Market Update: Wed, July 24, 2019 | LPL Financial Research

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Daily Insights

Antitrust scrutiny for tech giants. The big technology and internet stocks sold off overnight on the news that the Department of Justice is investigating whether the big tech and internet companies have practiced anticompetitive behavior. Regulatory risk is among the reasons we have favored tilting equity allocations slightly toward the value style. We continue to favor the technology sector, however, but hold a more cautious view of consumer discretionary (includes Amazon) and communication services (includes Alphabet/Google and Facebook). Related declines and some earnings-driven weakness led to a lower market open this morning.

Face-to-face negotiations with China on the calendar. Lead U.S. negotiators will head to Shanghai on Monday, July 29, for the first in-person talks since May. This news on top of recent reports of progress on Chinese agriculture purchases, greater market access for U.S. companies in China, and easing of Huawei restrictions, all support our expectation that some sort of trade deal with China will be reached over the next several months.

More weakness in Europe. The composite Eurozone purchasing managers’ index (PMI) fell to 51.5 from 52.2, with pronounced weakness in Germany, where the manufacturing survey fell to its lowest level in 7 years at 43.1. In addition to trade tensions, IHS Markit cited geopolitical risk, Brexit, and an ailing auto industry for the weakness. We have not yet seen enough economic stability in the region to consider a more positive tactical view.

Choppiness ahead? The S&P 500 Index has hit our fair value target of 3,000, and we’ve opined in the most recent Weekly Market Commentary: Riding the Wave…For Now and on this week’s Market Signals podcast on where U.S. stocks could go from here. On the LPL Research blog today, we’ll take a look at how stocks have fared in the second half of a pre-election year, and the potential for some choppiness ahead.

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