Market Update: Mon, Sep 30, 2019 | LPL Financial Research

Daily Insights

Stocks rebound. U.S. stocks are higher this morning, rebounding after a late-afternoon sell-off on Friday. The S&P 500 Index fell about 1% during Friday’s trading session on news that the U.S. is exploring plans to limit U.S. investors’ portfolio flows into China. The Trump administration later denied these claims, saying the U.S. specifically isn’t considering preventing Chinese companies from listing on U.S. exchanges. The S&P 500 is still about 2% away from a record high close, but U.S. stocks have had trouble actually notching a fresh all-time high amid elevated global uncertainty.

Chinese manufacturing activity increases. A Markit gauge of Chinese manufacturing activity rose to 51.4 in September, the highest level since February 2018, according to preliminary data. New domestic orders for the region climbed the most in 18 months, even as new export orders continued to decline. Separately, China’s official manufacturing gauge increased to 49.8 in September, higher than consensus expectations, but still in contractionary territory (under 50).

The repo market’s perfect storm. Recent stress in the short-term repurchasing (repo) market has raised concerns about a potential “liquidity crisis” in the financial system. Interest rates on repo market agreements jumped earlier this month amid a shortage of cash available to lend, forcing the Federal Reserve (Fed) to inject liquidity into the market to stabilize rates. Check out our latest post on the LPL Research blog for our thoughts on the repo market’s liquidity crunch, and why we think it was more a “perfect storm” of circumstances rather than a sign of systemic weakness.

Searching for direction. Stocks were searching for direction last week as investors digested news of political tensions and signs of trade progress. Review all major indexes in Friday’s Weekly Market Performance: Searching for Direction.

Global economy muddles along. The U.S. economy continues to perform well, however, the outlook in other developed economies is not quite as bright. The outlook for emerging markets depends on trade, and we continue to watch for signs of improvement in Europe and Japan. We review global economies in this week’s Weekly Market Commentary: Global Economy Muddles Along.

The week ahead. In the week ahead, investors will be focusing on Institute of Supply Management (ISM) manufacturing and services reports for September, which will be released on Tuesday and Thursday respectively. On Friday, investors will get a look at the September jobs report, which we’re watching especially closely amid signs of slowing growth and subdued corporate demand.

 

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