Market Update: Wednesday, December 13, 2017

MarketUpdate_header

Market Recap

  • Domestic indexes finished mixed; tax reform, Federal Reserve (Fed) meeting remained driving factors. S&P 500 Index +0.2%, Dow +0.5%, Nasdaq -0.2%.
  • Telecommunications, financials soundly led; utilities, energy lagged.
  • Negative breadth on NYSE (1.2:1), Nasdaq negative (1.2:1); slightly above-average volume (~102% of 30-day avg.).
  • 10-year Treasury yields higher; +1 basis point (0.01%) to 2.40%.
  • Commodities: WTI crude oil -1.3% to $57.26/bbl., COMEX gold near flat at $1246/oz., industrial metals broadly higher.

Overnight & This Morning

  • U.S. indexes open higher as markets continue to hold, pending central bank rate decision this afternoon.
  • European indexes mostly lower midday; Brexit negotiation developments remain a focal point. STOXX Europe 600 -0.2%, DAX -0.2%, CAC 40 -0.4%, FTSE 100 +0.6%.
  • Asian markets mostly higher at close; though Nikkei -0.5% despite positive Japanese machinery orders data. Hang Seng +1.5%, Shanghai Composite +0.7%.
  • Treasury yields dip; 10-yr. note -2 basis points (-0.02%) to 2.38%.
  • Commodities: Oil up but off early highs (+0.1% to $57.19/bbl.), gold higher at $1247/oz., industrial metals higher.
  • Economic data: Federal Open Market Committee (FOMC) meeting announcement and forecasts headline today’s docket, consumer inflation data indicated 0.4% month-over-month increase in November.

MacroView_header

Macro Notes

  • More signs of compromise on the tax bill. The latest reports from the congressional conference of the House and Senate tax bills indicate that the corporate rate will be increased from 20% to 21% in the final deal, with implementation delayed until January 1, 2019, moves that help pay for other compromises. Latest reports suggest the following for the final bill: 1) a $750K cap on the mortgage interest deduction (rather than $500K in the House plan or $1 million in the Senate plan), 2) a top individual rate of 37% (compared with 39.6% in both plans), 3) restoring the $10K state and local tax deduction (SALT) that was eliminated in the Senate plan, and 4) a higher deduction for pass-through entities (consistent with the Senate plan). Note that Democrat Doug Jones’ victory over Roy Moore in the Alabama senate election is not expected to have an impact on next week’s tax reform vote, although it may make it tougher for the Trump Administration to achieve other parts of its agenda in 2018 and may put the Senate majority more at risk in the midterm elections in 2018.
  • Headline inflation meets expectations, but core misses. The headline figure for the consumer price index (CPI) rose 0.4% month over month for November, meeting expectations and improving on October’s 0.1% reading. On an annualized basis, prices increased 2.2%, marking the third month in a row we’ve seen levels above the Fed’s 2% target. However, when food and energy are striped out, prices rose just 0.1% month over month, with the year-over-year gain of 1.7% falling short of October’s 1.8% and matching 2017 lows. Despite the mixed readings, the data is not likely to sway the Fed from raising its target for the federal funds rate when it wraps up its two-day policy meeting this afternoon.
  • Fed rate hike expected. The FOMC will release the statement of its latest monetary policy meeting at 2 p.m. ET today. We expect that the announcement will include a 0.25% hike in the fed funds rate. The Fed will also be providing updated economic projections and dot plots (which show the Fed’s expected future path of interest rates), in addition to Fed Chair Janet Yellen holding what will likely be her last press conference as Fed chair at 2:30 p.m. ET. Look for more details after the meeting on the LPL Research blog.

