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Archive for October, 2016

Weekly Market Update – October 28, 2016

The Dow was down eight points on Friday as uncertainty about the upcoming presidential and congressional election continued to roil the market. It was flat on the week. Year-to-date the index is up 4.2%.

Economic data on the week were mixed. Numbers released Friday showed that GDP grow by an annualized 2.9% in the third quarter, ahead of expectations of 2.5%. This was a considerable acceleration from the 1.4% growth in the second quarter, and in fact marked the fastest quarterly growth rate in two years. New home sales in September rose to a seasonally-adjusted 593,000. Though this was below consensus estimates of 600,000, it was nevertheless an increase of 3.1% from August’s mediocre sales numbers. Durable goods orders disappointed, falling by 0.1% against expectations for a 0.1% increase. Meanwhile, the trade deficit fell 5% on the month to $56.1 billion. An uptick in exports (up 0.9%) and a fall in imports (down 1.1%) drove the decline in equal measure. Jobless claims came in at 258,000, in line with expectations. Consumer confidence was weaker than expected. The 98.6 index figure was down from 103.5 in September and below the consensus estimate of 101.2

The Federal Reserve offered little additional interest rate guidance this week but investors continue to believe a rate hike is likely at the Fed’s meeting in December. San Francisco Fed president John Williams reiterated the case for a hike at that point. While Williams emphasized that rate hikes were necessary if inflation and unemployment met the board’s targets, he noted that sluggish growth meant that the Fed would raise rates more slowly than it had in the past. The market puts the odds of a quarter-percent rate hike at the December meeting at over 70%. For the week, the US preferred index was up 0.35%. Our fixed-income strategy continues to outperform this index and the Barclay’s Bond Index.

Crude retreated a bit following its 15-month high of $51.78 last week. Doubts about OPEC’s promised production cuts, announced in late September, continued to percolate. Members continued to debate the terms of the agreement, while Iraq threatened to pull out and Russia tried to dodge cuts to output. Crude finished the week down $2.18 (4.2%), at $49.60.

The week’s corporate earnings announcements were a mixed bag. Google was up following strong revenues and earnings while Amazon reported disappointing earnings but solid revenue growth. Likewise, Apple’s reported $9 billion in net income marked its first revenue decline in 15 years, pushing the stock price down on the week.

Highlights in next week’s economic calendar include auto sales (Nov. 1), crude inventories (Nov. 2), and most importantly, nonfarm payrolls (Nov. 4). Additionally, fourth quarter earnings reports will continue. Facebook, UHaul/Amerco, and Callon Petroleum, among others, are scheduled to report.

Have a great weekend.

J.M. Hanley

Weekly Market Update – October 21, 2016

The Dow was down 17 points on Friday after the second week of corporate earnings. For the week the Dow was flat. Year-to-date the Dow is up 4.1%.

U.S. economic data was mixed for the week. Manufacturing output was slightly higher in September, increasing by 0.2%. September headline CPI increased 0.3% from August, in line with consensus. Housing starts dropped 9.0% month over month to 1,047,000. However, much of the headline decline has been ascribed to the 38.9% decline in starts for multifamily units. In contrast, the number of single-family starts rose 8.1% month over month after posting a 5.9% decline in August. Existing-home sales rose 3.2% from August to a 5,470,000 with the median sales price of $234,200. First-time buyers made up 34% of all transactions, the biggest share in four years. Initial jobless claims rose 13,000 to 260,000. October’s Philadelphia Fed Index beat expectations, coming in at +9.7 vs +6.0 consensus and compared to +12.8 prior.

Fed officials continue to signal that a December tightening is likely. Comments also reinforced expectations for a very gradual tightening path. Boston Fed President Eric Rosengren downplayed the impact of the presidential election on market conditions and stated that it makes little economic difference bypassing November and waiting until December to hike rates. The market is currently expecting a 70% probability for a December hike. For the week, the U.S. Preferred Index was up 1.27%. Our preferred continue to outperform this index.

The price of crude oil settled at a 15-month high of $51.60/barrel this Wednesday following EIA inventory data showing a crude draw of 5,300,000 barrels vs. an expectation for an increase. The data showed a gasoline build of 2,500,000 barrels while distillates declined 1,200,000 barrels. Refinery utilization dropped to near multiyear lows at 85%. Crude was up 0.6% for the week.

Corporate earnings are running ahead of expectations with upside surprises from PayPal, Microsoft, American Express, United Health Group, and E*Trade Financial.

