Market Update: Tuesday, July 3, 2018


Daily Insights

  • Enjoy the 4th. The NYSE closes at 1:00pm ET today and will be closed all day tomorrow in honor of the July 4th holiday. From everyone at LPL Research, we wish all of you a happy and fun July 4th!

  • Yields search for direction. With the 10-year Treasury yield near 2.85% and the 30-year near 3%, rate markets are searching for direction amid concerns over global trade tensions. Several indicators, including the copper/gold ratio and the Treasury futures markets, indicate that yields could continue their modest decline in the short term. However, if trade tensions abate, yields could quickly see a repricing higher. Regardless, we believe yields are poised to move gradually, but only marginally, higher for the remainder of the year, with the 10-year Treasury ending the year in the 2.75-3.25% range.*

  • Second quarter fixed income performance better than first. As we expected, the second quarter was kinder to fixed income markets than the first. The sizable repricing of growth expectations, inflation expectations and rate hike expectations (all higher) over the first quarter occurred at a pace we believed to be unsustainable for the full year. The second quarter delivered on that belief, with better returns across most segments of high-quality fixed income compared to the first quarter. Foreign debt was the exception to that rule. Emerging market debt’s return profile worsened due to trade concerns, and developed unhedged foreign bonds were hurt by dollar strength.

  • Germany strikes a deal. Migration has been a very touchy subject for Europe’s largest economy, but German Chancellor Merkel has reached a deal on migration with interior Minister Seehofer. The European economy appears to be weakening and there hasn’t been much good news out of the area recently, so today’s new is a nice change and European stocks are up solidly as a result.

  • Manufacturing remains a bright spot. The June ISM Manufacturing Index came in at 60.2, better than both last month and the consensus estimate. In fact, 17 of the 18 covered industries sported growth. Trade was mentioned as an area of uncertainty, but new orders remained above the 60 level for the 14th consecutive month. The bottom line is the trade concerns didn’t appear to slow down manufacturing last month. We remain positive on the U.S. economy the second half of this year, led by earnings, the benefits of fiscal policy, and high confidence. Although manufacturing is only about 10% of the overall gross domestic product, we still find this number a good sign of economic strength in 2018.

  • July tends to bounce. Stocks staged a nice reversal off their lows yesterday to close in the green. It is worth noting that equity strength in the month of July is quite normal, as over various timeframes this is consistently the strongest summer month. Taking it a step further, over the past 10 years only the month of March has a better average return than July. We will take a look at this and some other big market moving events during the month later today on the LPL Research blog.

  • LPL Research Senior Market Strategist on CNBC talking markets. In case you missed it, see what Ryan Detrick had to say about the yield curve and the economy for the second half of the year.


Click Here for our detailed Weekly Economic Calendar





  • Change in Nonfarm Payrolls (Jun)
  • Change in Mfg. Payrolls (Jun)
  • Unemployment Rate (Jun)
  • Trade Balance (May)



* Please see the Outlook 2018: Return of the Business Cycle publication for additional disclosures

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