MonitoringWeek_header

Click Here for our detailed Weekly Economic Calendar

Wednesday

  • MBA Mortgage Applications (Dec 8)
  • CPI (Nov)
  • Core CPI (Nov)
  • Real Avg Weekly & Hourly Earnings (Nov)
  • FOMC Rate Decision
  • Yellen (Dove)
  • Germany: CPI (Nov)
  • Germany: Wholesale Price Index (Nov)
  • Italy: Industrial Production (Oct)
  • UK: Jobless Claims Change (Nov)
  • Eurozone: Industrial Production (Oct)
  • Eurozone: Employment (Q3)
  • Japan: Nikkei Japan Mfg PMI (Dec)
  • Japan: Industrial Production & Capacity Utilization (Oct)
  • China: Retail Sales (Nov)
  • China: Industrial Production (Nov)

Thursday

  • Weekly Jobless Claims (Dec 9)
  • Import & Export Price Indexes (Nov)
  • Retail Sales (Nov)
  • Markit Mfg & Svs PMI (Dec)
  • Business Inventories (Oct)
  • France: CPI (Nov)
  • France: Markit France Mfg PMI (Dec)
  • Germany: Markit Germany Mfg & Svs PMI (Dec)
  • Italy: CPI (Nov)
  • Eurozone: Markit Eurozone Mfg & Svs PMI (Dec)
  • UK: Retail Sales (Nov)
  • BOE: Bank Rate
  • ECB: Main Refinancing Rate
  • ECB: Draghi
  • Bank of Canada: Poloz
  • Bank of Mexico: Overnight Rate
  • Japan: Tankan Survey (Q4)
  • China: Foreign Direct Investment (Nov)

Friday

  • Empire Manufacturing Index (Dec)
  • Industrial Production & Capacity Utilization (Nov)
  • Manufacturing Production (Nov)
  • Total Net Treasury Int’l Capital Flows (Oct)
  • Eurozone: Trade Balance (Oct)
  • ECB: Nowotny
  • Bank of Russia: Key Rate

Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Stock investing involves risk including loss of principal.

Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.

Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards.

Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor

Member FINRA/SIPC
Tracking # 1-677289

Market Update: Tuesday, December 12, 2017

MarketUpdate_header

Market Recap

  • Domestic indexes finished mostly higher ahead of busy macro front. S&P 500 Index +0.3%, Dow +0.2%, Nasdaq +0.5%.
  • Telecommunications led, technology strength continued, energy up on continued WTI crude oil rise; financials, industrials lagged.
  • Positive breadth on NYSE (1.2:1), Nasdaq negative (1.3:1); below-average volume (~93% of 30-day avg.).
  • 10-year Treasury yields higher; +1 basis point (0.01%) to 2.39%.
  • Commodities: Oil +1.2% to $58.02/bbl., COMEX gold -0.3% to $1244/oz., industrial metals mixed.
  • Economic data: Data lull ahead of two-day Federal Reserve (Fed) meeting; tax reform still in focus though no recent newsworthy developments.

Overnight & This Morning

  • U.S. indexes open slightly higher as markets await central bank news.
  • European indexes broadly higher midday; follows positive U.K. inflation data. STOXX Europe 600 +0.4%, DAX +0.2%, CAC 40 +0.5%.
  • Asian markets lower; soft Chinese inflation data weighed, though money supply and lending data better than expected. Nikkei -0.3%, Hang Seng -0.6%, Shanghai Composite -1.3%.
  • Treasuries holding steady. 10-yr. note yielding 2.39%.
  • Commodities: Oil pushing higher (+0.6% to $58.35/bbl.), gold flat at $1244/oz., industrial metals remain mixed.
  • Economic data: Domestic Producer Price Index (PPI) numbers came in slightly above expectations (+0.4% month over month vs. expectations of +0.3%).

MacroView_header

Macro Notes

  • Busy week for central banks. The Fed’s two-day meeting begins today with an interest rate decision set to be made tomorrow at 2 p.m. We expect a rate hike, though markets have largely priced this in, so the economic projections, dot plots, and post-meeting press conference may be the bigger focus for investors. While, the European Central Bank (ECB) and Bank of England will also offer statements at the end of their respective monetary policy meetings on Thursday, December 14, we don’t expect any new policy announcements. However, the ECB will release updated economic projections, which could have an impact on markets. We discuss these meetings in more detail in this week’s Bond Market Perspectives, due out later today.
  • 10-year Treasury remains in recent range…again. The 10-year Treasury yield has traded within a range of just under 0.1% over the past 30 trading days. The last time we’ve seen such a tight range was in late February 1974. The range was definitely more impressive at that point given that the 10-year was yielding around 7%, but the range we are seeing today is historically tight nonetheless.
  • Surprise, Surprise, Surprise! Economic surprise indexes from Bloomberg and Citigroup both hit multiyear highs in November, confirming a broad picture of growing economic momentum. In this week’s Weekly Economic Commentary, we look at what drove the numbers and what it might mean for the economy as we head into 2018.

