Market searches for direction. The S&P 500 Index is sliding again this morning amid more back-and-forth in the U.S.-China trade dispute. Many sentiment indicators are flashing signs of fear despite the benchmark index just 4% off its all-time closing high. While this investor fear can help limit downside potential, we are cognizant of the fact that most years will experience a correction larger than we have seen thus far. We’re also monitoring persistently low Treasury yields, as well as the performance of international markets. On a further pullback, we would first look for support near the 200-day moving average, followed by the 2600 level of the S&P 500.
Fed minutes released. Minutes of the Federal Reserve’s (Fed) most recent meeting, which ended May 1, showed that “many participants” considered slowing consumer inflation as “transitory.” Members also agreed that the Fed’s current patient approach is appropriate, and should help stoke economic growth and inflation. Overall, policymakers were relatively optimistic on the U.S. economy, an opinion that runs counter to financial markets’ positioning for lower rates. In today’s LPL Research blog post, we’ll dig more into the growing disagreement between the Fed and markets on future policy.
Brexit and the European Union. In developed economies, Brexit uncertainty continued as UK Prime Minster Theresa May suffered another Cabinet resignation last night. The European Union (EU) election outcome on Sunday may ultimately decide her fate. The pound sterling lost 0.3% to $1.26. Euro-area manufacturing reports improved slightly last month as strength in France outweighed continued weakness in Germany.
India’s elections concluding. Emerging economies’ headlines were led by India’s election. Prime Minister (PM) Narendra Modi appears to be headed for a second term with more than 50% of the ballots counted. This political clarity is expected to result in increased foreign investment.
- 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)
- Durable Goods Orders (Preliminary MoM, April)
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Index data obtained via FactSet
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