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Archive for August, 2016

Weekly Market Update – August 26, 2016

The Dow was down 53 points on Friday following Fed chair Janet Yellen’s statement that an interest-rate rise was likely in the near future. Year-to-date the Dow is up 5.6%.

This week’s domestic economic data was mixed. Durable goods orders jumped 4.4% in July, which was more than expected, following a 4.2% fall in June. The labor market showed signs of continued momentum, as initial jobless claims fell to 261,000. This was 4,000 below expectations and marked their lowest level in five weeks. Housing data was mixed. New home sales beat expectations, rising 12.4% in July to their highest level in nine years. However, existing-home sales fell 3.2% to 5,400,000. The release cited low inventories as a factor putting pressure on affordability. Finally, Markit’s US manufacturing PMI fell to 52.1 following a high of 52.9 in July. Though expectations for hiring were positive, new orders and backlogs both contracted.

Crude oil was down 2.4% this week. Following a decline Monday, reports of Iranian collaboration with OPEC in a potential price freeze sparked a new rally. Much of this ground was later given up following high inventory data and a statement from Saudi Arabia that no production freeze from OPEC was imminent.

In her speech today at Jackson Hole, Federal Reserve Chair Janet Yellen signaled an increased likelihood that the Fed would raise rates in the months ahead. Yellen cited strong numbers in the labor market and internal forecasts predicting an increase in inflation, which she said outweighed in importance sluggish GDP growth. Yellen left open the possibility that rates could be increased as early as the Fed’s September meeting, though her comments suggested that such a decision would hinge on whether or not the September 2nd jobs report showed continued improvement in the labor market. For the week, the U.S. Preferred Stock Index was up 0.2%.

Next week’s economic calendar highlights include Personal Income (Aug. 29), Consumer Confidence (Aug. 30), Crude Inventories (Aug. 31), Initial Jobless Claims (Sept. 1), and Nonfarm Payrolls (Sept. 2). The biggest market movement will come from the jobs report.

Have a great weekend,
Yansong Pang

Weekly Market Update – August 19, 2016

The Dow finished 45 points lower on Friday as investors anticipate higher chances of an interest rate hike this year. Year-to-date the index is up 6.5%.

Not much came out from this week’s domestic economic data. Jobless claims fell to 262K from 266K in the prior week. The Philly Fed index for August rose to +2 from (2.9) and was in line with consensus. July Federal Open Market Committee (FOMC) Minutes this Thursday gave out no real directional takeaways. The minutes indicated there was a general agreement that the committee should wait before raising rates until there was more economic data that provided more confidence that the economy was strong enough to withstand the potential impact to demand from an increase. Some participants felt that a rate hike was or would soon be warranted, while others wanted to wait for more evidence of inflation. The minutes noted that with neutral rates potentially remaining quite low, the Fed’s framework should have capacity to supplement conventional policy accommodation with other measures. Recall there has been a pickup in conversation about a “rethink” of policy in the increasingly accepted new low natural rate world, which San Francisco Fed President Williams discussed on Monday and St Louis Fed President Bullard touched on today. The minutes also revealed some discussion about potential overvaluation in the CRE market, elevated level of equity values relative to expected earnings and the reach for yield. For the week, the U.S. Preferred Stock Index was -0.3%.

For the week, the crude was up 8.8%. Upbeat prospects for a rebalance of the oil market were fueled by drawdowns in U.S. crude and gasoline inventories, declining production in China and Latin America, and recent indications that major producers both outside and within the Organization of the Petroleum Exporting Countries could take steps to stabilize prices.

Next week’s economic calendar highlights include New Home Sales (Aug. 23rd), Crude Inventory (Aug. 24th), and Initial Jobless Claims and Natural Gas Inventories (Aug. 25th). The rest of August normally has low trading volume as Well Street heads off for vacations.

