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Weekly Market Update for October 20, 2017

by J.M. Hanley

The Dow was up on Friday, rising 166 points to close at 23,324. For the week, the Dow rose 2.00% (S&P 500 +0.86%) and year-to-date is now up 18.04% (S&P 500 +15.0%). The yield on the 10-year Treasury rose ten basis points this week, closing at 2.38%. Third quarter earnings reports pushed stocks higher.  Three-quarters of companies have reported earnings higher than Wall Street’s expectations, though profits growth has slowed from recent quarters.  Progress on tax reform also gave equities a boost.

Economic data released this week presented a mixed picture. There continued to be a divergence between “soft” data assessing economic sentiment and “hard” data tracking actual production and sales.  The Empire Manufacturing Index, which measures sentiment among industrial producers, reached its highest point in eight years this month.  Industrial production rose 0.3% in September.  Manufacturing output was a bit sluggish. 

Elsewhere, the National Association of Homebuilder’s housing market index reached its highest point in six months.  However, starts for new housing were a bit lower than analysts had anticipated. Weakness in multi-family units weighed on the numbers, and new building permits were also low. Existing home sales did a bit better.  Sales climbed 0.7% in September, faster than most had anticipated. Average sales prices rose substantially from a year ago.  High prices could be discouraging some would-be first-time buyers.

In Washington, the Senate passed a 2018 budget which will also enable Congress to begin work on tax reform in earnest.  The bill passed Thursday was crafted in such a way that the process could move along more quickly than anticipated.  The tax reform bill has yet to be released, and many details continue to be negotiated.  The news pushed equity valuations higher.   Elsewhere in the capital, interviews continued for the next chair of the Federal Reserve.  The choice seems to be between current Fed governor Jerome Powell and Stanford economist John Taylor.  Powell would be expected to continue status-quo policies, while Taylor could take a more conservative approach.

The price of crude oil rose 1% this week to ~$52 a barrel – down 3% YTD. US crude stockpiles showed a larger-than-expected draw – of 5.7m barrels – while product inventories of gasoline (+0.9m bls) and diesel (+0.5m bls) both rose. Refinery utilization again dropped below seasonal norms driven by Hurricane Nate curtailments. Nate also shut-in significantly more oil & gas production in the Gulf of Mexico than that of Harvey.

Third quarter earnings reports brought mostly good news.  In Ulland Portfolios, health insurer United Health Group climbed seven percent after it reported that it paid out less in claims than forecast.  Next week will be a busy one.  Google, Amazon, Granite Construction, and General Motors, 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 October 13, 2017

by JM Hanley

The Dow was up on Friday, rising 31 points to close at 22,872. For the week, the Dow rose 0.43% (S&P 500 +0.15%) and year-to-date is now up 15.7% (S&P 500 +14.0%). The yield on the 10-year Treasury fell seven basis points this week, closing at 2.28%.Third quarter earnings reports began in earnest this week with most big banks announcing results. JP Morgan, Citibank, and Bank of America reported strong results.  Wells Fargo’s were less so, weighed down by falling profits.

Economic indicators brought largely positive news.  From investors’ perspective, Friday’s inflation report was most important.  Consumer prices in September increased 0.5% from the previous month.  While this was somewhat less than markets had expected, it was still faster than the pace in August.  Gasoline prices, which rose substantially this month as a consequence of hurricanes in the Gulf of Mexico, accounted for three-fourths of the increase. Prices rose 0.1% when food and energy were excluded.  The Federal Reserve is still expected to raise interest rates in December.

Better news came in retail. Sales in the sector increased the most since March of 2015.  Harvey and Irma made their influence felt here as well: auto sales were particularly strong, as car owners in Texas and Florida repaired and replaced their storm-damaged vehicles. Consumer confidence provided another bright spot. Sentiment in September reached its highest point since the beginning of 2004.

Policy discussion in Washington had little impact on markets. Congressional leaders continued to discuss which deductions should be curbed to fund tax reform. The President’s executive order deregulating individual marketplaces for health insurance pressured some hospital-related stocks.  However, the impact was limited to that part of the healthcare sector.

The price of crude oil rose 4% this week, back above $51 a barrel – down 4% YTD. US crude stockpiles showed a larger-than-expected draw – of 3.9m barrels – and inventories of gasoline rose (+2.5m bls) while diesel fell (-1.5m bls). Refinery utilization continued to improve driven by strong processing margins along the Gulf Coast, prompting more refineries to defer maintenance. Oil prices benefitted this week from Q3 production shortfalls from some US producers, as the North American rig count continued its slide. A large drop in European crude inventories and the decertification of the Iran nuclear agreement by the White House also contributed to the price rise.

