Daily Insights

• Retail sales reverse two-month slide. Retail sales rose 0.8% in October, reversing a two-month slide from weather-related weakness and beating consensus estimates for a 0.5% increase. Retail control-group sales, which are used to calculate gross domestic product, climbed 0.3%, below consensus estimates of a 0.4% gain, showing that core retail spending was slightly weaker than expected. We still believe that the U.S. consumer is the healthiest in years, aided by fiscal stimulus and modestly accelerating wages, and strong consumer demand will drive output going forward.

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Daily Insights

• Oil tumbles 7%, extends record string of declines. WTI posted its largest single-day decline in three years yesterday, extending its record losing streak to 12 days. The slide came after OPEC revised down its 2019 demand estimate by 500k barrels per day (bpd) while forecasting an “alarming” resurgence of non-OPEC supply, led by the U.S. The report likely underpins recent calls from Saudi Arabia and other cartel members to cut supply by 1+ million bpd when it meets in Vienna next month, but criticism from President Trump helped prices sustain downward momentum in Tuesday’s session. Losses have been mounting as traders fear a supply glut comparable to the one seen in 2014 may be forthcoming, and recent data has heightened worries that global growth may be moderating (gross domestic product out of Germany, France, and Japan contracted in Q3). However, traders are getting some of the blame with money managers’ combined bullish positions currently at 14-month lows, reflecting both an increase in short positions and a decrease in long positions, and U.S. high yield spreads-a gauge for monitoring credit risk in the energy sector-remain well off the late-2015 levels, a period also characterized by plunging oil prices and global growth concerns.

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Daily Insights

• Stocks pause after back-to-back weekly gains. After rebounding from October’s volatility spike over the past two weeks, investors used negative headlines tied to a few bellwether firms in the U.S., along with political tensions in Europe and Washington as reasons to take some gains off the table yesterday. Equity flows went into defensive sectors, with growth-oriented technology shares bearing a brunt of the selling pressure. Stocks are rebounding this morning, however, with major U.S. indexes opening higher on the heels of bargain hunting and upbeat earnings from a major home improvement retailer.

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Daily Insights

• Strong Q3 earnings season nearly in the books. With 90% of S&P 500 Index companies having reported, S&P 500 Index earnings growth is tracking to an impressive 27.9% year-over-year increase, the highest growth rate since the fourth quarter of 2010 and 6 percentage points above expectations as of quarter end. Beat rates of 77% and 60% for earnings and revenue are impressive, as is the amount of earnings upside. However, we are most impressed with the amount of revenue upside-tougher to generate-that has been generated over the past two weeks. Revenue growth is tracking to an 8.5% year-over-year increase, compared to 7.7% just two weeks ago. The strong top line performance, clearly boosted by a strong U.S. economy, is particularly impressive given there is no direct benefit from the lower corporate tax rate. The resilience of earnings estimates, despite tariffs, has also been impressive. S&P earnings estimates for the next 12 months have only been reduced by 0.8% since quarter end, less than the 5-year average decline during earnings season of 1.6% and the 10-year average decline of 2.1% (source: FactSet).

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US: S&P 500 Index +2.1%, Dow +2.8%, Nasdaq +0.7%
Europe: STOXX Europe 600 +0.5%, German DAX +0.1% France CAC 40 +0.1%, U.K. FTSE 100 +0.7%
Asia: Japan Nikkei +0.0%, China Shanghai Composite -2.9%, Korea KOSPI  -0.5%
Rates/Commodities: 10-Year Treasury yield -3 basis points to 3.19%, WTI crude oil -3.9%, COMEX gold -0.7%

Major U.S. indexes added to last week’s gains amid an eventful week that included midterm elections, a Federal Reserve (Fed) monetary policy meeting, another string of corporate earnings, and some key economic data releases. Continue reading →

Daily Insights

• LPL Market Signals Podcast. In our latest episode, listen to LPL Financial Chief Investment Strategist John Lynch and Senior Market Strategist Ryan Detrick discuss why the S&P 500 Index’s tumultuous October doesn’t dampen our optimism for the U.S. economy. Subscribe to the free Market Signals podcast series on iTunes, Google Play, Spotify, or wherever you get your podcasts!

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