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Archive for January, 2017

Weekly Market Update – January 27, 2017

The Dow was down 7 points on Friday as it reached and stayed above 20,000 this week for the first time in history. For the week the Dow was up 1.3%. Year-to-date the Dow is up 1.7%.

GDP expanded at a seasonally adjusted annual rate of 1.9% in the last three months of 2016, below the 2.2% estimate. Initial jobless claims came in at 259,000, higher than the 245,000 consensus. New home sales fell 10.4% to a 536,000 in December, potentially dragged down by higher mortgage rates. Purchasing Manager Index increased to 55.1 in January from 53.9 in December, ahead of the 54.5 consensus. Our preferreds continue to outperform the Barclay’s Aggregate Bond Index, and continue to do well in the New Year.

 Politics dominated the news flow as the public tries to get used to the President’s communication style. President Trump opened his first week with a focus on manufacturing by meeting with executives from Johnson and Johnson, Tesla, Under Amour, and United States Steel Corporation. Trump pledges to cut regulations by 75% and impose some type of border tax. The President also signed executive orders to make it easier to complete construction on the Keystone XL and Dakota Access Pipelines, to construct a “large physical barrier” along the U.S.-Mexico border, to reinforce border security, and to start the repeal and replacement process for the Affordable Care Act.

The price of crude oil was 1.2% lower this week as strong drilling activity around the world weighs on the market. Although the OPEC countries and other exporters have agreed to cut production by 1.8 million barrels a day, the U.S. stockpiles are still growing, inciting fears that the rise in oil price will allow U.S. producers to drill profitably again.   

Corporate earnings are running ahead of expectations with upside surprises from Alibaba, Boeing, Seagate, Southwest Airlines, eBay, and Microsoft. Q1 earning reports will continue next week for widely held companies like Apple, Facebook, Amazon, etc.

Next week’s economic calendar highlights include Personal Income and Pending Home Sales (Jan. 30), Consumer Confidence (Jan. 31), Crude Inventory and Federal Reserve Open Market Committee (FOMC) Rate Decision (Feb. 1), Initial Jobless Claims (Feb. 2), and Non-farm Payrolls (Feb. 3). The FOMC interest rate decision is likely to have the biggest impact on the market.

Have a great weekend! 

Weekly Market Update – January 20, 2017

The Dow was up 95 points on Friday as Wall Street assessed the likely direction of policy under the new Trump administration. For the week the Dow was down 0.3%. Year-to-date the Dow is up 0.33%.

The consumer price index (a measure of inflation) rose 0.3% in December, a rate that slightly outpaced November’s 0.2%. Housing and gasoline costs drove the spike. CPI was up 2.1% from the previous December, its fastest rate of increase since July 2014. Industrial production rose 0.8% in December – analysts expected a 0.6% increase – thanks to outperformance in utilities. Initial jobless claims came in at 234,000, better than the 254,000 consensus estimate. This marks their lowest level since November of 1973. December new-housing starts also outperformed, rising 11.3% to a 1.226m seasonally-adjusted rate. Wall Street expected only 1.187m.

Commentary from the Federal Reserve was muted this week. In a speech Wednesday, Fed chairwoman Janet Yellen said that the economy was approaching the Fed’s twin objectives of full employment and price stability. Yellen noted that it takes some time for interest rate hikes to work their way through the economy. If the Fed were to delay rate hikes for too long, she said, it would risk a “nasty surprise.” Our preferreds continue to outperform the Barclay’s Aggregate Bond Index, and continue to do well in the new year.

The price of crude oil was flat on the week, closing Friday at $55.45 a barrel. Oil fell during the first half of the week over concerns about a resurgence in US shale production. Prices then regained ground Thursday and Friday amid a weakening US dollar as well as signs that OPEC nations were serious about implementing production cuts.

Highlights on next week’s economic calendar include initial jobless claims (Jan. 26), existing home sales (Jan. 24), new home sales (Jan. 26), quarterly GDP numbers (Jan. 27), and durable goods orders (Jan. 27).  Fourth quarter corporate earnings releases will continue.