Have a great weekend,
Yansong Pang

Weekly Market Update – August 12, 2016

The Dow finished 37 points lower on Friday after disappointing data on July retail sales. For the week the Dow was up 0.18%. Year-to-date the index is up 6.6%.

This week’s domestic economic data surprised to the downside. The U.S. retail sales released by the Commerce Department on Friday came in flat vs. an expected 0.5% rise, indicating a potential hurdle for economic growth in the second half of the year. Productivity declined for the third straight quarter and fell at a 0.5% annualized rate in Q2 following a 0.6% decline in Q1 while consensus expected a 0.5% increase. Unit Labor costs increased by 2%, slightly ahead of consensus. High rates of retirements and slow population growth were cited as reasons for the slowdown in productivity growth. Neither the dollar nor Treasury yields had much change. Next Wednesday’s Federal Open Market Committee (FOMC) Minutes will shed more light on the issue. For the week, the U.S. Preferred Stock Index was flat.

Crude oil surged on Thursday following a Saudi Energy Minister statement that OPEC members and nonmembers would discuss the market situation on the sidelines of the International Energy Forum in Algeria next month and could also cover “any possible action that may be required to stabilize the market.” The Saudi Energy Minister also noted that the market is on the right track toward rebalancing, but that the process of clearing inventories will take time. Many were skeptical about the possibility of a revived production freeze, and this month’s IEA report slightly reduced the global demand forecast for 2017. For the week, the crude was up 6.8%.
Earnings continued to be released for Q2 by several well-known and widely held companies. Following earnings, AMG share price was -3%, Disney +1%, and Alibaba +5%. Q2 reports have mostly concluded by this week.
Next week’s economic calendar highlights include Core Consumer Price Index (Aug. 16th), Crude Inventory and Federal Open Market Committee Minutes (Aug. 17th), and Initial Jobless Claims and Natural Gas Inventories (Aug. 18th). The rest of August normally has low trading volume as Well Street heads off for vacations.

Have a great weekend,
Yansong Pang (庞岩松)

Weekly Market Update – August 5, 2016

The Dow finished 192 points higher on Friday after the Labor Department reported a stronger-than-expected gain in monthly nonfarm payrolls. For the week the Dow was up 0.6%. Year-to-date the index is up 6.4%.

Domestic economic data came in mixed. Non-farm payrolls increased by 255,000 in July versus 179,000 consensus estimate, increasing the possibility of a September or December interest rate hike. Unemployment rate was unchanged at 4.9% and initial jobless claims rose to 269K this week from 266K last week and above the 265K consensus estimate. July ISM Manufacturing Index drop to 52.6 from prior 53.2 while the ISM non-manufacturing index fell to 55.5 from prior 56.5. Personal income rose 0.2% versus consensus for a 0.3% gain and May’s 0.2% growth. Real disposable personal income was up 0.1%, primarily on increased spending for electricity and gas, healthcare services and other nondurable goods. Private payrolls increased by 179K last month, beating the 170K consensus. New York Federal Reserve President William Dudley stated that an interest rate increase prior to the November Presidential Election was possible but cautioned a stronger dollar might hinder economic growth. For the week, the U.S. Preferred Stock Index was -0.35%.

Crude oil dropped to a three month low earlier this week due to oversupply concerns and softer than expected demand, but later bounced backed on a large gasoline stockpile decrease. OPEC members seek to revive production freeze talks in September while concerns linger about supply resumptions and softening demand. Natural gas prices were firm, supported by continuing hot weather.
Earnings were released for Q2 by several well-known and widely held companies. Following earnings, Priceline share price was +5%, Facebook +2%, and U-Haul -9%. Earnings releases will continue in the next two weeks.
Next week’s economic calendar highlights include Unit Labor Costs (Aug. 9th), Crude Inventory (Aug. 10th), Initial Jobless Claims (Aug. 11th), and Producer Price Index (Aug. 12th). Next week will conclude most of the Q2 earnings reports.

Have a great weekend,
Yansong Pang (庞岩松)

 

Ulland Investment Advisors

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