Market Update: Wed, May 22, 2019 | LPL Financial Research

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Daily Insights

FOMC minutes out this afternoon. The Federal Open Market Committee (FOMC) minutes will be released at 2pm EST today. The market is expected to have an outsized focus on discussions surrounding inflation, particularly in terms of the Federal Reserve Bank’s (Fed) overall support for Powell’s assertion that “transitory factors” were largely responsible for softer core inflation readings in Q1. This has dampened some speculation about a rate cut, though the market is still pricing in a rate cut before year-end. We continue to doubt that the Fed will cut rates in 2019 given over 3% gross domestic product growth, healthy wage growth, and a labor market close to full employment.

Fed commentary. St. Louis Federal Reserve Bank President James Bullard said publicly that “disappointing” inflation data could prompt the Fed to cut rates, even though U.S. economic growth could eventually stabilize. Bullard, a voting FOMC member, has recently commented on the possibility of lower inflation through the rest of this year, so today’s comments weren’t surprising. While consumer inflation has slowed recently and the calls for lower rates have intensified, we think pricing pressures could pick up amid stabilizing demand and healthy wage growth. Trade has been the wild card for the near-term economic and inflation outlooks, though, and we’re monitoring the impacts of trade uncertainty.

Bulls are smiling. The S&P 500 Index gained each of the first four months of 2019, for the first time since 2013. What is quite interesting about this development is that historically the rest of the year (so the final 8 months) gained 14 out of 15 times!  Here’s the catch, there has been an average pullback of more than 8% along the way. We discuss this more in today’s LPL Research blog.

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Wednesday

  • FOMC Meeting Minutes (May 1)
  • Nikkei Japan Manufacturing PMI (Preliminary, May)

Thursday

  • Initial Jobless Claims (May 18)
  • Markit US Manufacturing PMI (Preliminary, May)
  • Markit US Services PMI (Preliminary, May)
  • Markit US Composite PMI (Preliminary, May)
  • New Home Sales (MoM Apr)
  • Kansas City Fed Manufacturing Index (May)
  • Germany GDP Report (Q1)
  • Markit Germany Services PMI (Preliminary, May)
  • Markit Eurozone Manufacturing PMI (Preliminary, May)
  • Markit Eurozone Services PMI (Preliminary, May)
  • Japan CPI Report (Apr)

Friday

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Index data obtained via FactSet

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