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Weekly Market Update for May 11, 2018

by JM Hanley

The Dow was up on Friday, rising 92 points to close at 24,831. For the week, the Dow rose 2.3% (SP500 +2.4%) and year-to-date is now up 0.5% (SP500 +2.0%). The yield on the 10-year Treasury (an important interest-rate indicator) rose two basis points and closed at 2.97%.

Inflation increased only 0.3% last month, more slowly than expected. Gas and housing got more expensive, but cars and plane tickets were cheaper. Take out energy and transportation and prices barely changed.  If inflation keeps plodding along like this the Federal Reserve won’t need an extra interest-rate hike.

The price of crude oil rose 2% this week to $70 a barrel – up 17% YTD. US crude stockpiles showed a surprise draw this week, of 2.9m barrels, and product inventories of gasoline (-2.2m bls) and diesel (-3.8m bls) both fell. Pressuring oil expectations this week were comments by Iran’s oil ministers arguing a reasonable band for oil of $60-65, as well as a mandate passed in California requiring solar roofs on all new single-family homes by 2020.  On the flip side, in addition to a positive crude report, oil benefited from a decision by the US to exit the Iran nuclear accord, an Israeli raid in Syria, and Venezuela having oil inventories seized by creditors.

Saudi Arabia, meanwhile, was a mixed bag.  On one hand, the Minister of Energy suggested reducing inventories below average levels may be required to encourage industry investments to meet future demand needs; but on the other hand, it was noted that Saudi Arabia may look to mitigate the impact of declines in Iran exports (i.e. increase in Saudi supply).

Companies continued to report their first-quarter earnings this week. Revenues at Ebix were higher than expected.  The firm is doing a roaring trade sending remittance payments in India. Axon, best known as the maker of Taser, reported another stellar quarter. Police chiefs across America and in Europe have lined up to buy its body cameras and evidence storage software. Shares of the firm have more than doubled in price since February 27.

CVS said the Administration’s new drug-price initiative wouldn’t cramp profits.  Previous chatter had suggested the government would take aim at pharmacy benefits managers, of which CVS’s unit is the largest.  But instead the plan merely tinkers with rebates paid to Medicare recipients. Tencent and L Brands, among others, 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

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