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Archive for November, 2017

Weekly Market Update for November 22, 2017

The Dow was down on Friday, falling 65 points to close at 23,526. For the week so far, the Dow was down 0. 7% (SP500 -0.7%) and year-to-date is now up 19% (SP500 +16%). Trading was muted this week ahead of the Thanksgiving holiday. Markets were cheered by signs of progress on tax reform. Strong performance in healthcare and tech names also pushed the major indexes higher. The yield on the 10-year Treasury fell two basis points, closing at 2.32%.

There was little news from the market this week. Existing home sales last month were better than analysts had expected, but were lower than last October. Analysts attributed the decline to a limited supply of affordable homes for first-time buyers.

The price of crude oil rose this week to $58 a barrel – up 8% YTD. US crude stockpiles showed an in-line draw – of 1.9m barrels – while product inventories of gasoline (+0.1m bls) and diesel (+0.2m bls) rose. Oil prices picked up steam throughout the week driven by the closure of a major pipeline from Canada to the US. The Keystone pipeline is expected to restart but be severely limited through month-end, limiting imports to the US. Also positive for crude this week was a large inventory draw at the major storage hub in Cushing (OK), as well as stronger crude exports and gasoline demand. Next Thursday (30th), OPEC will once again convene to reassess their management of group production. Most investors assume they will extend their production cuts, set to expire in March, through the end of 2018.

Third quarter earnings season has almost concluded. None of our major equity holdings reported this week. Nutanix, one of our core equity positions, did climb 10% Wednesday. The move came after an analyst at investment bank Needham suggested the company’s stock price would continue to climb as investors realize the firm’s potential as a software company for data centers. RBC, another investment bank, also released a favorable comment on the company. Nutanix is scheduled to report earnings on Tuesday of next week.

The markets, and our office, will be closed tomorrow for the Thanksgiving holiday. We will be open for the first half of the day on Friday.

*The information contained in this commentary is not investment advice for any person. It is presented only for informational purposes to assist in explaining factors that may have had an impact in the past or may have an impact in the future on client portfolios or composites. All expressions of opinion reflect the judgment of the firm on this date and are subject to change. Included information has been obtained from sources considered reliable, but we do not guarantee that the foregoing materials are accurate or complete. Clients or prospective clients should contact Ulland Investment Advisors for individualized information prior to deciding to participate in any portfolio or making any investment decision. Ulland Investment Advisors does not provide tax advice. All clients are strongly urged to consult with their tax advisors regarding any potential investment. Past performance does not guarantee future results; there is always a possibility of loss

Weekly Market Update for November 17, 2017

by JM Hanley

The Dow was down on Friday, falling 100 points to close at 23,358. For the week, the Dow fell 0.27% (S&P 500 -0.13%) and year-to-date is now up 18.2% (S&P 500 +15.2%). Major indexes retreated slightly after weeks of gains. The consumer goods and telecom sectors performed well. Energy and industrial firms were mixed. Progress on tax reform continued, albeit slowly. The yield on the 10-year Treasury fell six basis points, closing at 2.34%.

Economic data this week brought few surprises. Inflation rose 0.1% in October, which was about as expected. Prices climbed twice as fast excluding food and energy. Inflation moved up 1.8% from October of 2016 – the fastest pace since April. The producer price index, which also measures inflation, showed a similar gain. Pharmaceutical costs rose steeply, partially offset by lower gasoline prices.

In other news, retail sales rose more than expected in September. Vehicles, home furnishings, and electronics proved particularly strong. This augurs well for the Christmas shopping season. The National Association of Homebuilders’ housing index climbed again last month. Though it is now close to a post-recession high, a limited supply of housing lots and a shortage of construction labor continue to weigh on homebuilders. Finally, industrial production rose by a percent in October, nearly twice as fast as economists had expected.

The price of crude oil was flat this week above $56 a barrel – up 6% YTD. US crude stockpiles showed a surprise build – of 1.9m barrels – while product inventories of gasoline were relatively flat. Oil prices initially sold off this week given the disappointing US inventory data, a reduced demand forecast by one of the three leading prognosticators, and an about-face by Kurdistan in its quest for independence. Then on Friday, crude regained all its lost ground after Saudi Arabia soothed market concerns by saying that Russia should be onboard for further extensions of the output cut.

While it is likely we will experience heightened volatility heading into and out of the OPEC meeting at the end of November, the market has been working down excess barrels and we see a strong set-up for oil in the coming quarters.

*The information contained in this commentary is not investment advice for any person. It is presented only for informational purposes to assist in explaining factors that may have had an impact in the past or may have an impact in the future on client portfolios or composites. All expressions of opinion reflect the judgment of the firm on this date and are subject to change. Included information has been obtained from sources considered reliable, but we do not guarantee that the foregoing materials are accurate or complete. Clients or prospective clients should contact Ulland Investment Advisors for individualized information prior to deciding to participate in any portfolio or making any investment decision. Ulland Investment Advisors does not provide tax advice. All clients are strongly urged to consult with their tax advisors regarding any potential investment. Past performance does not guarantee future results; there is always a possibility of loss

Weekly Market Update for November 10, 2017

by JM Hanley

The Dow was up on Friday, rising 40 points to close at 23,422. For the week, the Dow fell 0.50% (S&P 500 -0.21%) and year-to-date is now up 18.52% (S&P 500 +15.3%). Major indexes marked their first weekly decline in eight weeks, though volumes were relatively light. Markets mulled new developments in the push for tax reform. Poor earnings reports in some financial and healthcare names also weighed on the indexes. The yield on the 10-year Treasury rose seven basis points, closing at 2.40%.

