Market Update: Monday, October 9, 2017

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Market Recap

  • Stocks little changed Friday but end the week higher. Investors unconcerned by drop in payrolls–S&P 500 Index (-0.1%) snapped 8-day win streak. Dow flat, Nasdaq +0.1%.
  • Technology stocks led sectors, Nasdaq higher. Telecommunications, consumer staples lagged.
  • Treasuries fell; 10-year Treasury note +2 basis points (0.02%) to 2.37, +3 basis points (+0.03%) on the week.
  • Commodities – WTI crude oil (-2.9%) settled below $50/bbl. Friday; COMEX gold inched higher despite modest dollar weakness, industrial metals mostly lower with copper -0.6%.
  • Nonfarm payrolls (-33k) fell for the first time since September 2010, though analysts expected below-average numbers following Hurricane’s Harvey, Irma.

Overnight & This Morning 

  • Major U.S. indexes opened higher, looking to regain momentum after Friday’s pause.
  • Asian stocks closed higher despite reemergence of U.S.-North Korea tensions. China equities lead after being closed last week; Hang Seng -0.5%, Shanghai Composite +0.8%, Nikkei closed for holiday.
  • European markets up modestly; failing to hold early-session gains. DAX hit new high withing the day after strong industrial production data before pulling back with broad market. STOXX Europe 600 +0.2%.
  • Treasuries slide continues as rate hike expectations mount; dollar continues to weaken.
  • Commodities – Oil (+0.4%) moving higher after Friday selloff; Gold +0.6% to $1283/oz. on rising North Korea tensions, industrial metals continue to tick lower.

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Macro Notes

  • Earnings season preview: Not bad, all things considered. Third quarter earnings season kicks off this week as several big banks are slated to report. We expect another solid quarter of earnings growth, but a third straight double-digit increase for S&P 500 profits appears unlikely due to hurricane impacts, tougher comparisons, and a lack of contribution beyond technology and energy. As discussed in this week’s Weekly Market Commentary, we have several reasons to be optimistic, hurricane impacts aside.
  • Time for a dollar bounce? The U.S. dollar is near the low end of its three-year range, but we believe there are reasons to expect the greenback to begin to bounce. The Federal Reserve (Fed) is increasing rates faster than most other major banks, which could provide a fundamental reason to expect a stronger currency. Additionally, sentiment indicators show similar amounts of pessimism that have marked other major lows. This week in our Weekly Economic Commentary, we take a closer look at the U.S. dollar and show why some strength could be in the cards.
  • Can the small cap strength continue? On August 21, 2017, the Russell 2000 Index (small caps) closed down for the year; it is currently up 11%. Hopes over tax reform sparked the bounce, as small companies are much more sensitive to any lowering of tax rates. As we discussed in our Midyear Outlook: A Shift in Market Control, we expected small caps to do well the second half of this year–now the question is: Can it continue? We think so and will discuss in more detail today on the LPL Research blog.

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Click Here for our detailed Weekly Economic Calendar

Monday

  • Germany: Industrial Production (Aug)
  • Eurozone: Sentix Investor Confidence
  • BOJ: Outright Bond Purchase
  • Japan: Current Account Balance (Aug)
  • Japan: Trade Balance (Aug)
  • China: New Loan Growth & Money Supply (Sept)

Tuesday

  • NFIB* Small Business Optimism (Sept)
  • Kashkari* (Dove)
  • Kaplan* (Hawk)
  • Germany: Trade Balance (Aug)
  • Germany: Current Account Balance (Aug)
  • Germany: Imports & Exports (Aug)
  • France: Industrial Production (Aug)
  • Italy: Industrial Production (Aug)
  • UK: Industrial Production (Aug)
  • UK: Trade Balance (Aug)
  • UK: GDP Estimate (Sept)
  • Japan: Core Machine Orders (Aug)

Wednesday

  • MBA Mortgage Applications (Oct 6)
  • Jolts Job Openings (Aug)
  • FOMC Meeting Minutes (Sept 20)
  • Evans* (Dove)
  • Williams* (Dove)
  • BOJ: Outright Bond Purchase
  • Japan: Machine Tool Orders (Sept)
  • Japan: PPI (Sept)

Thursday

  • PPI (Sept)
  • Initial Jobless Claims (Oct 7)
  • Powell* (Dove)
  • Brainard* (Dove)
  • Continuing Claims (Sept 30)
  • Monthly Budget Statement (Sept)
  • France: CPI (Sept)
  • Eurozone: Industrial Production (Aug)
  • ECB: Draghi
  • Bank of England: Credit Conditions & Bank Liabilities Survey
  • China: Trade Balance (Sept)
  • China Imports & Exports (Sept)

Friday

  • CPI (Sept)
  • Core CPI (Sept)
  • Real Average Weekly & Hourly Earnings (Sept)
  • Retail Sales (Sept)
  • Evans*(Dove)
  • Kaplan* (Hawk)
  • Powell* (Dove)
  • Germany: CPI (Sept)
  • Germany: Wholesale Price Index (Sept)
  • Italy: CPI (Sept)
  • China: Foreign Reserves (Sept)
  • Business Inventories (Aug)

Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

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