Stocks Rebound Despite Continued Downward Pressure on Rates
US: S&P 500 Index +1.2%, Dow +1.7%, Nasdaq +1.1%
Europe: STOXX Europe 600 +0.8%, German DAX +1.4% France CAC 40 +1.5%, U.K. FTSE 100 +0.4%
Asia: Japan Nikkei -2.0%, China Shanghai Composite -0.4%, Korea KOSPI -2.1%
Rates/Commodities: 10-Year Treasury yield -4 basis points to 2.40%, WTI crude oil +0.7%, COMEX gold: -1.8%
A choppy week of trading capped off a strong first quarter of 2019. In the end, the S&P 500 Index posted its best quarterly price return since the third quarter of 2009. Still, stock market activity was again overshadowed by the Treasury market after last week’s inversion of several parts of the yield curve was followed up with more downward pressure on interest rates, spurring a “March Madness for Yields.”
On the economic front, a string of mostly downbeat housing market data was accompanied by mixed gauges of consumer sentiment, a downwardly-revised final estimate of fourth quarter 2018 GDP, and a reading on personal consumption expenditures, including the Federal Reserve’s preferred inflation measure, that indicated consumer spending growth ticked higher month over month but missed consensus expectations. “Investors took this week’s data in stride,” said LPL Chief Investment Strategist John Lynch. “Though economic growth moderated in the fourth quarter and housing data remains somewhat lackluster, the fundamental backdrop for the U.S. economy remains supportive and the recent drop in interest rates provides a tailwind for housing.”
Overseas, European stocks held up amid mostly disappointing economic data and a volatile week of Brexit-related headlines as the U.K. nears its March 31 deadline. Prime Minister Theresa May orchestrated an eleventh-hour vote on a watered-down version of her twice-defeated bill, sweetening the offer—to no avail—by agreeing to resign once Brexit is delivered. A range of options remain on the table following the third unsuccessful vote, including a second referendum, though the European commission warned that a no-deal Brexit was now “likely.”
Asian equities were mostly lower despite trade progress and China’s latest Beige Book report, which showed an “unmistakable first-quarter recovery” after the government’s monetary stimulus efforts in the latter half of 2018 helped stabilize its economy. Meanwhile, Japan’s Nikkei trailed regional benchmarks with an $18 billion stimulus package passed as a partial offset to the looming consumption tax hike failing to support equities.
The week ahead will see several important economic announcements, where the U.S. will be reporting the ISM and nonfarm payrolls headlining the U.S. docket. Abroad, Brexit will remain in the European spotlight, though a basket of countries will post closely-watched PMI data, including Japan, China, and the composite Eurozone. Track these and other important events on our Weekly Global Economic & Policy Calendar.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted
Investing in foreign and emerging markets securities involves special additional risks. These risk include, but are not limited to, currency risk, geopolitical risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
Basis Points are a unit relating to interest rates that is equal to 1/100th of a percentage point. It is frequently but not exclusively used to express differences in interest rates of less than 1%.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
This research material has been prepared by LPL Financial LLC.
To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.
The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured. These products are not Bank/Credit Union obligations and are not endorsed, recommended or guaranteed by any Bank/Credit Union or any government agency. The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.
Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor
For Client Use – Tracking #1-837819 (Exp. 3/20)