- The stock market’s “Sweet 16.” In the spirit of March Madness and an exciting NCAA college basketball tournament that has already brought some historic upsets and exciting buzzer beaters, our latest Weekly Market Commentary features our “Sweet 16” keys for stocks over the remainder of the year, which we will preview today on the LPL Research blog. Among the positives: U.S. and global economic growth, earnings, and technicals; among the negatives: trade policy. Collectively, we expect these drivers to push stocks higher over the balance of 2018, though we acknowledge that volatility could stay with us. We’ll take a deeper dive into some of these market drivers next week in our “Final Four.”
US: S&P 500 Index -1.24%, Dow -1.56%, Nasdaq -1.04%
Europe: STOXX Europe 600 -0.14%, German DAX +0.35%, France CAC 40 +0.16%, U.K. FTSE 100 -1.17%
Asia: Japan Nikkei +0.97%, China Shanghai Composite -1.13%, Korea KOSPI +1.40%
Rates/Commodities: 10-Year Treasury yield -4 basis points to 2.85%, WTI crude oil +0.40%, COMEX gold -0.84%
Global equity markets struggled finding reasons to move higher after investors started the week digesting an announcement from the Trump administration that it intends to levy more tariffs, this time on China; meanwhile, European Union officials are gearing up for possible confrontations with the U.S. over the recently enacted tariffs on aluminum and steel. Elsewhere, United States economic data Continue reading
- MLPs hit by FERC ruling. Yesterday, the Federal Energy Regulatory Commission (FERC) decided it would no longer allow master limited partnerships (MLP) to recover an income tax allowance in their regulated cost of service rates, driving the Alerian MLP Index down over 10% intraday before it closed about 4.5% lower. Though the policy change, which only impacts regulated interstate oil and gas pipelines and not all pipeline partnerships, can be appealed, our sense is that the rule may stick. As discussed in today’s blog, our investment case for MLPs has been based on U.S. energy production growth, attractive yields, and deregulation. We believe these factors remain favorable, and the transition to more internal funding sources (and less reliance on capital markets) is positive in the long run. However, the transition has been bumpy and MLP investors have faced several other headwinds, including: energy sector weakness, higher interest rates, and slower distribution growth.
Thursday’s news that the Federal Energy Regulatory Commission (FERC) will no longer allow master limited partnerships (MLP) to recover an income tax allowance in their regulated cost of service rates drove the group down about 4.5% on the day (the benchmark Alerian MLP Index was down over 10% at one point on an intra-day basis). The policy change, which only impacts regulated interstate oil and gas pipelines and not all pipeline partnerships, can be appealed but our sense is Continue reading
After a large number of companies beat earnings growth expectations and upped guidance in the fourth quarter, many project earnings strength to continue this year. In fact, we recently upgraded our S&P 500 Index earnings expectations to $152.50 from $147.50 as a result of accelerating U.S. and global economic growth prospects that we expect to boost companies’ bottom lines. Continue reading
- Data in China continues to point to solid steady growth ahead. Although trade policy remains the key issue for global investors at the moment, we should not lose sight of the latest round of solid economic data out of China, including exports, industrial production, capital investment, and retail sales. The solid economic growth outlook in China supports our positive view of emerging market (EM) equities.
On March 10, 2000, at the peak of the internet bubble, the Nasdaq closed at 5048.62. It took more than 15 years, posting 113 new highs along the way, for the index to break back above that record-high level. Though, from another perspective, it may only just be getting into unchartered territory. Continue reading
- U.S. markets closed lower despite early advance; news from Washington, D.C. shifting trade focus to China outweighed in-line core CPI report. S&P 500 Index -0.6%, Nasdaq -1.0%, Dow -0.7%, Russell 2000 -0.6%.
- REITs (+0.3%), utilities (+0.2%) continued to benefit from interest rate decline, which weighted on financials (-0.5%); technology (-1.2%) also lagged on valuation concerns.
- Negative breadth on NYSE (1.5:1); trading volume below average (~87% of 30-day avg.).
- Treasuries strengthened; 10-yr. note yield -3 basis points to 2.84%.
- Commodities: WTI crude oil -1.2% to $60.64/bbl.; COMEX gold higher to $1325/oz.; industrial metals all higher; U.S. dollar weakened vs. most major crosses.
- Economic data: Domestic core CPI reading met expectations (0.2%), helping to abate worries of accelerating inflation. Continue reading
Inflation has been a key concern for markets after wage growth accelerated in the January employment report (released at the beginning of February), and the Consumer Price Index (CPI) rose more than expected. With February data now available, should investors be relieved or more anxious? Continue reading
- U.S. markets finished mixed in choppy session; trade talk remains a focus, but few directional drivers overall. S&P 500 Index -0.1%, Nasdaq +0.4%, Dow -0.6%, Russell 2000 +0.3%.
- REITs (+0.5%), utilities (+0.4%) benefited from Treasury yield decline, ended as day’s outperformers. Industrials (-1.2%), healthcare (-0.5%) lagged.
- Positive breadth on NYSE (1.2:1); trading volume below average (~87% of 30-day avg.).
- Treasuries strengthened; 10-yr. note yield -3 basis points to 2.87%.
- Commodities: WTI crude oil -1.1% to $61.35/bbl.; COMEX gold near flat at $1324/oz.; industrial metals all higher; U.S. dollar mixed vs. major crosses.
- Economic data: Very light day for releases; U.S. government monthly deficit slightly better than expected (-$215.2B vs. -$216B). Japanese Producer Price Index figures softer than anticipated (0.0% vs. 0.2%). Continue reading