Markets higher after holiday - Following the big gains in US equities last week, the S&P 500 Index opened above the 3000 level for the first time since early March. Asian and European markets fared better as well, with Japan a standout. Moreover, WTI crude prices are higher after a solid four-week showing. Meanwhile markets remain supported by signs of recovery as more of the US economy reopens Fed buys $1.5 billion in bond ETFs - The Federal Reserve’s (Fed) purchases of bond ETFs accelerated in the week ending May 20, raising the total to $1.8 billion. The purchases have helped keep corporate credit markets orderly and have helped narrow corporate credit spreads, while representing only a small fraction of the Fed’s $11 billion in bond purchases for the week. We discuss the Fed’s bond purchases and the state of corporate credit markets later today on the LPL Research blog. Concentrated earnings decline - With 480 companies having reported results, first quarter S&P 500 Index earnings are tracking to a 14.6% year-over-year decline. Consumer discretionary and financial companies have driven all but one percentage point of the overall decline. Consensus estimates for the next 12 months’ earnings have been cut by 20% since March 31, as nearly 40% of S&P 500 companies have withdrawn guidance amid heightened uncertainty around the economic recovery (sources: FactSet, JPMorgan Chase). Only 11 S&P 500 companies will report results this week. We recap earnings season in our latest Weekly Market Commentary, available later today. Corporate credit spread narrow - The average credit spread for investment-grade corporate bonds broke below 2% last week for the first time since early March, ending the week at 1.86%. That is well below the recent March 23 peak of 3.73% and is slowly closing in on the 15-year median of 1.36%, with the help of Fed purchases. We are neutral overall on investment-grade corporates, with income attractive and valuations still better than neutral, but with some concerns about vulnerability to potential downside-risk scenarios. IMPORTANT DISCLOSURES This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. This Research material was prepared by LPL Financial, LLC. Earnings per share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability. Earnings per share is generally considered to be the single most important variable in determining a share’s price. It is also a major component used to calculate the price-to-earnings valuation ratio. The credit spread is the yield the corporate bonds less the yield on comparable maturity Treasury debt. This is a market-based estimate of the amount of fear in the bond market Bass-rated bonds are the lowest quality bonds that are considered investment-grade, rather than high-yield. They best reflect the stresses across the quality spectrum. Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity. Not Insured by FDIC/NCUA or Any Other Government Agency Not Bank/Credit Union Guaranteed Not Bank/Credit Union Deposits or Obligations May Lose Value