Market Update: Wednesday, October 3, 2018

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Daily Insights

  • ADP employment report stronger than expected. Employment figures out this morning from payroll processor ADP showed employers in the private sector added 230,000 jobs last month, well ahead of the 183,000 consensus expectations. Hiring was broad-based across industries and firm sizes, though growth was most apparent in the services sector, which accounted for 80% of the increase. Strong growth was also seen in construction, a welcome sign for the housing industry, which has yet to fully recover from the financial crisis.

  • Italy remains a focal point. Investors’ attention remains on Italy, with European equities rebounding and U.S. stocks opening higher today after senior government officials appeared willing to reduce the country’s projected budget deficit over the coming years from the initial 2.4% proposed last week, which exceeds the 2% limit agreed upon with the European Union (EU) by the previous government, to 2.2% and 2.0% in 2019 and 2020, respectively. Still, the ongoing issue pushed the euro to six-week lows vs. the dollar, while Italian bond yields are recovering but remain near four-year highs. Though reminiscent of Greece’s debt woes, Italy’s economy is the third largest in Europe, so reverberations from an economic shock-particularly the banking sector that holds a lot of government debt-would strike a serious blow to the Eurozone. However, our expectation is for Italy’s government leaders to continue working with EU officials to avoid a Greece-like scenario.

  • What can the strong third quarter tell us? The S&P 500 Index added 7.2% in the third quarter, for the best overall quarter since the fourth quarter of 2013. The good news is a strong third quarter is usually a good sign for continued strength in the fourth quarter. In fact, since 1950, after the third quarter gains >7%, the fourth quarter has finished higher 13 of 14 times, with stronger than average returns. We take a closer look at this interesting phenomena later today on the LPL Research blog.

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Wednesday

  • ADP Employment Report (Sep)
  • Markit US Services PMI (Sep)
  • Markit Eurozone Services PMI (Sep)
  • Eurozone Retail Sales (MoM, Sep)

Thursday

Friday

  • Trade Balance (Aug)
  • Change in Nonfarm Payrolls (Sep)
  • Unemployment Rate (Sep)
  • Japan Leading Index (Preliminary, Aug)


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