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Archive for July, 2016

Weekly Market Update – July 29, 2016

The Dow finished 24 points lower on Friday after data showed the American economy expanded at a disappointing 1.2% annualized growth rate in the second quarter. For the week the Dow was down 0.75%. Year-to-date the index is up 5.8%.

Domestic economic data came in mixed. Q2 GDP grew at a seasonally adjusted rate of 1.2%, well below the 2.6% forecast of economists. A wider trade gap was cited as a drag on GDP. June new home sales increased 3.5% sequentially to 592,000 vs. 560,000 consensus. The Conference Board’s Index of consumer confidence came in better than expected at 97.3 in July. The Markit services Purchasing Managers’ Index (PMI) fell to a five-month low of 50.9 in the July flash reading, down from 51.4 in June and below consensus for 52.5. The Richmond Fed manufacturing index jumped to +10 in July from -10 in June, with most key metrics improving. Weekly initial jobless claims remained low at 266,000. A gasoline glut and signs of increasing production dragged down oil prices. However, high temperature drove natural gas prices higher.

The Federal Open Market Committee (FOMC) held rates steady at its July meeting as expected. However, the Fed changed some language in its statement in recognition of improving economic conditions, noting a strengthened labor market and expanding economic activities. The statement also acknowledged strong growth in household spending and an increase in labor utilization. Moreover, the statement incorporated the phrase “near-term risks to the economic outlook have diminished.” The U.S. government bond yields fell on Friday as a softer economic growth dampened expectations that the Fed will raise interest rates this fall. For the week, the U.S. Preferred Stock Index was up 0.5%.

Earnings were released for Q2 by several well-known and widely held companies. Following earnings, Facebook share price was +1.3%, Apple +6.6%, Gilead -8.5%, Sprint +28%, Amazon +1.9%, and Google +4.5%. Earnings releases will continue in the next two weeks.

Next week’s economic calendar highlights include Construction Spending (Aug. 1st), Personal Income and Auto Sales (Aug. 2nd), Crude Inventory (Aug. 3rd), Initial Jobless Claims (Aug. 4th), and Nonfarm Payrolls (Aug. 5th). The Nonfarm Payrolls will have the greatest impact on the market.

Have a great weekend,
Yansong Pang

Weekly Market Update – July 22, 2016

The Dow finished 54 points higher on Friday as the market dipped from its record highs earlier this in week. For the week the Dow was up 0.3%. Year-to-date the index is up 6.6%.

Domestic economic data came in mixed. Jobless claims continued to impress, dropping to a three-month low of 253,000 for last week. The Philly Fed manufacturing indexed missed expectation, coming in at -2.9 vs. the +4.5 consensus. Existing home sales for June rose 1.1% to a 5,570,000 seasonally adjusted annual rate. According to FactSet, the earnings of the 123 companies in the S&P 500 index are on track to contract 4.2% and corporate profits are expected to fall 5.3% in the second quarter. Despite global economic uncertainty caused by the UK’s vote to exit the European Union (“Brexit”), Federal Reserve officials are optimistic about an interest-rate increase before the end of this year, possibly as soon as September. For the week, the U.S. Preferred Stock Index is flat.

Although the market has stabilized after the initial uncertainty from Brexit, its impact on the global economy remains unclear. Concerns of reduced investments in the Eurozone and increased market volatility resulted in a 0.2% decrease in Eurozone growth forecast for the next two years according to experts surveyed by the European Central Bank. The projected Eurozone growth now stands at 1.4% for 2017 and 1.6% for 2018. We continue to trim our European bank exposures in portfolios.

Corporate earnings will make news next week as Apple, Facebook, and Alphabet (Google) release Q2 revenues and earnings. Next week’s economic calendar highlights include Consumer Confidence and New Home Sales (Jul 26th), Crude Inventories and Federal Open Market Committee (FOMC) Interest Rate Decision (Jul 27th), Initial Jobless Claims (Jul 28th), and Chicago PMI (Jul 29th). The FOMC meeting will have the greatest impact on the market.

Have a great weekend,

Yansong Pang (庞岩松)

Weekly Market Update – July 15, 2016

The Dow finished up 10 points on Friday in a quiet trading session after a 5-day rally. For the week the Dow was up 2%, and year-to-date the index is up 6.3%.

“Brexit” concerns subsided as Theresa May was appointed as Prime Minister of the UK on Wednesday, and the new cabinet began to take shape. Expectations of policy support continued to act as tailwinds for the market despite the surprise move to keep rates unchanged on Thursday by the Bank of England (BOE). However, the BOE signaled its willingness to loosen policy at its August meeting, suggesting a potential combination of different easing measures. Expectations of Japanese stimulus also served as a cushion for global equity markets. In the US, St Louis Fed President Bullard suggested that the Fed Funds rate should be kept below 1% for the next few years, given the current low growth environment. The US Preferred Index PFF gained 0.9% for the week.

Economic data were largely favorable this week, with a positive first batch of Q2 earnings. Initial jobless claims were stable at 254,000, better than expectations and just above the multi-decade low in April. Headline PPI Inflation increased 0.5% in June, ahead of consensus and the most significant gain in a year. Retail sales were better than expected, as was industrial and manufacturing production. On the flip side, the consumer sentiment index fell short of expectations due to worries about recent global developments.

Crude oil finished the week at 45.95, up 1%, as the rally on Tuesday was followed by a strong selloff on Wednesday due to poor inventory data. Next week’s economic calendar highlights include Crude Inventories (July 20th), and Initial Claims (July 21st).

Have a good weekend,
Natalie Do

Weekly Market Update – July 8, 2016

The Dow finished 251 points higher on Friday as the far-better-than-expected June U.S. Jobs Report alleviated some concerns of an economic slowdown. For the week the Dow was up 1.1%. Year-to-date the index is up 4.1%.

Domestic economic data were largely positive for the week. Nonfarm payrolls rose by 287,000 vs. consensus estimate of 165,000, making June the strongest month of hiring since last October and providing reassurance of continued economic growth in the U.S. despite recent global uncertainties. Markit’s US services PMI rose slightly to 51.4 in June from 51.3 in May. June ISM Services Index recorded the biggest sequential increase since 2008, suggesting strong business activities. Initial jobless claims dropped to 254,000 and June ADP employment came in at 172,000, both numbers better than consensus estimates.

Earlier this week, a number of Federal Reserve officials commented that it was too early to estimate the impact of Brexit on the U.S. economy. The Federal Open Market Committee (FOMC) Minutes on Tuesday highlighted the financial market turbulence following the Brexit vote and judged it appropriate to leave policy options open and remain dependent on economic data. The strong jobs report increases the possibility of an interest rate hike later this year. For the week the US Preferred stock index was down 0.20% and the U.S. 10 Year Treasury yield dropped by 8 basis points to 1.36%. Our preferreds did quite well, and the interest rate environment and slow economic growth should allow more favorable conditions to continue.

U.S. crude oil inventories and production continue to drop which is expected to close the supply and demand gap later this year. The warm summer and the ongoing conversion of coal electric utility plants to natural gas are reducing high natural gas inventories as well.

Next week’s economic calendar highlights include Crude Inventories (July 13th), Initial Jobless Claims and Producer Price Index (July 14th), and Consumer Price Index (July 15th).

Have a great weekend,

Yansong Pang (庞岩松)


Ulland Investment Advisors

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