U.S. markets rally midweek. Following modest declines the past 4 weeks, U.S. equities are poised to end this week sharply higher with the S&P 500 Index gaining 3.6% in the past 3 trading days alone. On a technical basis, we are watching whether the index can eclipse 2880, which marked the closing highs from mid-May before the most recent leg lower. On the downside, tactical support can be found at the 2742 level, which has held on a closing basis since early February.
Fed + trade = rally. The S&P 500, up 3.2% for the week as of Thursday’s close, is looking to close out a positive week today after four consecutive weeks of losses. The Federal Reserve (Fed) got the rally going on Tuesday following comments from Chair Jerome Powell at a policy conference that more explicitly acknowledged the possibility that the Fed may need to lower rates. While the Fed has been the main driver, progress on trade negotiations with Mexico has helped sustain the rally.
Signs of progress on trade with Mexico. An initial 5% tax on U.S. companies for the goods they import from Mexico may still go into effect Monday, but there have been clear signs of progress towards an eventual resolution. The Trump administration has threatened raising tariffs in 5% increments until Mexico shows progress helping to manage the flow of immigrants on the U.S. border. The sides are talking, with Mexico showing willingness to implement some additional steps. We believe an eventual resolution is likely, probably as early as this summer.
Nonfarm payrolls miss estimates. U.S. hiring slowed in May, hinting that renewed trade tensions and a maturing business cycle could be leading to slower job creation. Nonfarm payrolls rose 75K in the month, below consensus estimates for a 175K increase. Job gains for March and April were also revised down by 75K. We’ll dig into the May jobs report’s details in today’s LPL Research blog post.
- Nonfarm Payrolls Report (May)
- Unemployment Rate (May)
- Average Hourly Earnings (YoY May)
- Japan Leading Index (Preliminary Apr)
- Germany Industrial Production (Apr)
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.
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.
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.
All company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.
All performance referenced is historical and is no guarantee of future results.
This Research material was prepared by LPL Financial, LLC.
Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL is not an affiliate of and makes no representation with respect to such entity.
If your advisor is located at a bank or credit union, please note that the bank/credit union is not registered as a broker-dealer or investment advisor. Registered representatives of LPL may also be employees of the bank/credit union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, the bank/credit union. Securities and insurance offered through LPL or its affiliates are:
|Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by Any Government Agency | Not a Bank/Credit Union Deposit|
Index data obtained via FactSet
For Public Use – Tracking # 1-861719 (6/20)