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Weekly Market Update – May 20, 2016

The Dow finished 66 points higher on Friday as the market adjusts to the heightened expectations of a June Federal Reserve interest rate hike. For the week the Dow was down 0.20% and year-to-date the index is up 0.44%.

April’s headline CPI recorded the largest increase in three years and was up 0.4% from the previous month, ahead of expectations of a 0.3% gain and was led by 8% increase in gasoline prices. Core CPI, which excludes food and energy, was up 0.2% and was in line with consensus. Industrial production rose 0.7% in April, well ahead of consensus. Jobless claims came in line with expectations at 278,000. However, May’s Philadelphia Fed manufacturing index declined 1.8 compared to consensus of 4.0 increase, with new orders decreasing for the second consecutive month.

The release of the minutes from the Federal Open Market Committee’s April 26-27 meeting was the focus of this week. The meeting noted a continued strong labor market, an increased risk sentiment, and a decline in financial market volatility. Positive rate hike comments were delivered by the regional Fed bank presidents on Tuesday and during the “Fedspeak” on Thursday. The Fed will review new economic data before making a rate decision at its June meeting. For the week, the U.S. 10 Year Treasury yield increased 0.16% and the US Preferred stock index PFF was down 0.15%.

Crude oil rallied by 3.2% for the week to $47.67 per barrel as the Canadian wildfire outages and disruptions in Nigeria and Libya chipped away an oversupply. The U.S. oil rig count remained flat at 318 after 8 weeks of consecutive declines. A stronger dollar will put downward pressure on oil prices by making the dollar-denominated commodity more expensive for investors of other currencies.

Next week’s economic calendar highlights include New Home Sales (May 24th), Crude Inventories (May 25th), Initial Jobless Claims and Pending Home Sales (May 26th), and Q1 GDP Estimate (May 27th). We expect continued discussion of a Fed interest rate increase which will insure another volatile week.

Have a great weekend,

Yansong Pang (庞岩松)


Ulland Investment Advisors

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