Market Update: Fri, Feb 1, 2019 | LPL Financial Research

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LPL Research on Yahoo! Finance. Senior Market Strategist Ryan Detrick was on Yahoo! Finance yesterday talking Super Bowl and stocks. Watch the full interview here, and view the related LPL Research blog post from last Friday here.

Daily Insights

Technical update. The equity bounce continues, with most equity indexes up at least 1% this week. In fact, the Dow has a shot at being up 6 weeks in a row. Technically, the S&P 500 Index continues to consolidate above its 50-day moving average, but potential resistance lies just ahead of the 200-day moving average near 2,740. We are extremely encouraged by the now 15% bonce since the December 24th low, but things are quite stretched and some type of potential correction would be perfectly fine and healthy.

Stocks had a great January!
The S&P 500 and Dow posted their best January since 1987 and 1989, respectively. Cyclical sectors (communication services, industrials, energy) lead, while defensives (healthcare, utilities) lagged. The good news is that when the S&P 500 gains at least 7% in January, there can be continued follow through, with the final 11 months of the year gaining 11% on average and up five out of six times going back to 1950.

Strongest payrolls gain since 2016. As investors sift through conflicting signals on global economic growth, the U.S. labor market remains a consistently bright spot for the domestic economy. Nonfarm payrolls rose 304K in January, handily beating consensus estimates for a 165K gain. Through last month, payrolls posted their biggest two-month increase since July 2016, even though December’s payroll gains were revised down to 222K. Average hourly earnings grew 3.2% year over year, around the fastest pace of the cycle, but still at manageable levels historically. We’ll dig into today’s encouraging jobs report later today on the LPL Research blog.

European stocks stumble after strong January. After the STOXX Europe 600 posted its best monthly return in more than three years, the regional benchmark turned lower to kick off February following a series of Purchasing Managers’ Index data that showed manufacturing activity in the Eurozone economy continued to decelerate and is now hovering near contraction territory, while inflation also ticked lower (down 0.2% YoY to 1.4%). Data in the region have steadily declined over the past year, driven by weakness in Germany, Europe’s largest economy, and Italy, which recently fell into recession.

Friday

  • Nonfarm Payrolls Report (Jan)
  • Markit US Manufacturing PMI (Jan)
  • ISM Manufacturing PMI (Jan)
  • Markit Eurozone Manufacturing PMI (Jan)
  • Eurozone CPI Report (Jan)

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Index data obtained via FactSet

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