The Senate released its version of tax reform legislation this Thursday. It differs from the House bill in a few ways. Both would cut the corporate tax rate to 20%, but the Senate bill would delay the cut until 2019. The Senate’s legislation would also fully repeal the deduction for state and local taxes. It would maintain the current structure of seven individual income tax brackets. Further revisions to the bill are expected, since it cannot add to the deficit in the long term. Once passed, the House and Senate legislation would need to be reconciled with each other before being enacted into law.

In other policy news, William Dudley, president of the Federal Reserve in New York, announced that he would retire next summer. There was otherwise little change to the prevailing belief that that the Fed will raise rates at its meeting on December 13. Investors put the odds at 99%.

The price of crude oil rose 2% this week to over $56 a barrel – up 6% YTD. US crude stockpiles showed a surprise build of 1.5m barrels. However, product inventories of gasoline (-3.3m bls) and diesel (-3.3m bls) both declined more than expected. Upheaval of the status quo in Saudi Arabia over the weekend and throughout this week is injecting some newfound geopolitical risk into the price of oil, at a time when oil supply vs. demand balances are making steady improvement. According to media reports, the government of Saudi Arabia has arrested or detained over 200 princes, sitting ministers, and former ministers in an anti-corruption crackdown. The kingdom alleges over $100 billion was misused or embezzled over several decades.

Third-quarter earnings reports brought more good news. In Ulland portfolios, Playa Resorts rose after it reported strong revenues despite the impact of hurricane season. Shares of Air Lease were also up after the company reported better-than-expected expansion of their profit margins. Priceline did not perform as well. While the company showed strong results, its management noted they will need to spend more on advertising because the online travel business is growing more competitive. Earnings season will begin to wind down next week. Tencent, Viacom, and L Brands, among others, are expected to report.

*The information contained in this commentary is not investment advice for any person. It is presented only for informational purposes to assist in explaining factors that may have had an impact in the past or may have an impact in the future on client portfolios or composites. All expressions of opinion reflect the judgment of the firm on this date and are subject to change. Included information has been obtained from sources considered reliable, but we do not guarantee that the foregoing materials are accurate or complete. Clients or prospective clients should contact Ulland Investment Advisors for individualized information prior to deciding to participate in any portfolio or making any investment decision. Ulland Investment Advisors does not provide tax advice. All clients are strongly urged to consult with their tax advisors regarding any potential investment. Past performance does not guarantee future results; there is always a possibility of loss

Weekly Market Update for November 3, 2017

by JM Hanley

The Dow was up on Friday, rising 23 points to close at 23,539. For the week, the Dow rose 0.45% (S&P 500 +0.26%) and year-to-date is now up 19.11% (S&P 500 +15.6%). Large tech companies continued to report strong earnings, and energy companies benefitted as the price of oil moved higher. The yield on the 10-year Treasury fell ten basis points this week, closing at 2.33%.

Republican leaders in the House of Representatives released their tax reform legislation on Thursday. The bill largely conforms to the framework Congressional leaders laid out last month. The corporate tax rate is to be permanently cut from 35% to 20%. Firms with cash overseas could bring it home at a one-time rate of 12%. Individually-owned businesses, which currently pay personal income rates, would see their taxes reduced to 25%. Individual income tax brackets would be reduced to four, while the standard deduction and the child tax credit would both increase. The estate tax would be eliminated beginning in 2024.

The revenue lost is to be made up by eliminating or reducing a number of special deductions. Filers would no longer be able to deduct state and local taxes on their federal return. Additionally, homeowners with mortgages over $500,000 would no longer be able to claim interest expense on the loan (previously, this limit had been set at one million). Larger university endowments would be subject to an excise tax. However, contrary to some earlier reports, the bill does not change amount that one can contribute to a 401(k).

The legislation will change in the coming weeks since Senate leaders are writing separate legislation, which would need to be reconciled with the House version. As the legislation is now written, all domestic firms would benefit from the lower corporate rate. Other winners include firms with lots of cash held overseas.

Elsewhere in the capital, the President appointed Jerome Powell to succeed Janet Yellen as chair of the Federal Reserve. Powell, a current Fed governor, is considered a safe choice who will maintain a gradual pace in raising interest rates and reducing the Fed’s holdings of US government debt. In other news, the economy added 261,000 jobs in October. This was a bit weaker than economists’ expectations. Unemployment fell to 4.1% – a sixteen-year low.

The price of crude oil rose 3% this week to over $55 a barrel – up 4% YTD. US crude stockpiles showed a larger-than-expected draw. Saudi Arabia raised official selling prices for barrels exported to Asia for the third consecutive month; this is another indicator that suggests the excess inventory in the Atlantic Basin is normalizing.

Third quarter earnings report continued. In Ulland portfolios, Apple, Alibaba and Stamps.com reported strong revenue growth and expanded profit margins, although Stamps fell because the estimate of future sales was not increased. Priceline, L Brands, and Callon Petroleum, among others, will report next week.

*The information contained in this commentary is not investment advice for any person. It is presented only for informational purposes to assist in explaining factors that may have had an impact in the past or may have an impact in the future on client portfolios or composites. All expressions of opinion reflect the judgment of the firm on this date and are subject to change. Included information has been obtained from sources considered reliable, but we do not guarantee that the foregoing materials are accurate or complete. Clients or prospective clients should contact Ulland Investment Advisors for individualized information prior to deciding to participate in any portfolio or making any investment decision. Ulland Investment Advisors does not provide tax advice. All clients are strongly urged to consult with their tax advisors regarding any potential investment. Past performance does not guarantee future results; there is always a possibility of loss

 

Ulland Investment Advisors

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