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Archive for November, 2019

Weekly Market Update for November 8th, 2019

by JM Hanley

The Dow was up on Friday, rising 6 points to close at 27,681. For the week, the Dow was up 1.2% (SP500 +0.9%) and year-to-date is now up 18.7% (SP500 +23.4%). The yield on the 10-year Treasury (an important interest-rate indicator) rose twenty-four basis points, closing at 1.95%. The price of crude oil rose two percent this week to $57 a barrel – up 26% YTD.

The week brought renewed optimism on the trade deal. The spokesman for China’s Ministry of Commerce said Thursday that the US and China had agreed to eliminate tariffs currently in place after sufficient progress on a trade deal. This optimistic prospect was later tempered by reports of strong resistance to such a move by some in the Administration.

The domestic economic outlook continues to be firmer than expected. Factory orders declined last month. But an important service-sector index rebounded by more than expected, driven by strength in business activity and employment. Consumer sentiment also improved. Confident consumers have been an important contributor to the economy’s resilience. News from Europe has also gotten better. German factory orders and retail sales throughout the Eurozone came in strong this week.

It was another busy week for third quarter earnings reports. Axon, which makes Taser, saw its share price surge today after reporting very positive results. Supply chain problems for the new Taser have been resolved, and shipments are good. Its new body camera, which gives senior personnel a live view, has also proven popular with police chiefs. CVS also did better than expected, and raised its forecast for full-year profits. Management was able to resolve problems that had arisen in its health insurance division (formerly Aetna) last quarter more quickly than anticipated. Trends have also been better than feared at its retail pharmacies.

Fidelity Information Services also put up better than expected numbers, and reported that early signs from recent acquisition WorldPay are encouraging. Merging both firms’ back office functions can save more than originally anticipated, and the management team sees robust opportunities to sell WorldPay’s products to Fidelity’s international customers. Fidelity provides internal software to banks and WorldPay helps process credit card transactions. One-time Fidelity subsidiary Black Knight, which sells software for servicing mortgages, was not so lucky. One of its larger clients opted to depart the platform. Such departures are rare and growth is expected to return to normal the year after next. Finally, Air Lease (which leases passenger jets to airlines) continues to navigate the grounding of the 737 Max well.

Next week is considerably lighter. Tencent is scheduled to report on Friday. So far, 80% of companies in the SP500 have reported. Earnings have been unchanged from last year, which is actually 5% better than expected. This, along with good economic data and the improved trade situation, has accounted for the market’s rise over the last few weeks.

*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 1, 2019

by JM Hanley

The Dow was up on Friday, rising 301 points to close at 27,347. For the week, the Dow was up 1.4% (SP500 +1.5%) and year-to-date is now up 17.2% (SP500 +22.3%). The yield on the 10-year Treasury (an important interest-rate indicator) fell nine basis points, closing at 1.71%. The price of crude oil fell less than a percent this week to $56 a barrel – up 24% YTD.

Market reaction to the Fed’s Wednesday meeting was relatively muted.  The Fed cut rates by a quarter point, as expected, marking the third such cut this year. Chairman Powell’s press conference implied it may be the last this year.  Powell noted that consumer spending has remained robust, and that the situation vis a vis Brexit and the US-China trade war had improved.  He suggested it would probably take an abrupt slowing of economic growth, or a dramatic escalation of the trade conflict, for him to change his mind.

Domestic economic data was mostly positive this week. Third quarter GDP grew 1.9%. While this marks a slowdown, it was actually better than expected, though it came more as a result of firms stockpiling inventory than investing in new capabilities.  Today’s payrolls report showed that job creation in October was much better than expected. Moreover, revisions to prior months suggested that an apparent slowdown in the labor market had in fact been illusory. Housing news was mixed: while prices declined (in August), pending home sales rose last month. A national survey of manufacturing poked back into positive territory, albeit by less than expected.

Third quarter earnings reports continued this week. Business is booming at the Chinese ecommerce giant Alibaba, which has proven resilient to the slowdown in China’s economy. The firm’s concerted effort to reach customers outside the largest metro areas, along with improvements to the algorithm that targets ads at shoppers, has paid dividends. Selling ads is also as lucrative as ever stateside, as this week’s results from Google testify. A major upgrade to Google search was one reason why. Facebook also did well, its political travails notwithstanding. Subsidiaries like Instagram are seen as the future growth driver, but this time it was “normal” Facebook that did better than expected.

Electronic Arts, the well-known video game designer, had success with existing franchises but delayed the debut of a new World War II-themed title. Shares of WellCare had been in something like purgatory of late as the private Medicaid administrator waited for a buyout by larger competitor Centene to close. But the firm reported strong earnings as a result of improvements on an old Medicaid contract in Illinois, which boosted its own shares and those of Centene alike.

Fidelity Information Services, CVS, Playa Resorts, Axon, and most of our energy companies will report earnings 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