Market Update: Fri, Mar 29, 2019 | LPL Financial Research

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Daily Insights

Big Q1. The S&P 500 Index is on pace for one of its best first-quarter returns ever, and history suggests more gains could follow. Going back to 1950, after rising at least 10% in the first quarter, the S&P 500 added to those gains over the balance of the year 9 out of 10 times. We will take a closer look at this interesting development today on the LPL Research blog.

Markets consolidate as volatility temporarily subsides. After acting as resistance for the better part of the last 6 months, the S&P 500 has consolidated in a tight range around the 2817 level. On the upside, this week’s less than 2% range is only about 5% from all-time highs, whereas on the downside the 200-day moving average may act as short-term tactical support near 2750. Markets are moving higher in early trading, and will look to close out this week with their tenth positive Friday in just 13 attempts this year. Be sure to check out our latest Weekly Market Commentary for a more in-depth look at the market technicals and fundamentals.

U.K. lawmakers scrambling at Brexit’s eleventh hour. After voting down Prime Minister Theresa May’s Brexit deal twice already, U.K. lawmakers are in the midst of a third, though not necessarily definitive, eleventh-hour vote on a watered-down version of the deal as the official March 31 deadline looms. Local reports suggest May is set for another defeat, though by a smaller margin than in the two previous tallies. Assuming the deal is rejected, on Monday officials plan to hold a fresh round of indicative votes, or mock votes, on several alternatives.

Core inflation disappoints. Core personal consumption expenditures (PCE) rose 0.1% month over month in January, below consensus estimates for a 0.2% gain. Year-over-year growth in core PCE fell to 1.8%, its lowest level in 12 months and squarely below the Federal Reserve’s (Fed’s) target of 2% growth for the measure. While year-over-year growth hasn’t dropped to a concerning level, it does reinforce the Fed’s patient policy stance.

Long-term rates slide, but 2/10 steepens. The 10-year Treasury yield is poised for its fourth straight weekly drop, and the benchmark rate is hovering at a 15-month low as investors’ rush into U.S. debt continues. However, a part of the curve we watch is steepening, even as long-term rates slide. The spread between the 2-year yield and the 10-year yield climbed to 16 basis points (bps) through yesterday. The 2-year yield, which reflects monetary policy more than economic expectations, declined to 2.24% through yesterday, hinting that short-term rates are now pricing in a Fed rate cut.

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Friday

  • Core PCE (MoM Jan)
  • New Home Sales (MoM Feb)
  • University of Michigan Sentiment Index (Mar)
  • Germany Unemployment Claims Rate (Mar)
  • UK GDP Report (Q4 2018)
  • Eurozone CPI Report (Mar)
  • Canada GDP Report (Jan)

 

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Index data obtained via FactSet

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