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Weekly Market Update for May 17, 2019

by JM Hanley

The Dow was down on Friday, falling 99 points to close at 25,764. For the week, the Dow was down 0.7% (SP500 -0.8%) and year-to-date is now up 10.4% (SP500 +14.1%). The yield on the 10-year Treasury (an important interest-rate indicator) fell eight basis points, closing at 2.39%.

Trade news, which came fast and furious again this week, was good on all fronts but the Chinese one. On the positive side of the ledger, tariffs on metal imports from Canada and Mexico were suspended. Markets were also cheered after the Administration opted to postpone tariffs on European and Japanese cars for six months (less positive were media reports that Washington’s demands of Tokyo and Brussels will be relatively inflexible). But these were more than offset by the Commerce Department’s decision to ban exports to Chinese telecom conglomerate Huawei.

Negotiations with China theoretically still could resume by the end of this month, with a deal of some variety signed at the end of the G20 summit six weeks from now. But an agreement looks increasingly unlikely. Some hold out the hope that Washington will spare a further $300 billion of Chinese goods from duties and permit exports to Huawei. Others see a new negative tone in negotiations with any agreement far off.

The price of crude oil rose 2% this week to nearly $63 a barrel – up 38% YTD. US crude stockpiles showed a greater-than-expected build – of 5.4m barrels – driven by a rebound in imports from the Middle East. Oil prices benefitted from heightened US-Iran tensions as well as sabotage attacks on Saudi Arabian ships. Energy equities didn’t follow the upward drift in oil prices, with domestic producers falling 1% and service providers declining 4%.

Major Chinese internet firms were the highlight of earnings reports this week. Tencent reported okay results, and Alibaba’s were good. The ecommerce firm’s highly profitable advertising business is as strong as ever. Both suffered in Friday trading after a slew of bad macroeconomic updates from China and a weak report by search engine giant Baidu.

*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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