Highlights on next week’s economic calendar include industrial production (10/18), housing starts (10/18), and existing home sales (10/20).  Third quarter earnings announcements will ramp up.  In Ulland portfolios, United Health Group, Intuitive Surgical, and Iberia Bank, among others, will 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 October 6, 2017

by JM Hanley

The Dow was essentially unchanged on Friday, falling 2 points to close at 22,774. For the week, the Dow rose 1.65% (S&P 500 +1.19%) and year-to-date is now up 15.2% (S&P 500 +13.9%). There was little major corporate news this week. Financial stocks performed the best. Investors anticipate that rising interest rates will benefit banks, energy companies, and industrial firms, among others. The yield on the 10-year Treasury rose four basis points this week, closing at 2.35%.

This week’s economic data presented a mixed picture. Today’s jobs report earned the most attention. Nonfarm payrolls declined by 33,000 in September. This marks the first time jobs numbers have declined since September of 2010. Economists surveyed had expected the economy to add 88,000. Hurricanes Irma and Harvey seemed to be to blame, as the steepest declines came in food services, drinking establishments, and other industries most adversely affected by the storms. Next month’s jobs number should show a restoration of storm-related lost jobs. The unemployment rate actually declined to 4.2% and wages rose.

Additionally, August’s jobs figure was revised upwards, which was expected. But it was more than offset by a downward correction to the July numbers. Better news came in cars and manufacturing. Both reported better-than-expected sales in September.

Commentary from Federal Reserve members reinforced the belief that the board will raise interest rates in December. Most blame the slow inflation seen recently on cyclical factors, and expect that low unemployment and steady growth will push it back on track. Strong wage growth this past month strengthens their case. Markets now put the odds of a December rate hike at 93%. Elsewhere in Washington, Congressional leaders continue to negotiate the details of tax reform legislation, which continues to fuel a strong stock market.

The price of crude oil fell 5% this week to $49 a barrel – down 8% YTD. US crude stockpiles showed a larger-than-expected draw – of 7.0m barrels – and product inventories of gasoline rose (+1.6m bls) while diesel fell (-2.6m bls). Refinery utilization is now in line with the 3-year average for this time of year, although Tropical Storm Nate could develop into a hurricane and make landfall near refineries in the Gulf. Oil prices were pressured by a production restart of a large field in Libya, as well survey results that showed a rise in OPEC production this month.

Highlights on next weeks’ economic calendar include small business optimism (10/10), September CPI (10/13), a measure of inflation, retail sales (10/13), and consumer sentiment (10/13). Q3 earnings releases start next week with banks among the first on Thursday and 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 September 29, 2017

by J.M. Hanley

The Dow finished up on Friday, rising 24 points to close at 22,405. For the week, the Dow rose 0.25% (S&P 500 +0.36%) and year-to-date is now up 13.4% (S&P 500 +12.5). Rising confidence that the Fed will raise rates in December, along with Congress’s release of a blueprint for tax reform, helped push the major indices to record highs for a second straight week. The yield on the 10-year Treasury rose three basis points this week, closing at 2.31%.

Economic data reported this week were mixed.  The Commerce Department now estimates that US GDP grew at an annualized rate of 3.1% in the second quarter.  This marks its fastest pace of growth in two years.  While positive, the second quarter compensated for sluggish growth in the first three months of the year. Elsewhere, personal consumption expenditures – an alternative measure of inflation – came in slightly lower than forecast.  Nevertheless, Chair Janet Yellen reiterated the Fed’s view that lagging inflation stems from mostly transitory factors. Markets now put the odds that the Fed raises interest rates in December at 78%.

In Washington, Congressional leaders released their outline for tax reform on Wednesday.  The plan would decrease the corporate tax rate and allow businesses to deduct the expense of new equipment more easily, among other measures. Many details of the legislation remain to be worked out.  Markets nevertheless reacted positively to the prospectus, particularly the equities of smaller firms.

 The price of crude oil rose 2% this week, above $51 a barrel – down 4% YTD. US crude stockpiles showed a larger-than-expected draw – of 2.6m barrels – and product inventories of gasoline unexpectedly rose (+1.1m bls) while diesel fell (-0.8m bls). Refinery utilization further improved to 88%, with the metric now nearly in line with the 3-year average of 90% for this time of year.

Oil prices benefitted again this week from developments in the Middle East. The semiautonomous region of Kurdistan – officially part of Iraq – voted strongly in favor of seeking independence, via a nonbinding referendum. The vote was criticized by the US and other int’l parties, particularly Baghdad, who believe it could destabilize the region. Given the large quantities of oil that are located in the Kurdistan region (>500k barrels/day of production), escalation between parties could disrupt the flow of crude and thus pressure oil prices higher.

 *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

 

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Ulland Investment Advisors

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