Market Update: Friday, February 23, 2018

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Market Recap

  • U.S. markets closed mixed; S&P 500 Index (+0.1%) snapped two-day losing streak, Nasdaq (-0.1%) posted fourth straight loss. Few directional drivers, though monetary policy concerns linger. Dow +0.7%, Russell 2000 -0.1%.
  • Energy, REITs led. Financials, healthcare only negative sectors for the day.
  • Positive breadth on NYSE (1.1:1) trading volume very light (~83% of 30-day avg.).
  • Treasury yields dipped slightly; 10-yr. note yield -2 basis points (-0.02%) to 2.92%.
  • Commodities: WTI crude oil (+1.5% to $62.62/bbl.) reclaimed some losses following positive inventory surprise, COMEX gold flat at $1333/oz., industrial metals finished mixed.
  • Economic data: U.S. jobless claims posted favorable reading (222K vs. 230K expected), as did continuing claims (1,875k vs. 1,930k expected); domestic crude inventories drew down 1.6M bbl. vs. last week’s 1.8M increase, Federal Reserve’s balance sheet depicted a weekly drawdown from $4.435T to $4.412T; driven by lighter Treasury holdings.

Overnight & This Morning

  • Domestic equities opened higher, rebounding after yesterday’s late-session weakness.
  • Europe markets trending higher midday, euro strength becoming a point of focus for EU policymakers. STOXX Europe 600 +0.2%, DAX flat, CAC 40 flat, FTSE 100 -0.2%.
  • Asian markets climbed after improvement in U.S. markets. Weaker yen continued to support Nikkei (+0.7%). Shanghai Composite +0.6%, Hang Seng +1.0%.
  • Treasuries strengthening; 10-yr. note yield -3 basis points to 2.89%. Dollar mixed vs. major crosses.
  • Commodities: Oil near flat (-0.1% to ~$62.58/bbl.); gold -0.1% to ~$1331/oz.; industrial metals remain mixed.
  • Economic releases: Canadian inflation surprised to the upside, falling in-line with global trend (+0.7% month over month vs. +0.5%), German gross domestic product met growth expectations of 0.6% quarter over quarter.

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Macro Notes

  • Leading Economic Index (LEI) tops forecasts, points to continued solid growth. The Conference Board’s LEI Index, which measures U.S. business trends that often precede shifts in the business cycle, further accelerated in January, rising 1.0% month over month (+0.6% prior) and 6.2% year over year. In addition, 8 of the 10 underlying indicators improved, with gains most pronounced in residential construction, manufacturing, labor markets, and financial conditions. The LEI is a component of LPL Research’s Five Forecasters, with a negative move year over year suggesting increased risk of recession in the next year. That signal is nowhere in sight, and the data continue to signal solid underlying fundamentals for the U.S. economy.
  • The December Low Indicator. The S&P 500 recently closed beneath the December low close. Historically, when this happens during the first quarter, it can be a warning for equities that year. Today, on the LPL Research blog we will take a closer look at what this could mean.

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Click Here for our detailed Weekly Economic Calendar

Friday

  • Germany: Imports & Exports (Q4)
  • Germany: GDP (Q4)
  • Eurozone: CPI (Jan)
  • Mexico: GDP (Q4)
  • Canada: CPI (Jan)
  • China: Property Prices (Jan)

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