Receive Weekly Market Updates via Email

shadow

Archive for October, 2015

Weekly Market Update – October 23, 2015

The Dow gained 158 points Friday on the strength of better-than-expected earnings from three large technology firms and another Chinese interest rate cut.  For the week the Dow was up 2.5% (its fourth straight week of gains) and for the year the index is now down 1.2%.

China announced Friday a quarter point cut in its benchmark interest rate and a half point reduction in its banks’ reserve-requirement ratio, it’s sixth rate reduction since last November.  The move comes just days after China reported Q3 GDP of 6.9%, the country’s slowest rate of growth since the beginning of 2009 during the financial crisis.  China also announced it would lift the cap on bank deposit rates, giving a boost to the income households will receive from savings deposits as China works to transition from an exporting economy to one more dependent upon domestic consumption.  The policy moves are intended to ensure China achieves its goal of 7% annual growth, an outcome presently being challenged by slowing demand for its goods and services, weak factory output and pricing pressure.

China’s interest rate cut comes a day after European Central Bank President Mario Draghi’s comments hinted at additional stimulus measures to try and jumpstart Europe’s moribund economy.  Markets responded in kind with the Dow rising over 320 points.

In the US, three large tech companies, Amazon, Microsoft and Google, all reported earnings that beat analysts’ expectations Friday.  On the strength of the news, Amazon and Google hit all-time highs.  Overall, Q3 corporate earnings have been better than expected and going forward, the continued global economic stimulus measures should help strengthen sales and profits.

The yield on the 10-year Treasury rose 6 bps Friday to 2.08%, up 6 bps for the week and down 10 bps for the year.  Oil fell 78 cents Friday to $44.60, down almost 6% for the week.  Strength in the US dollar and the reduction of only one oil drill rig this week (the smallest number in eight weeks) pressured pricing.  Rigs are down 63% from their high point last year.

Next week’s economic calendar highlights include September new home sales on Monday, consumer confidence reports on Tuesday and Friday, the first estimate of Q3 GDP and weekly jobless claims on Thursday and an October manufacturing report on Friday.  Expect the housing data to show a slight increase in activity from August, consumer confidence to rise, Q3 GDP to show growth of approximately 3.2%, weekly jobless claims to settle in the 260-270,000 range (from 259,000 this week) and the manufacturing report to show a slight decline in activity from September.  Q3 corporate earnings will continue next week as well.

Weekly Market Update – October 16, 2015

The Dow gained 74 points Friday as weaker-than-expected economic data gave a boost to markets.  For the week the Dow was up .8% (its third straight week of gains) and for the year the index is now down 3.7%.

September industrial production (factory output) came in below expectations Friday while earlier in the week September retail sales did the same.  Inflation data was also tame.  The tepid numbers increase speculation that an interest rate hike will be pushed back into 2016 and the current stimulus measures will continue in the short term. 

GE announced third quarter earnings Friday that beat expectations, pushing the Dow component up 3%. Third quarter corporate earnings begin in earnest next week and will be parsed to determine the effect the strong dollar and slowing global demand had on profits.     

The yield on the 10-year Treasury held steady Friday to 2.02%, down 8 bps for the week and down 16 bps for the year.  Oil settled 18 cents higher Friday to end the day at $47.26 after the weekly drill rig report again showed a reduction in the number of drilling rigs in operation, dropping the count by 10 to 595, the seventh consecutive weekly decline.  For the week, oil was down almost 5% on continued global over-supply concerns (US crude inventories grew by 7.6 million barrels last week, the largest increase in six months). 

Next week’s economic calendar highlights include September housing data on Tuesday and Thursday and weekly jobless claims also on Thursday.  Expect the housing data (housing starts and existing home sales) to show a slight decline in activity from August and weekly jobless claims to settle in the 260-270,000 range (from 255,000 this week).  The week will be full of market-moving Q3 earnings news as well.

Weekly Market Update – October 9, 2015

The Dow gained 34 points Friday, the average’s sixth straight day of gains and its longest streak since last December.  For the week the Dow was up 3.7% and for the year the index is now down 4.5%.

Markets enjoyed a relief rally this week, in part due to the belief that the Fed will postpone its initial interest rate hike until next year given the state of tumult global markets have been in recently.  The Fed minutes released Thursday strengthened this view as concerns about the health of the global economy and low inflation in the US highlighted the Fed’s “dovish” statement.  Factor in last week’s weaker-than-expected September jobs report and the prospect of a delay seems more likely.

Q3 earnings season officially kicked off this week with the release of Alcoa’s (metals and manufacturing) earning report.  The company’s quarterly sales were down over 10%, noting weakness globally but especially in China, where production growth was well below projections.  Profits of the S&P 500 companies are projected to fall 4.5% in the third quarter, which would be the biggest decline in six years.  Particular attention will be paid to the larger multinationals like Alcoa that participate heavily in China and other struggling European and Asian countries.  

The yield on the 10-year Treasury fell 1 basis points Friday to 2.10%, up 11 bps for the week and down 8 bps for the year.  Oil settled 20 cents higher Friday to end the day at $49.63, up over 8% for the week. The weekly drill rig report again showed a reduction in the number of drilling rigs in operation, dropping the count to 605.  One year ago the number was 1,609. 

Next week’s economic calendar highlights include September inflation data on Wednesday and Thursday, September retail sales on Wednesday, weekly jobless claims on Thursday and a consumer confidence reading on Friday.  Expect inflation to remain in check, retail sales to show a slight improvement from August, weekly jobless claims to settle in the 260-270,000 range (from 263,000 this week) and consumer confidence to rise.

In observance of the Columbus Day holiday, fixed income markets will be closed on Monday though equity markets and our offices will be open.

Weekly Market Update – October 2, 2015

After losing 250 points early in the day Friday in response to a tepid September jobs report, the Dow recovered and managed to finish 200 points in the black.  For the week the Dow was up 1% and for the year the index is now down 8.2%.

The September jobs report showed the addition of 142,000 jobs in the month, well below expectations of 200,000.  The August and July numbers were revised lower as well, from 173,000 to 136,000 and from 245,000 to 243,000, respectively.  The unemployment rate remained at 5.1%.  Markets fell heavily in early trading in reaction to the report but recovered as the day progressed and the report was digested. 

With stocks coming off their worst quarter in four years in response to global and specifically Chinese growth concerns and continued weakness in commodity prices, the continuing market turbulence and weaker-than-expected data may prompt the Fed to wait until next year to begin raising rates (previous conventional thought projected the first rate hike to occur this December).  Rates will be lower for longer thus helping preferred and trust preferred performance going forward.

Q3 earnings season begins next week and attention will be closely paid to the results, especially from multinational firms, to gauge to what extent the perceived economic slowdown in China and other struggling nations had on corporate revenues. 

The yield on the 10-year Treasury fell 5 basis points Friday to 1.99%, down 18 bps for the week and down 19 bps for the year.  Oil rose 1.8% Friday to settle at $45.54 after the weekly drill rig report showed the number of drilling rigs in operation fell by 26 to a five-year low.  There are currently 62% fewer rigs operating since a record 1,609 rigs were in operation last October.  During the last two weeks we have reduced the Magnum Hunter position in most portfolios due to increasing credit risks at the company.  

Next week’s economic calendar is quiet with weekly jobless claims on Thursday the only data release of note.  Expect weekly jobless claims to again settle in the 270-280,000 range (from 277,000 this week).

 

Ulland Investment Advisors

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