Market Update: Thurs, Feb 14, 2019 | LPL Financial Research

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Daily Insights

China trade surplus with the U.S. narrowed. Though distorted by the Chinese New Year, China’s trade surplus narrowed from $29.9 billion in December to $27.3 billion in January. Overall, Chinese exports (+9.1% year over year) rose more than expected-a positive global economic signal-while imports (-1.5% year over year) fell less than expected. A potential trade deal will likely narrow this trade deficit with China further and, more importantly, should help reduce uncertainty and unleash some animal spirits to drive more capital investment globally.

Europe slowing; Germany narrowly avoids recession. The euro area economy expanded just 0.2% in the fourth quarter (1.2% year over year), in line with estimates and barely managed to avoid a technical recession (Germany’s economy contracted in Q3). Getting past the auto production drag from tougher auto emissions rules, a likely better global trade environment, and Brexit clarity may help European growth pick up a bit in the coming months but achieving even 1.5% GDP growth in 2019 may be a stretch.

Japanese economy outperforming Europe. Japanese GDP grew at a 1.4% annualized pace in Q4, in line with expectations but better than Europe’s pace. Growth was inflated following the contraction in Q3 amid weather disruptions, however, suggesting the pace may slow a bit going forward and is unlikely to get any better than 1% in 2019.

Retails sales’ December drop. Advanced estimates of retail sales for December came in at 10-year lows, falling 1.2% month over month but rising 2.3% year over year. The data were not unexpected after several retail bellwethers preempted the data last month with post-holiday sales estimates. Sales in the control group, a subset used by analysts to gauge underlying consumer demand, fell 1.7% vs. consensus expectations for a 0.4% increase. Auto-related sales continued to rise however, and a separate report released by the New York Federal Reserve on Tuesday showed new auto loans in 2018 hit their highest level in the data’s 19-year history. While the U.S. consumer remains in good shape, recently downward trending data is worth monitoring, which we will continue to do.

Love or hate the rally? The S&P 500 Index is up nearly 10% for the year and it is only Valentine’s Day. What is an investor to do? Today on the LPL Research blog we will take a look at other years that started off with big rallies and what happened next. The good news? Historically continued outperformance is quite normal.

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Thursday

  • PPI Report (MoM, Jan)
  • Initial Jobless Claims (Feb. 9)
  • Germany GDP Report (Preliminary, Q4 2018)
  • Eurozone GDP Report (Preliminary, Q4 2018)
  • Japan Industrial Production (Dec)
  • China CPI Report (Jan)
  • China PPI Report (Jan)

Friday

  • Retail Sales (MoM, Jan)
  • Industrial Production (MoM, Jan); Cons: 0.2%, LP: 0.3%
  • University of Michigan Sentiment Index (Preliminary, Feb); LP: 91.2
  • Eurozone Trade Balance (Dec)

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Index data obtained via FactSet

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