Welcome To The Third Quarter | Daily Market Update

Thursday, July 1, 2021

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Welcome to the third quarter

Hard to believe it, but we’ve made it to the midpoint of the year already! Here are some takeaways from last quarter.

  • The S&P 500 Index gained 2.2% in June, for its fifth consecutive higher month.
  • For the quarter real estate, technology, and communication services lead, while industrials, consumer staples, and utilities lagged.
  • For the quarter, the S&P 500 added 8.2%, higher five consecutive quarters for the first time since 2016.
  • Incredibly, the S&P 500 has been higher >5% for five consecutive quarters for only the second time in history (1953 and 1954).
  • What does this mean? Well, stocks added another 26.4% the next four quarters back then, so be open to this strength suggesting continued strength.

Daily Insights

US equities trade mixed amid yesterday’s record-setting session

  • The S&P 500 and Dow Jones Industrials opened higher as value names rebound this week.
  • European markets are higher through midday trading as the Eurozone manufacturing Purchasing Managers’ Index (PMI) set a fresh record high.
  • Asian markets finish their session lower despite South Korean exports show four straight months of double-digit growth.

Mixed jobless claims report

  • Initial claims for unemployment insurance were reported this morning totaling 364k versus expectations of 388k.
  • Continuing claims rose slightly to 3.47 million from 3.39 million last week’s report.
  • Looking ahead to tomorrow’s nonfarm payrolls report, economists are expecting 711k jobs to be added and the unemployment rate to fall to 5.6%.

More on the third quarter

Historically stocks are weak during the third quarter, something to be aware of as we turn the calendar to July.

  • The S&P 500 Index has gained only 0.7% on average during the third quarter, the worst of the calendar year.
  • It has closed green 62% of the time though, in line with Q1 and Q2. The big reason why the average is worse is some spectacular crashes have taken place during this quarter.
  • Here’s the catch (and there’s always a catch), stocks have gained 8 of the past 9 third quarters.

We discussed this and more in 4 Charts To Help You Get Ready For July and Beyond.

See enlarged chart.

Technical update

  • Crude prices are spiking above $75/bbl. this morning, providing a boost to value.
  • Energy stocks remain leadership, but $77/bbl. will be a key test for crude price, as it represents the high for oil prices following the collapse that began in 2014.
  • Broad equity participation remains weak short-term, but a sustained run from value has the potential to clear numerous internal divergences.

LPL Research in the Media

LPL Financial was quoted on 3 Market Worries in Business Insider, while LPL Financial Chief Market Strategist Ryan Detrick joined Yahoo! Finance to talk current market trends.

Three Things That Worry Us

We explore three things that worry us that could make the market more susceptible to a pullback as we enter the second half of 2021.  Learn more in this week’s Weekly Market Commentary.

The Krispy Kreme Indicator

In this week’s LPL Market Signals podcast, LPL Research discusses why stocks are choppy in typical year two fashion, with many worries are creeping in and the upcoming Krispy Kreme IPO near the top of the list.



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