Market Update: Fri, Aug 2, 2019 | LPL Financial Research

LPLResearch-Macro-View

Daily Insights

Volatile week following Fed and tariff announcements. The S&P 500 Index has had a rocky week so far, on track for the largest weekly decline since May. We’re currently monitoring the 2,972 level as a first area to find support, which would be a 5% retracement of the January 2018 high. Should this level falter, the next major zone of support would be around 2,728, the low from May.

Tariff tweet. Thursday afternoon, August 1, President Trump’s tweet imposing a 10% tariff on the final approximately $300 billion tranche of Chinese imports starting September 1 pushed markets down, with the S&P 500 falling 0.9% after being up approximately 1% pre-announcement. WTI crude oil also experienced its biggest one day drop, in percentage terms, since February 4, 2015. President Trump continues to describe the trade talks with China as “constructive,” with the U.S. in pursuit to continue the positive dialogue despite China not buying U.S. agricultural products in large enough quantities, as previously promised by President Xi. This announcement comes on the heels of the Federal Reserve’s (Fed) rate cut, potentially adding pressure on the Fed cut rates further with tariffs weighing on business sentiment and investment.

Solid job creation in July. Nonfarm payrolls rose 164,000 in June, in line with consensus estimates for a 165,000 gain. Job creation has slowed this year, but not to levels that concern us. The 12-month average payrolls gain was 187,000 through July, an above-average pace for the expansion. Average hourly earnings grew 3.2% year over year in July, a faster pace than June’s growth and at a healthy clip for the U.S. consumer. We’ll dig more into the July jobs report in today’s LPL Research blog post.

U.S. manufacturing muddles through. U.S. manufacturing expanded for the 35th consecutive month in July, according to the Institute for Supply Managements’ (ISM) manufacturing Purchasing Managers’ Index (PMI), but growth fell to its lowest level since 2016. New orders, an important leading indicator, accelerated modestly, while export orders contracted and overall production slowed. U.S. manufacturing has held up better than both Europe and China in the face of increasing trade friction, but the July report provided further evidence that the U.S. has not been immune from the global manufacturing slowdown as trade uncertainty continues to undermine fiscal incentives put in place to encourage capital expenditures.

 

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.

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.

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.

Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies

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 performance referenced is historical and is no guarantee of future results.

This research material has been 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.

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

 

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:

Member FINRA/SIPC

For Public Use – Tracking # 1-878976