s Weekly Economic Commentary, due out later today.
- Inflation data in focus this week. This week’s economic reports will be highlighted by inflation data, with the Producer Price Index on Thursday and the Consumer Price Index on Friday. Other key reports include July small business confidence and the June Job Openings and Labor Turnover Survey on Tuesday, second quarter productivity and June wholesale trade and inventories on Wednesday, and July wage data on Friday. Internationally, we’ll be watching China’s trade and inflation data tomorrow, Germany’s trade and inflation data on Thursday, U.K. manufacturing and industrial production on Thursday; and Japan’s second quarter GDP data next week-end.
- Can the Dow hit 10 in a row? The Dow is up nine consecutive days for the longest win streak since 12 in a row in February of this year. Incredibly, this could be the first year since 1959 to see two separate 10-day win streaks. It has also closed at a new all-time high on eight consecutive days for only the 10th time ever, using data going back to 1900.
- Here’s why the CBOE Volatility Index (VIX) is low. One major theme we’ve been noting this year is the historic lack of volatility; well, things have only gotten slower. Last week, the S&P 500 traded in a range of only 0.56%, the second smallest weekly range ever using reliable intra-day data back to 1970. In fact, each of the past two weeks haven’t seen the S&P 500 trade in a weekly range of more than 1 percent – that hasn’t happened since 1993. Incredibly, the S&P 500 hasn’t closed up or down 0.3% for 12 consecutive days, the longest streak ever. Last, with approximately 100 trading days left in the year, only six days have traded in a daily range of more than 1 percent. The average year since 1990 has been 134 days trade in more than a 1 percent range and the current record low is 39 in 1993.
- A special thank you to our advisors for making Focus 2017 a success. We enjoyed sharing our insights with you and learning how LPL Research can help accelerate your growth. Today, on the LPL Research blog, we continue our post-Focus highlights following last Friday’s “toughest Research questions,” with some of our favorite advisor tweets that helped to capture the key themes and takeaways from the industry’s premier advisor conference.
- Germany: Industrial Production (Jun)
- Japan: Business Cycle Indicator Leading & Coincident Index (Jun)
- China: Trade Balance (Jul)
- China: Imports & Exports (Jul)
- Japan: Current Account (Jun)
- Japan: Trade Balance (Jun)
- NFIB Small Business Optimism (Jul)
- Germany: Trade Balance (Jun)
- Germany: Imports & Exports (Jun)
- France: Budget Balance (Jun)
- Japan: Money Supply (Jul)
- China: CPI (Jul)
- China: PPI (Jul)
- MBA Mortgage Applications (Aug 4)
- Non-Farm Productivity & Unit Labor Costs (Q2)
- Wholesale Trade & Inventories (Jun)
- Italy: Industrial Production (Jun)
- Japan: Machine Tool Orders (Jul)
- Japan: PPI (Jul)
- China: New Loan Growth & Money Supply (Jul)
- PPI (Jul)
- Monthly Budget Statement (Jul)
- France: Industrial & Mfg. Production (Jun)
- Italy: Trade Balance (Jun)
- UK: Industrial & Mfg. Production (Jun)
- UK: Trade Balance (Jun)
- UK: NIESR GDP Estimate (Jul)
- CPI (Jul)
- Germany: CPI (Jul)
- France: CPI (Jul)
- Italy: CPI (Jul)
- Russia: GDP (Q2)
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