Market Update: Wednesday, October 18, 2017


Market Recap

  • Domestic indexes finished mixed as large caps outperformed small caps. S&P 500 Index +.01%, Dow +0.2%, Nasdaq flat, Russell 2000 -0.3%.
  • Breadth negative on NYSE (1.4:1), another low volatility-low volume day (~84% of 30-day average).
  • Healthcare (+1.3%) led on potential for a bipartisan bill reinstating insurance subsidies; financials, consumer staples, industrials lagged as markets prepare to digest the influx in earnings results.
  • 10-year Treasuries held flat, finishing at 2.30%; U.S. dollar slightly stronger across the board.
  • Industrial production bounced back into positive territory slightly outperforming expectations, but manufacturing, while turning positive, disappointed. The data overall supported the broad picture of continued steady economic growth.
  • WTI crude oil finished higher (+0.3%) after inventories showed unexpectedly large draw, COMEX gold dipped (-1.2% to $1288/oz.) in response to dollar strength.

Overnight & This Morning 

  • U.S. stocks open up +0.1% as earnings reports continue to roll in.
  • Asian markets mixed overnight; Nikkei (+0.1%) advanced for the 12th straight session; Shenzhen (-0.4%), Hang Seng (+0.1%), as China’s President Xi gave three-hour address to Communist Party Congress–continuing to tighten his hold on power; this meeting takes place every five years.
  • Equities in Europe are higher midday; STOXX Europe 600 +0.4%; Spain’s IBEX (unchanged) lagged amid Catalan tensions.
  • Treasury prices slightly lower, 10-year yield +3 basis points (0.03%) to 2.33%.
  • Commodities – WTI crude (+0.7%) is back above $52/bbl., metals broadly lower–gold (-0.4%), copper (-0.2%).
  • Today’s economic calendar – September housing starts; Fed’s October Beige Book; Fed Presidents Dudley, Kaplan will speak.


Key Insights

  • Fed chair announcement on November 3. President Trump will announce his choice for chair of the Federal Reserve (Fed) on November 3 before departing for an 11-day trip to Asia. The short list is current chair Janet Yellen, current Fed Governor Jerome Powell, National Economic Council director Gary Cohn, economist John Taylor, and former Fed Governor Kevin Warsh. President Trump could go outside that list, but the chances of that are significantly lower than they once were. Powell’s star has been rising as the stability candidate, but the president and Taylor were reported to have had a strong rapport at their meeting last week. Of these candidates, Taylor and Warsh are clearly the most hawkish and the most likely to have a market impact if selected, with the bias being toward a stronger dollar and increased rate hike expectations.

Macro Notes

  • Time for healthcare to shine? Well-received earnings and the reported agreement between Republican Senator Alexander of Tennessee and Democratic Senator Patty Murray of Washington to potentially reinstate the ACA subsidies eliminated by President Trump’s executive order last week drove the sector to a market-leading 1.3% advance on Tuesday. Though the deal still faces hurdles to get through Congress and to the President’s desk, prospects appear favorable. We believe the combination of attractive valuations and the solid outlook for healthcare spending overall sets the stage for potential further gains, despite the sector’s 22% year-to-date advance.
  • The long-term technical patterns for copper remain bullish. One commodity that continues to move higher and exhibit bullish price momentum is copper. Today on the LPL Research blog, we take a look at another asset class that benefits when copper moves higher.


Click Here for our detailed Weekly Economic Calendar



  • Philadelphia Fed Mfg. Report (Oct)
  • Leading Economic Index (Sep)
  • UK: Retail Sales (Sep)
  • Japan: All Industry Activity Index (Aug)
  • Japan: Machine Tool Orders (Sep)


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

Tracking # 1-656864