Next week’s economic calendar highlights include Consumer Confidence (Oct. 25), Crude Inventories (Oct. 26), Initial Jobless Claims and New Home Sales (Oct. 27), and Advance Estimate for Q3 GDP (Oct. 28). Q3 earning reports will continue next week for widely held companies like Apple, Google, Amazon, Sprint, etc.

Have a great weekend,

Yansong Pang

Weekly Market Update – October 14, 2016

The Dow was up 39 points on Friday after J.P. Morgan, Citigroup, and Wells Fargo reported better-than-expected earnings. For the week the Dow was down 0.6%. Year-to-date the Dow is up 4%.

This is a quiet week for U.S. economic data. Retail sales rose 0.6% in September from the previous month, in line with expectations. Job openings fell to an 8 month low in August to 5,440,000, down from 5,830,000 in July and below the 5,800,000 consensus. Professional and business services had the largest decrease at 223,000. The quit rate was 2.1%, the same as the prior month, while the layoffs rate was 1.1%. Small business sentiment ticked lower, as the National Federal Independent Business (NFBI) Small Business Index for September fell to 94.1 from 94.4 in August, with strong gains in expected business conditions offset by weak inventories. The NFIB President commented “We improved from awful to bad” and “the bottom line is that small business owners are deeply uncertain about the future, and that is affecting their decisions.”

Minutes from the September Federal Open Market Committee (FOMC) meeting provided little new insights on the policy outlook. Participants generally agreed that economic activity had picked up and that a “reasonable argument” could be made either for an immediate hike or a delay. However, many of the participants expressed the view that recent evidence suggested that some slack remained in the labor market. With inflation continuing to run below the FOMC’s target and few signs of increased pressure on wages and prices, most of these participants thought it would be appropriate to await further evidence of continued progress towards their objectives. The most likely time for a 25bps rate increase is December. For the week, the U.S. Preferred Index was down 0.77%. Our preferred continue to outperform this index.

The price of crude oil extended its gains this week on supportive comments from Russia. Russian President Putin told the World Energy Congress in Istanbul that Russia is ready to participate in joint measures to limit output and wants other oil exporters to do the same. He noted that given the current situation, a freeze or even a cut in production is probably the only proper way to stabilize the market. Saudi Arabia’s energy minister, who said it is “not unthinkable” that oil will rise to $60 a barrel by the end of 2016. He also expressed optimism about finalizing the production cut deal by the end of November. Crude was up 1% for the week.

Next week’s economic calendar highlights include Consumer Price Index (Oct. 18), Crude Inventories (Oct. 19), and Initial Jobless Claims and Existing Home Sales (Oct. 14). Q3 earning reports will continue next week for widely held companies like Bank of America, Yahoo, Intuitive Surgical Inc., etc. The election continues to get closer, but has yet to add much volatility to the market.

Have a great weekend,
Yansong Pang

Weekly Market Update – October 7, 2016

The Dow was down 28 points on Friday following a weaker-than-expected jobs report. For the week the Dow was down 0.4%. Year-to-date the Dow was up 4.7%.

The U.S. economy added 156,000 jobs in September vs. a 170,000 consensus expectation. The unemployment rate increased to 5%. Initial jobless claims came in at 249,000, a decrease of 5,000 from last week. The slow jobs growth could decrease the possibility for the Federal Reserve to increase interest rates at its December meeting. There are two more jobs reports for the U.S. central bank to consider before they make a final decision. For other economic data, the ISM manufacturing index returned to expansion in September, coming in at a level of 51.5 against consensus for 50.5 and August’s contractionary 49.4 reading. September’s non-manufacturing ISM came in at 57.1, well ahead of consensus for 53.0 and hitting its highest level since October 2015, suggesting strong business activities. September auto sales are tracking to come in at a 17,620,000, ahead of the 17,500,000 consensus forecast. For the week, the U.S. Preferred Stock Index was down 0.8%.

The price of crude oil fell on Friday after the Russian energy minister damped the hopes that an agreement on production cuts would be struck at a meeting with key members of the Organization of the Petroleum Exporting Countries in Istanbul next week. Crude was up 2.7% for the week.

Next week’s economic calendar highlights include Crude Inventory (Oct. 12), Initial Jobless Claims (Oct. 13), and Producer Price Index (Oct. 14). Q3 earning reports will start at the end of next week.

Have a great weekend,
Yansong Pang

 

Ulland Investment Advisors

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