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Archive for May, 2016

Weekly Market Update – May 27, 2016

The Dow finished 45 points higher on Friday with the Fed Chair Janet Yellen’s comments in focus. For the week the Dow was up 2.1% and year-to-date the index is up 2.6%.

Economic data remain mixed for this week. The Q1 GDP growth figure was revised upwards to an annualized 0.8% from a previous estimate of 0.5%, driven by stronger data on inventories and housing. Pending home sales rose 5.1% to the highest level in a decade, and April new home sales increased 17% from the previous month. Jobless claims dropped to 268,000 versus a 275,000 consensus. Economist forecasts for Q2 GDP averaged 2.5%, showing expectations of a seasonal turnaround from the poor growth in Q1. However, core durable orders, and manufacturing and services Purchasing Managers’ Index (PMI) all fell short of expectations as business optimism declined to the lowest level in seven years. Continued pressure on earnings could explain this trend of poor business spending: according to the Commerce Department, corporate profits rose only 0.3% in Q1 after a 7.8% drop in Q4 last year.

The comments from Federal Reserve officials this week continued to point towards a June interest rate hike as oil rallied and core inflation rose at an annualized rate of 2.1% in Q1, past the Fed’s target of 2%. Federal Reserve Chairwoman Yellen said on Friday that a rate increase would be appropriate “in the coming months” if the economy continued to improve. For the week, the US Preferred stock index PFF was up close to 1%.

Crude oil was up 4% for the week to $49.56, fueled by a combination of supply disruptions in Canada, Nigeria & Venezuela and a continued fall in U.S. oil output. However, the strong dollar remained a headwind as its appreciation makes the dollar-priced commodity more expensive for holders of other currencies. The next OPEC meeting will be hosted in on Thursday, June 2nd in Vienna. No agreement to reduce production is expected.

Our office and the market will be closed Monday, May 30 in observance of Memorial Day. Next week’s economic calendar highlights include Chicago PMI and Consumer Confidence (May 31th), Initial Jobless Claims (June 2nd), and Nonfarm Payrolls and Unemployment Rate (June 3rd). Of these, Nonfarm Payrolls have the highest probability of moving the market.

Have a good weekend,

Natalie Do

Weekly Market Update – May 20, 2016

The Dow finished 66 points higher on Friday as the market adjusts to the heightened expectations of a June Federal Reserve interest rate hike. For the week the Dow was down 0.20% and year-to-date the index is up 0.44%.

April’s headline CPI recorded the largest increase in three years and was up 0.4% from the previous month, ahead of expectations of a 0.3% gain and was led by 8% increase in gasoline prices. Core CPI, which excludes food and energy, was up 0.2% and was in line with consensus. Industrial production rose 0.7% in April, well ahead of consensus. Jobless claims came in line with expectations at 278,000. However, May’s Philadelphia Fed manufacturing index declined 1.8 compared to consensus of 4.0 increase, with new orders decreasing for the second consecutive month.

The release of the minutes from the Federal Open Market Committee’s April 26-27 meeting was the focus of this week. The meeting noted a continued strong labor market, an increased risk sentiment, and a decline in financial market volatility. Positive rate hike comments were delivered by the regional Fed bank presidents on Tuesday and during the “Fedspeak” on Thursday. The Fed will review new economic data before making a rate decision at its June meeting. For the week, the U.S. 10 Year Treasury yield increased 0.16% and the US Preferred stock index PFF was down 0.15%.

Crude oil rallied by 3.2% for the week to $47.67 per barrel as the Canadian wildfire outages and disruptions in Nigeria and Libya chipped away an oversupply. The U.S. oil rig count remained flat at 318 after 8 weeks of consecutive declines. A stronger dollar will put downward pressure on oil prices by making the dollar-denominated commodity more expensive for investors of other currencies.

Next week’s economic calendar highlights include New Home Sales (May 24th), Crude Inventories (May 25th), Initial Jobless Claims and Pending Home Sales (May 26th), and Q1 GDP Estimate (May 27th). We expect continued discussion of a Fed interest rate increase which will insure another volatile week.

Have a great weekend,

Yansong Pang (庞岩松)

Weekly Market Update – May 13, 2016

The Dow finished 185 points lower on Friday as strong economic data failed to offset the recent risk aversion sentiment. For the week the Dow was down 1.2% and year-to-date the index is virtually flat.

The retail data from the Commerce Department showed the best monthly gain since March 2015 as retail sales improved 1.3% from the prior month, led by autos, gas stations, and non-store retailers such as Amazon.com. The May index of US consumer sentiment recorded the highest reading since June 2015 and well ahead of consensus. In response to the stronger consumer spending growth trend, the Atlanta Fed raised it Q2 GDP forecast to 2.8% compared to 2.2% previously. On the other hand, initial jobless claims rose to 294,000, ahead of the 270,000 consensus, suggesting slowing market momentum.

Three Fed officials gave positive rate hike comments this Thursday, citing the gap between the market’s pessimism and the Fed’s view on the fundamental strength of US economy. Inflation expectations have firmed up due to a weakening US dollar, rising US wages and reforms in China against excess capacity. The US Preferred stock index PFF was largely unchanged, rising by less than 1% for the week.

Crude oil rallied by 4% for the week to $46 per barrel. On Friday OPEC noted that the reduction in US output and investments will reduce the global oil glut over the course of this year. Oil companies world-wide will cut their exploration budgets to half of the past three-year average. As another boon to oil prices, earlier this week, the Saudi Aramco CEO cited increased demand in regions including the US and India.

Next week’s economic calendar highlights include CPI (May 17th), Crude Inventory and Fed Minutes (May 18th), Initial Jobless Claims (May 19th), and Existing Home Sales (May 20th). Don’t be surprised if the market stays choppy and trendless. Current economic news seems unlikely to move the market either substantially higher or lower.

Have a good weekend,

Natalie Do

Weekly Market Update – May 6, 2016

The Dow finished up 80 points on Friday after the Labor Department reported the slowest pace of job creation since September, reducing the likelihood of a June interest rate hike. For the week the Dow was down 0.2% and year-to-date the index is 1.8% higher.

Non-farm payrolls surprised to the downside on Friday with a weaker gain than the consensus: Employers added 160,000 jobs in April, a smaller increase than the 202,000 jobs expected by economists. However, unemployment rate still held steady at 5%. Initial jobless claims rose to 274,000 last week, ahead of consensus but remaining near long-term lows. Average hourly earnings increased slightly, as well as the average work week. Global growth concerns were in focus this week following a surprise interest rate cut in Australia, weaker manufacturing data out of China and the UK, and disappointing European bank earnings. Due to lower probability of a rate hike, yields on 10-Year Treasury note declined 6 basis points to 1.77%.

Crude oil rebounded towards the end of the week, ending at $44.66 per barrel on the news of supply disruptions. A massive wildfire continued to spread near the Athabasca oil sands in Alberta, Canada, which results in a production decrease of 720,000 barrels per day. The standoff between Libya’s Eastern and Western factions prevented crude loadings at the Marsa al-Hariga port, shutting in 120,000 barrels per day. Nigeria’s recent militant attacks also reduced the country’s crude production. The next OPEC meeting will be hosted on Jun 2, 2016.

Next week’s economic calendar highlights include Crude Inventories (May 11th), Initial Jobless Claims (May 12th), Core PPI (May 13th).

Have a good weekend,

Natalie Do

 

Ulland Investment Advisors

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