Market Update: Friday, September 21, 2018

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Daily Insights

  • LPL Market Signals Podcast. Listen to Chief Investment Strategist John Lynch and Senior Market Strategist Ryan Detrick reflect on their memories of the financial crisis, and discuss the changes in today’s market landscape 10 years later. Please join our discussion on social via #LPLMarketSignals.

  • Historic GICS sector changes. The S&P 500 Index GICS sectors will undergo a significant shift after the market close today. S&P is scheduled to replace its telecommunications sector with a more expansive “communications services” sector – a change that will also impact the technology and consumer discretionary sectors. Investors employing sector and exchange traded fund (ETF) strategies should take particular note of this revamp. However, portfolio rebalancing ahead of these changes could impact all investors, as it could cause periodic volatility in the broader U.S. stock market. For more details on the implications of these significant changes, check out our Weekly Market Commentary from September 4.

  • Quadruple witching. Today is also quadruple witching day – one of four days each calendar year when stock index futures, single stock futures, stock index options and single-stock options expire on the same day. Quadruple witching tends to boost stock volumes as these contracts expire, so today could be an especially active day for the U.S. stock market.

  • Dow reaches a record. The Dow finally joined its index peers in record territory, rising nearly 1% yesterday to close at a fresh record high after a 237-day drought. The Dow has lagged the S&P 500 Index, the Nasdaq Composite, and the Russell 2000 this year amid escalating trade tensions, which have weighed on shares of larger, multinational U.S. companies. The S&P 500 also closed at a record high yesterday, its fifth in the last month.

  • More evidence of a cooling housing market. Existing home sales remained unchanged at 5.34 million in August, the lowest level since March 2016. Year over year, existing home sales fell 1.5%, the sixth straight decline for the data. Existing home sales, which account for 85-90% of total home sales, are a prime signal of a cooling U.S. housing market, an area of the economy that still hasn’t fully recovered since the financial crisis. Housing is an important part of output, accounting for approximately 15% of gross domestic product if you include the money spent on construction, maintenance, and rent.

  • LEI rises for a 27th straight month. The Conference Board’s Leading Economic Index (LEI) increased 0.4% in August and 6.4% year over year. The LEI, which is a composite of 10 economic indicators (like manufacturers’ new orders, stock prices, and weekly unemployment claims), shows that the economic expansion is still intact and healthy. The LEI also has turned negative year over year before every economic recession dating back to the 1970s. Because of its strong track record in forecasting recessions, the LEI is one of our Five Forecasters in our Recession Watch Dashboard.

  • Washington and stocks. Republicans control Congress and the presidency. With the midterms right around the corner, advisors typically ask “what could it mean for U.S. stocks if Republicans lose the House and/or Senate?” or “what does it mean if they retain both the House and Senate?” Today on the LPL Research blog, we will dive deeper into stocks’ historical patterns around midterm elections, and if we could see the same activity after the upcoming election.

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Click Here for our detailed Weekly Economic Calendar

Friday

  • Eurozone Markit PMI (Preliminary, Sep)
  • Markit U.S. Manufacturing PMI (Preliminary, Sep)


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Index data obtained via FactSet

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