Weekly Market Drivers | LPL Financial Research

Markets Pare Early Losses, Trade Dominates Headlines

US: S&P 500 Index -0.8%, Dow -0.7%, Nasdaq -1.7%
Europe: STOXX Europe 600 +1.2%, German DAX +1.5% France CAC 40 +2.1%, U.K. FTSE 100 +2.1%
Asia: Japan Nikkei -0.5%, China Shanghai Composite -2.0%, Korea KOSPI -2.5%
Rates/Commodities: 10-Year Treasury yield -8 basis points to 2.39%, WTI crude oil +2.1%, COMEX gold: +0.0%

Markets closed slightly lower for the week, as the S&P 500 Index showed resilience in a three-day winning streak after one of the worst days of the year. On May 13, the S&P 500 fell 2.4%, its biggest one-day loss since January. The index then pared that loss through the end of the week.

Monday’s weakness was also reflected in the bond market. The spread between the 3-month and 10-year Treasury yields closed in negative territory, the second yield curve inversion (long-term rates falling below short-term rates) of the current economic expansion. Economic data continued to waver as this week’s retail sales data disappointed consensus estimates. Some investors have considered weakening consumer data a case for a Federal Reserve rate cut, but we continue to believe that a rate cut is unlikely given healthy wage growth and a labor market close to full employment.

“Trade tensions have weighed on consumer and business sentiment,” said LPL Research Chief Investment Strategist John Lynch. “However, we see plenty of evidence that solid U.S. fundamentals are intact, and we expect growth to stabilize and confidence to improve as trade talks near a resolution.” Trade continued to dominate international headlines, although news a bit more upbeat this week as the U.S. announced plans to lift steel and aluminum tariffs on Canada and Mexico, paving the way for Congress’ approval of the new North American trade deal. Elsewhere on the trade front, U.S. officials announced they would delay the decision to implement tariffs on auto-related imports from the European Union and Japan by 180 days. News of the delay buoyed European stocks, which managed to close the week firmly in positive territory.

Looking forward to the week ahead, investors will have their attention set on the Federal Open Market Committee meeting minutes on Wednesday. Overseas, a slew of Purchasing Managers’ Index data is slated for release, with Germany, Japan, and the composite Eurozone scheduled to announce. Track these and other important events on our Weekly Global Economic & Policy Calendar.

 Important Disclosures

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.

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.

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.

FTSE 100 Index measures the 100 companies listed on the London Stock Exchange with the highest market capitalization.

The Shanghai Stock Exchange Composite Index is a capitalization-weighted index. The index tracks the daily price performance of all A-shares and B-shares listed on the Shanghai Stock Exchange. The index was developed on December 19, 1990 with a base value of 100. Index trade volume on Q is scaled down by a factor of 1000.

The Hang Seng index is a market capitalization weighted index which tracks daily changes of the 48 largest companies in the Hong Kong stock market.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The small business optimism index is compiled from a survey that is conducted each month by the National Federation of Independent Business (NFIB) of its members. The index is a composite of ten seasonally adjusted components based on questions on the following: plans to increase employment, plans to make capital outlays, plans to increase inventories, expect economy to improve, expect real sales higher, current inventory, current job openings, expected credit conditions, now a good time to expand, and earnings trend.

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

Member FINRA/SIPC

For Client Use – Tracking #1-854551 (Exp. 5/20)