Broker Check

January 7, 2019 - Investor’s Whiplashed, but Stocks up for Second Week

| January 07, 2019

A Friday rally that saw the U.S. equities spike more than 3% helped the S&P 500 Index kick off the New Year with its second straight weekly advance. The energy sector outperformed as oil continued to rise off its December 24 low, while interest-rate sensitive utilities and REITs were the only two sectors that failed to finish higher. Elsewhere, the dollar weakened against most major currencies, which, along with persistent volatility, sustained gold’s ascent.

Drilling down, the late-week surge was an abrupt reversal that followed a Thursday selloff triggered by disappointing U.S. manufacturing data and an announcement from the world’s largest smartphone maker that its fourth-quarter revenue would fall short of Wall Street’s expectations, fueling simmering global growth concerns. However, investors did an about-face on Friday thanks to a combination of a better-than expected nonfarm payrolls report, very market-friendly comments from Federal Reserve Chair Jerome Powell, and an announcement from China’s central bank that it was lowering its reserve requirement (minimum percentage of banks’ capital required to be maintained) and reducing fees and taxes imposed on financial institutions in an effort to boost the country’s cooling economy.

The announcement out of China spurred a 2% rally in the Shanghai Composite and Hang Seng that lifted both indexes into positive territory for the week, but data showing its manufacturing sector contracted last month for the first time since 2016 kept gains in check. In Europe, stocks followed a similar pattern to U.S. equities despite economic data that showed both manufacturing and services sector activity for December barely expanded to cap off 2018.

Moving along to the week ahead, trade will garner the bulk of global investors’ attention, as a U.S delegation will travel to Beijing to resume trade talks with Chinese officials. On the economic front, investors will be keen on consumer price data in the U.S. after this week’s surprise increase in wage growth. In the Eurozone, December’s consumer confidence, retail sales, and third-quarter final Gross Domestic Product data is scheduled to be released. Turning to Asia, consumer and producer prices are due out of China. Track these and other important events on our Weekly Global Economic & Policy Calendar.


Important Disclosures

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

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

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

Indices 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 not indicative of future results. The tax loss harvesting and other tax strategies discussed should not be interpreted as tax advice and there is no representation that such strategies will result in any particular tax consequence. Clients should consult with their personal tax advisors regarding the tax consequences of investing.

Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

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


For Client Use - Tracking #1-808143 (Exp. 1/20)