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Weekly Market Update – May 27, 2016

The Dow finished 45 points higher on Friday with the Fed Chair Janet Yellen’s comments in focus. For the week the Dow was up 2.1% and year-to-date the index is up 2.6%.

Economic data remain mixed for this week. The Q1 GDP growth figure was revised upwards to an annualized 0.8% from a previous estimate of 0.5%, driven by stronger data on inventories and housing. Pending home sales rose 5.1% to the highest level in a decade, and April new home sales increased 17% from the previous month. Jobless claims dropped to 268,000 versus a 275,000 consensus. Economist forecasts for Q2 GDP averaged 2.5%, showing expectations of a seasonal turnaround from the poor growth in Q1. However, core durable orders, and manufacturing and services Purchasing Managers’ Index (PMI) all fell short of expectations as business optimism declined to the lowest level in seven years. Continued pressure on earnings could explain this trend of poor business spending: according to the Commerce Department, corporate profits rose only 0.3% in Q1 after a 7.8% drop in Q4 last year.

The comments from Federal Reserve officials this week continued to point towards a June interest rate hike as oil rallied and core inflation rose at an annualized rate of 2.1% in Q1, past the Fed’s target of 2%. Federal Reserve Chairwoman Yellen said on Friday that a rate increase would be appropriate “in the coming months” if the economy continued to improve. For the week, the US Preferred stock index PFF was up close to 1%.

Crude oil was up 4% for the week to $49.56, fueled by a combination of supply disruptions in Canada, Nigeria & Venezuela and a continued fall in U.S. oil output. However, the strong dollar remained a headwind as its appreciation makes the dollar-priced commodity more expensive for holders of other currencies. The next OPEC meeting will be hosted in on Thursday, June 2nd in Vienna. No agreement to reduce production is expected.

Our office and the market will be closed Monday, May 30 in observance of Memorial Day. Next week’s economic calendar highlights include Chicago PMI and Consumer Confidence (May 31th), Initial Jobless Claims (June 2nd), and Nonfarm Payrolls and Unemployment Rate (June 3rd). Of these, Nonfarm Payrolls have the highest probability of moving the market.

Have a good weekend,

Natalie Do

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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