Investment Commentary – July 6th, 2016

Market Indices as of Market Close July 6th, 2016
Dow 17,918 (2.83% YTD)
S&P 2,099 (2.73% YTD)
NASDAQ 4,859 (-2.96% YTD)
Global Dow 2,285 (2,033 52 week low /2,568 high)
10-year Treasury 1.37 (1.32 52 week low /2.47 high)
Gold 1,365 ($1,049 52 week low /high $1,378)
Oil $47.89 ($32.22 52 week low /high $57.98)

Stocks shake off Brexit worries to book gains

U.S. stocks logged a solid gain Wednesday and the S&P 500 closed within a hair’s breadth of the psychologically significant 2,100 level as Wall Street attempted to shake off worries tied to the U.K.’s vote late last month to exit the European Union, dubbed Brexit. The S&P 500 index SPX, +0.54% rose 11 points, or 0.5%, to finish at 2,099, the Dow Jones Industrial Average DJIA, +0.44% ended 77 points, or 0.4%, to 17,918, supported by a 1.2% rise in health-care shares. Meanwhile, the tech-heavy Nasdaq Composite Index COMP, +0.75% enjoyed the best rise of the stock-market gauges, climbing 36 points, or 0.8%, to 4,859, led by 2.4% rise in the iShares Nasdaq Biotechnology ETF IBB, +2.37% The three main indexes have risen in five of the past six sessions in the wake of the June 23 referendum to exit the European Union, dubbed Brexit. Reverberations from Brexit were still be felt earlier in the session Wednesday, with haven assets, including government bonds, drawing strong bids and pushing yields to record lows. Indeed, the U.S. benchmark 10-year Treasury yield [s:TMUBMUSD10Y] touched an all-time low of 1.321%, but yields closed higher as risk appetite returned somewhat.

Private-sector employment picks up in June: ADP

WASHINGTON (MarketWatch)—Private-sector employment picked up a bit in June, suggesting the weak May nonfarm-payroll report may be an anomaly, Automatic Data Processing Inc. reported Thursday.

ADP reported that 172,000 private-sector jobs were added in June, above economists expectations for a gain of 150,000 jobs.

ADP also revised May’s gain to 168,000 from the original estimate of 173,000.

Analysts use ADP’s data to get a feeling for the Labor Department’s employment report, which will be released Friday and covers government jobs in addition to the private sector.

Last month, the ADP sent a false signal. The government reported a dismal 38,000 jobs in May, which was “a game-changer” for the Federal Reserve, according to Econoday.

The pickup in private-sector employment in June “suggests that last month’s very weak number was an outlier. Tomorrow’s [government] number should be close to 200,000 so it feels we’re back on track,” said Mark Zandi, chief economist of Moody’s Analytics, which prepares the report with ADP’s data.

Economists polled by MarketWatch expect the government’s report for June to show that nonfarm payrolls rebounded to 170,000 jobs from the weak May reading.

JP Morgan The Weekly Brief: After the announcement of the UK vote to leave the EU on 24 June, global markets reacted with immediate risk-off sentiment, but a few days later, most global equity markets had recovered. In fact, the UK FTSE 100 had recovered all the post-Brexit losses by Thursday last week. However, the main asset bearing the brunt of the political and economic concerns of this referendum result is the pound sterling (GBP). With the GBP/USD exchange rate near record lows, it is important to consider which parts of the UK equity market will benefit from sourcing revenues abroad. This week’s chart shows how some industry groups, such as tobacco, mining, and energy depend very little on domestic sales, while home builders, retailers, and real estate investments do.

THIS DAY IN FINANCIAL HISTORY: Securities Exchange Act Signed

July 6th, 1934: With a stroke of his pen, President Roosevelt signed the Securities Exchange Act. This act was designed to set rules and regulation on the notoriously corrupt New York Stock Exchange that caused the 1929 crash. This legislation also started the Securities Exchange Commission (SEC), which is responsible for monitoring the nation’s brokerage houses and investment, 1934: Securities Exchange Act Signed

The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.

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