Stocks rebound. Global stocks are modestly higher this morning after a volatile week of trade headlines and yield curve concerns. The S&P 500 Index closed down 2.4% for the week through Thursday, heading for its third straight weekly loss after two significant selloffs on Monday and Wednesday. We believe a retest of the December lows remains unlikely, and we think any decline beyond 10% here is excessive. Still, more bumps could be ahead for U.S. stocks as investors reconcile high global uncertainty with a sound domestic economic outlook and looser monetary policy.
Searching for a bottom. LPL Research sees several important technical support levels between current levels and a 10% correction, a topic discussed in Thursday’s blog post. We are starting to see signs of the strong pessimism that precedes reversals to emerge. The next step to watch for is strong equity buying that includes participation of riskier names, something notably absent from Thursday’s defensive-led advance for the S&P 500.
Productivity gains. Even though the global macroeconomic environment is challenging, we’re still encouraged by recent progress in U.S. economic data. On the LPL Research blog later today, we’ll highlight an especially bright report that came out this week: nonfarm productivity. Over the last two quarters, productivity has increased at the fastest rate since 2014, showing that companies’ business spending surge in early 2018 could be flowing through to economic output.
NEW LPL Research on Bloomberg Radio. Listen to LPL Senior Market Strategist Ryan Detrick discuss August volatility, the economy, and more on Bloomberg Radio. Ryan’s segment starts at the 27:20 mark.
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