Have a great weekend.

Weekly Market Update – January 13, 2017

The Dow was flat Friday. Solid fourth quarter earnings reports from big banks offset falling oil prices and soft holiday sales numbers in retail. For the week, the index was up 0.4%; year-to-date it’s up 0.6%. Our preferreds continue to outperform the Barclay’s Aggregate Bond Index, and are off to a good start in 2017.

It was a quiet week for domestic economic headlines. The NFIB small business optimism index saw its largest monthly gain on record, rising to 105.8 last month from 98.4 in November. The sharp increase was linked to the outcome of the election. Heightened expectations drove the surge. 50% of small business owners expected the economy to do better, and 31% expected sales to increase. Elsewhere, December retail sales rose 0.6% from the previous month, slightly disappointing analysts who had expected a 0.7% increase. The National Retail Sales Federation announced that holiday sales rose 4.3%. This outpaced the expected 3.6% increase. Online sales, which increased 12.6%, were particularly strong. The producer price index (PPI) rose 0.3% in December after an increase of 0.4% in November. PPI’s annualized 1.6% surge in December is the fastest in three months, and underscores the likelihood that higher inflation could be on the horizon.

Several of the nation’s largest banks reported fourth-quarter results Friday, marking the unofficial start to earnings season. Results were generally positive. J.P. Morgan outperformed. It posted earnings of $1.71 a share, about 20% better than Wall Street had forecast. Bank of America also beat expectations, as lower expenses offset a slight decline in revenue. Wells Fargo offered a mixed bag. While revenue missed estimates, its net interest margin – the income earned from its deposits – outperformed, making investors optimistic given rising interest rates. Shares had climbed 1.5% by the end of the day.

The price of crude oil (Brent) closed at $55.61 a barrel on Friday, down 2.6% on the week. This marked the largest weekly drop since early November. Prices have risen steadily since major oil exporters signed on to a production cut agreement in December. Investors, however, remain wary that exporters won’t comply with the deal’s caps on production. Higher-than-expected buildup of U.S. oil and fuel inventories also weighed on prices.

Highlights on next week’s economic calendar include the consumer price index (Jan. 18), initial jobless claims (Jan. 19), housing starts (Jan. 19) and the Philadelphia Fed’s manufacturing index (Jan. 19). Fourth-quarter corporate earnings releases will continue next week.

Weekly Market Update – January 6, 2017

The Dow was up 65 points on Friday after jobs data showed solid but slower job creation and accelerated wage growth. For the week the Dow was up 1%. Year-to-date the Dow is up 1%.

The ISM manufacturing index increased to 54.7 in December from 53.2 in November, ahead of the 53.7 consensus. The headline, new orders, production and employment indexes all reached new highs for 2016. Construction spending increased 0.9% month over month in November to $1.18 trillion. Private nonresidential spending increased 0.9% while private residential construction increased 1%. December auto sales were on pace for a new annualized trend at 18.4M SAAR, above the November 2015 peak rate of 18.1M.

December Federal Reserve Open Market Committee (FOMC) minutes were a key focus this week. The minutes emphasized uncertainties regarding the timing, size and composition of any future fiscal policy initiatives. The minutes also noted potential upside coming from more expansionary fiscal policies and inflation forecasts. Several FOMC members said if the labor market tightens significantly more than expected, a less gradual pace of interest rate hikes could become appropriate. Our preferreds continue to outperform the Barclay’s Aggregate Bond Index, and are off for a good start for 2017.

The price of crude oil was 0.1% lower this week as investors weighed the prospects for lower production. As U.S. production slowly increases, the OPEC countries started to decrease their output to meet the 32.5 million barrels a day ceiling pledged at the Cartel’s Nov. 30 meeting.

Next week’s economic calendar highlights include Consumer Credit (Jan. 9), Wholesale Inventories (Jan. 10), Crude Inventories (Jan. 11), Initial Jobless Claims (Jan. 12), and Producer Price Index (Jan. 13). Corporate earnings releases for Q4 will start 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