Market Update: Thurs, Aug 22, 2019 | LPL Financial Research

Daily Insights

Stocks’ resiliency. U.S. stocks have been resilient this week, with the S&P 500 Index climbing 1.2% through Wednesday’s close amid light volumes. Stock investors barely flinched after minutes from the Federal Reserve’s (Fed) July meeting were released Wednesday, even as the spread between the 2-year and 10-year U.S. Treasury yields dipped below zero in trading. We’re encouraged by signs of recovery in U.S. stocks after a 6% pullback over these past few weeks. However, we’re in the dog days of summer with light data flow, so more volatility could be ahead as investors focus on headlines.

Complexity behind the rate cut. Newly released July Fed meeting minutes showed the complexity of policymakers’ discussions leading up to the first rate cut of this economic cycle. The minutes reinforced Fed Chair Jerome Powell’s description of the rate cut as a “mid-cycle adjustment,” even though they offer few clues on what the Fed will do next. We’ll delve more into the July meeting minutes later today on the LPL Research blog.

Global manufacturing stuck in a rut. Global manufacturing is still stuck in a rut, according to preliminary Markit Purchasing Managers’ Index (PMI) data for August. Eurozone PMI rebounded slightly, but manufacturing health in that region remains near a multi-year low. Germany’s PMI posted a seventh straight month in contractionary territory (below 50), while Japan’s PMI stayed in contractionary territory for a fourth month. Global manufacturing has been the sector hardest hit by prolonged trade tensions and weakened demand, and we don’t expect to see much improvement until a U.S.-China trade resolution is reached. Even then, a recovery in manufacturing may take some time.



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