MonitoringWeek_header

Click Here for our detailed Weekly Economic Calendar

Tuesday

  • National Federation of Independent Business Small Business Optimism (Nov)
  • PPI (Nov)
  • Monthly Budget Statement (Nov)
  • UK: CPI & PPI (Nov)
  • Germany: ZEW Survey (Dec)
  • Eurozone: ZEW Survey (Dec)
  • Russia: GDP (Q3)
  • BOJ: Outright Bond Purchase
  • Japan: Core Machine Orders (Oct)

Wednesday

  • MBA Mortgage Applications (Dec 8)
  • CPI (Nov)
  • Core CPI (Nov)
  • Real Avg Weekly & Hourly Earnings (Nov)
  • FOMC Rate Decision
  • Yellen (Dove)
  • Germany: CPI (Nov)
  • Germany: Wholesale Price Index (Nov)
  • Italy: Industrial Production (Oct)
  • UK: Jobless Claims Change (Nov)
  • Eurozone: Industrial Production (Oct)
  • Eurozone: Employment (Q3)
  • Japan: Nikkei Japan Mfg PMI (Dec)
  • Japan: Industrial Production & Capacity Utilization (Oct)
  • China: Retail Sales (Nov)
  • China: Industrial Production (Nov)

Thursday

  • Weekly Jobless Claims (Dec 9)
  • Import & Export Price Indexes (Nov)
  • Retail Sales (Nov)
  • Markit Mfg & Svs PMI (Dec)
  • Business Inventories (Oct)
  • France: CPI (Nov)
  • France: Markit France Mfg PMI (Dec)
  • Germany: Markit Germany Mfg & Svs PMI (Dec)
  • Italy: CPI (Nov)
  • Eurozone: Markit Eurozone Mfg & Svs PMI (Dec)
  • UK: Retail Sales (Nov)
  • BOE: Bank Rate
  • ECB: Main Refinancing Rate
  • ECB: Draghi
  • Bank of Canada: Poloz
  • Bank of Mexico: Overnight Rate
  • Japan: Tankan Survey (Q4)
  • China: Foreign Direct Investment (Nov)

Friday

  • Empire Manufacturing Index (Dec)
  • Industrial Production & Capacity Utilization (Nov)
  • Manufacturing Production (Nov)
  • Total Net Treasury Int’l Capital Flows (Oct)
  • Eurozone: Trade Balance (Oct)
  • ECB: Nowotny
  • Bank of Russia: Key Rate

Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Stock investing involves risk including loss of principal.

Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.

Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards.

Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor

Member FINRA/SIPC
Tracking # 1-676776

Can 2017 Go 12 for 12?

2017 could be one of the least volatile years ever for equities, along with being a solid year for the bulls. In addition, we could also be looking at the first year in U.S. stock market history to see every month of the calendar year close higher.

“The S&P 500 Index has had monthly win streaks that lasted a full 12 months, but never in history have all 12 months of a calendar year been positive on a total return basis. And with only a few weeks to go, should December finish in the green, we could be looking at yet another amazing record going down at the hands of 2017,” per Ryan Detrick, Senior Market Strategist.

1958, 1995, and 2006 were “close but no cigar” years, with each having 11 months in the green; while 1974 holds the record for futility with only one month in positive territory. The good news is that years following those with 11 higher months have never been lower, and average annual returns have been an impressive 10.8%. For more on monthly win streaks, be sure to watch this interview on CNBC with LPL Research.

IMPORTANT DISCLOSURES

The economic forecasts set forth in the presentation may not develop as predicted.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

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. Past performance is no guarantee of future results.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor

Member FINRA/SIPC

Tracking #1-676340 (Exp. 12/18)