Stocks set to open lower. The S&P 500 Index is modestly lower this morning following a weekend attack on Saudi Arabian oil facilities that sent oil prices soaring higher. The attack occurred Saturday, knocking out 5.7 million barrels of daily production with President Trump authorizing the release of oil from the Strategic Petroleum Reserve to help offset the cost increases caused by the attack. Even with these attacks and the rise of oil prices weighing on the stock market, the impact on the U.S. economy is set to be limited, with the U.S. being the top oil producer and energy accounting for only 2.5% of household consumption (down from 8% in the 1970s). Surging oil prices would do the most damage to countries that rely on energy imports, including China and Japan.
Another positive week for stocks. The S&P 500 rose approximately 1% last week, amid easing trade fears, bold policy measures from the European Central Bank (ECB), and strong retail sales data. It’s back above our fair market value estimate of 3,000 and near its record high level of 3,027.98 set July 26. See our latest Weekly Market Performance report for a recap of last week’s market activity.
Digesting negative yields. There’s a growing pile of negative-yielding debt around the world amid extraordinary monetary policy initiatives. While maintaining respect for global money flows, we believe the combination of economic fundamentals, domestic monetary policy, and a widening federal budget deficit limits the prospects for subzero yields in the United States. More on the negative yielding debt environment in our latest Weekly Market Commentary.
Weekly Economic Calendar. In the week ahead, the U.S. Federal Reserve’s rate decision on Wednesday highlights the economic docket, which also includes industrial production on Tuesday, building permits and housing starts on Wednesday, and initial jobless claims, Leading Economic Index, and existing home sales on Thursday. Internationally, Eurozone and Japan CPI reports, Eurozone consumer confidence, and the Bank of Japan and Bank of England rate decisions lead the international economic docket.
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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.
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.
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