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Archive for June, 2015

Weekly Market Update – June 26, 2015

The Dow managed a 56-point gain Friday despite stalled Greek debt talks and weakness in the technology sector. 

On Friday, Greece rejected a five-month bailout extension, setting the stage for another meeting with European officials on Saturday, the fifth such meeting in the last week.  Greece needs to secure 1.8 billion euros for payment to the IMF by the end of June to stave off default and a possible exit from the euro and European Union.  European markets were mostly lower on the news. 

In the US, technology stocks, specifically semiconductor shares, fell Friday after a disappointing report from Micron, one of the leading chip makers.  Data-wise, consumer confidence rose to a five-month high.

The yield on the 10-year Treasury rose 8 bps to 2.48%, up 10 bps for the week and now up 31 bps for the year.  Through Thursday, June 25, our trust preferred portfolios were up approximately 3%, on average, versus -.38 % for the Barclays Aggregate Bond Index. 

In an SEC filing on Thursday, Magnum Hunter, which many of our accounts have via its preferred security, reported that it will pursue the sale of the entirety of its Eureka Hunter pipeline.  Magnum Hunter believes the sale of its 45.53% Eureka interest could generate $600- $700 million.  This would be a significant positive for Magnum Hunter, and the sale price confirms our view of the quality of the firm’s assets.  As a result, the preferreds have rallied 25-30% this week, recovering some of their recent price decline.  We expect further appreciation upon confirmation of a deal and as additional liquidity events are announced.

Oil fell 7 cents to $59.63 Friday, down 34 cents for the week or .6%.  The loss was attributed to the ongoing Greek debt situation, concerns that Iran could soon release additional oil stores, and a drop in the oil rig count of only three for the week, an indication that the contraction in drilling might be coming to an end.  

Next week’s economic calendar highlights include June manufacturing and consumer confidence reports on Tuesday and the June jobs report on Thursday.  Expect manufacturing activity to increase from May, consumer confidence to rise and the jobs report to show the creation of approximately 250,000 jobs in June (vs. 280,000 in May) and no change in the unemployment rate (5.5%). 

Weekly Market Update – June 12, 2015

Stalled Greek debt talks and nervousness ahead of the Fed’s policy meeting next week sent markets lower Friday.  The Dow fell 141 points ending the week up .3%.  For the year the index is now up .4%.

European officials on Friday began their first formal talks on a worst-case-scenario outcome for Greece and its ongoing debt troubles, one day after the IMF halted discussions with Greek representatives citing “major differences”.  Greece is expected to deliver a 1.5 billion euro payment to the IMF by the end of the month, the completion of which looks unlikely at present time.  The specter of default contributed to Friday’s selloff in both the US and Europe, where markets in France and Germany fell more than 1%.

In the US, a report released Friday showing a rise in consumer confidence failed to catalyze markets as buying activity waned in advance of the Fed’s Open Market Committee meeting next Wednesday.  Further clues as to the timing of the Fed’s impending interest rate hike hope to be gleaned from the meeting and related statements.  The prevailing thought is that the first rate increase will be announced at the September meeting.

The yield on the 10-year Treasury held steady Friday at 2.38%, down 2 bps for the week and now up 21 bps for the year.  Through Thursday, June 11, our trust preferred portfolios were up approximately 3%, on average, versus -.28 % for the Barclays Aggregate Bond Index.  Magnum Hunter has been weak in advance of an announcement scheduled for June 19 about its effort to raise capital. 

Oil fell 1.3% to $59.98 Friday due to a stronger dollar and oversupply concerns.  On Thursday, the International Energy Agency said demand for oil was stronger than anticipated in the first quarter of 2015, but production in the US (and most other countries, including those in OPEC) remains steady, having yet to realize a reduction even though the number of rigs in operation has decreased by 60%.  May should show a fall in production when supply figures are announced. 

Next week’s economic calendar highlights include May industrial production (factory output) on Monday and weekly jobless claims and May inflation data on Thursday.  Expect factory output to increase from April, weekly jobless claims to again settle in the 270,000 – 280,000 range (from 279,000 this week) and the inflation data to show a slight increase in prices from April.

Weekly Market Update – June 5, 2015

The Dow fell 56 points Friday as a better-than-expected May jobs report increased the likelihood of an interest rate hike by the Fed later this year.  For the week the Dow fell .9% and for the year the index is now up .1%.

Friday’s May jobs report showed the addition of 280,000 jobs, the largest number registered so far this year.  The unemployment rate increased to 5.5% though mainly due to more people entering the labor force looking for work.  Hourly wages rose 2.3% from last year’s level, the biggest increase since August 2013.  The economic data firms the belief that the economic recovery is on track and that the softness exhibited in the first quarter was indeed related to temporary negative factors (adverse winter weather, the strong dollar, work stoppages, etc.).  Though the IMF this week urged the US to delay an interest rate increase until 2016, it is expected the Fed will begin to act perhaps as early as September and at the latest in December.

The yield on the 10-year Treasury rose 10 bps Friday to 2.40%, up 30 bps for the week and now up 23 bps for the year.  Through Thursday, June 4, our trust preferred portfolios were up approximately 3.5%, on average, versus .07% for the Barclays Aggregate Bond Index. 

Oil rose 1.95% to $59.13 Friday after the number of rigs drilling for oil fell for the 26th consecutive week according to the weekly drill rig report.  Oil production has yet to register as steep a decline as the rig count, but being a lagging indicator, production should soon begin to decrease, in turn helping oil prices recover.  OPEC met today and agreed to keep production level at 30 million barrels a day.

Next week’s economic calendar highlights include May retail sales and weekly jobless claims on Thursday and May inflation data and a consumer confidence reading on Friday.  Expect retail sales to show an uptick from April, weekly jobless claims to settle in the 270,000 – 280,000 range (from 276,000 this week), the inflation data to show a slight increase in prices and consumer confidence to increase from the prior reading.

 

Ulland Investment Advisors

4550 IDS Center · Eighty South Eighth Street · Minneapolis MN 55402 · Telephone: 612-312-1400 · Facsimile: 612-204-3464