Market Update: Monday, October 2, 2017

MarketUpdate_header

Market Recap

  • U.S. indexes closed out Q3 with more gains amid few drivers. Nasdaq (+0.7%) led on Friday; S&P 500 Index +0.4% on the day; also up on the week, month, and quarter. Dow +0.1%.
  • Small caps led on the month, half of ~6% monthly return occurred last week. Russell 2000 Index +0.1% on Friday.
  • Above average volume amid month- and quarter-end trading, breadth positive on NYSE, Nasdaq at 1.5:1.
  • Technology sector led, helped by internet stocks; utilities, consumer staples lagged.
  • 10-year Treasury yield +2 basis points (0.02%) on the day, 7 basis points (0.07%) on the week.
  • Commodities – WTI crude oil flat at $51.55/bbl., COMEX gold -0.4% to $1283/oz., industrial metals mostly higher excluding copper (-0.9%).

Overnight & This Morning

  • S&P 500 opened slightly higher, continues last week’s broad advance led by small caps, financial sector outperformance.
  • European markets broadly higher; Spain the exception as Catalan independence vote creates uncertainty. Euro continues decline vs. U.S. dollar. STOXX Europe 600 +0.2%.
  • Asian markets strengthened, aided by positive Chinese, Japanese manufacturing surveys. Quiet day overall as numerous exchanges closed for holidays. Nikkei +0.2%.
  • Treasuries up slightly as 10-year note yield -1 basis point (0.01%) to 2.32%.
  • WTI crude oil down sharply (-2.2%) to $50.50/bbl. on higher production, OPEC non-compliance concerns; gold sliding (-0.5%) to ~$1277/oz.

MacroView_header

Macro Notes

  • Last week’s tax proposal presented real progress. Most importantly, last week’s tax framework from Republican policymakers (the so-called “Big Six”) paved the way for a 2018 budget resolution–a needed step to give policymakers a reasonable shot at achieving tax reform. Although the framework lacks details and upcoming negotiations will be difficult, we continue to believe that a tax agreement is more likely than not by early 2018. Markets have become more optimistic about a deal in recent weeks based on several market-based barometers of policy sentiment, as discussed in our latest Weekly Market Commentary due out later today.
  • Here comes October. October kicks off the historically bullish fourth quarter, but this month is also known for also being the most volatile month of the year. Adding to the potential for some movement this month: an election in Japan, two central bank meetings, earnings season kicks off in the U.S., and the GDP advance estimate that will include the hurricanes’ impact. All in all, October is a big month and one that could provide a lot of fireworks. This week in the Weekly Economic Commentary, we take a closer look at the events that could move markets.
  • Good bye, September. September ended the month the same way it started–with new highs amid very low volatility. In the end, the average daily range for the S&P 500 during the month was only 0.40%, the smallest monthly range ever using data back to 1970. Additionally, the S&P 500 gained 2% for the month, but made nine new all-time highs along the way; with only 1955 and 1995 seeing more new highs this month.
  • Win streaks continue. With a two percent gain in September, the S&P 500 is now up six consecutive months on a price basis and 11 consecutive months on a total return basis. Going back to 1950[1], in only two other instances has the S&P 500 closed higher on a total return basis for 11 consecutive months (1954 and 1959). The quarterly win streak continues as well, as the S&P 500 is now higher eight consecutive quarters.
    [1] Please note: The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of predecessor index, the S&P 90.
  • Where did the big moves go? Don’t miss today’s post on the LPL Research blog where we show that big moves have been non-existent for the S&P 500 so far in 2017. In fact, this could be the first year since 2005 without a single 2% move (up or down), while it has only eight 1% moves–the least since 1995.

MonitoringWeek_header

Click Here for our detailed Weekly Economic Calendar

Monday

  • Markit Manufacturing PMI (Sept)
  • ISM Manufacturing (Sept)
  • Contruction Spending (Aug)
  • Kaplan (Hawk)
  • Germany: Markit Germany Manufacturing PMI (Sept)
  • Italy: Unemployment Rate (Aug)
  • Eurozone: Markit Eurozone Maufacturing PMI (Sept)
  • UK: Markit UK Manufacturing PMI (Sept)
  • Eurozone: Unemployment Rate (Aug)
  • Russia: GDP (Q2)
  • Japan: Vehicle Sales (Sept)
  • Japan: Monetary Base (Sept)

Tuesday

  • Wards Vehicle Sales (Sept)
  • Italy: Deficit to GDP (Q2)
  • Eurozone: PPI (Aug)
  • Japan: Nikkei Japan Services PMI (Sept)

Wednesday

  • MBA Mortage Applications (Sept 29)
  • ADP Employment Report (Sept)
  • Markit Services PMI (Sept)
  • ISM Non-Manufacturing (Sept)
  • Yellen (Dove)
  • France: Markit France Services PMI (Sept)
  • Eurozone: Markit Eurozone Services PMI
  • UK Markit UK Services PMI (Sept)
  • Eurozone: Retail Sales (Aug)
  • Poland: Base Rate Announcement

Thursday

  • Cahllenger Job Cuts (Sept)
  • Weekly Jobless Claims (Sept 30)
  • Trade Balance (Aug)
  • Factory Orders (Aug)
  • Durable Goods Orders (Aug)
  • Cap Goods Shipments & Orders (Aug)
  • Williams (Dove)
  • Harker (Hawk)
  • George (Hawk)
  • ECB: Account of the Monetary Policy Meeting

Friday

  • Change in Nonfarm, Private, & Manufacturing Payrolls (Sept)
  • Unemployment Rate (Sept)
  • Average Hourly Earnings (Sept)
  • Average Weekly Hours (Sept)
  • Labor Force Participation & Underemployment Rates (Sept)
  • Wholesale Sales & Inventories (Aug)
  • Consumer Credit (Aug)
  • Bostic (Dove)
  • Dudley (Dove)
  • Kaplan (Hawk)
  • Bullard (Dove)
  • Germany: Factory Orders (Aug)
  • Italy: Retail Sales (Aug)
  • Japan: Leading Index (Aug)

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.

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.

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 # 1-650317