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Weekly Market Update for May 3, 2019

by JM Hanley

The Dow was up on Friday, rising 197 points to close at 26,505. For the week, the Dow was down 0.1% (SP500 +1.0) and year-to-date is now up 13.6% (SP500 +17.5%). The yield on the 10-year Treasury (an important interest-rate indicator) rose three basis points, closing at 2.53%.

The Fed didn’t raise interest rates at their Wednesday meeting, but it was newsworthy nonetheless. Reality caught up with some optimists who’d been banking on an interest rate cut. Chairman Jerome Powell described the economy as healthy, said inflation was almost on target, and opined that some factors behind slow inflation would prove temporary. Thus, no rate cut is in the near future.

Today’s jobs report was good, though lower labor force participation somewhat offset lower unemployment. Wages, a main contributor to inflation, grew more slowly than anticipated. So did two important indexes of business activity. It looks less likely that rapid growth will force a rate hike. The market now cares most about March inflation data, out next week. Low interest rates and low inflation are ideal for equity markets. Stable rates are also favorable for our fixed income strategy.

The price of crude oil fell 2% this week to $62 a barrel – up 36% YTD. US crude stockpiles showed a greater-than-expected build – of 10.0m barrels – while product inventories of gasoline rose (+0.9m bls) and diesel fell (-1.3m bls). Oil showed early strength but reversed course later in the week on the bearish inventory build and weak “vehicle miles traveled” data for February. On Tuesday, Occidental disclosed they received financial backing from Warren Buffett to pursue the Anadarko deal, and Anadarko is actively considering the alternative bid.

A steady stream of earnings reports kept traders busy. The preferred shares of General Electric rallied after the firm reported much more cash income than expected. While it’s a positive development, the firm’s management attributed some of their success to the timing of big sales. Google reported lower revenues than expected. The search giant’s advertising business has grown so large that it’s run out of room to expand as fast as before.

In healthcare, CVS finally saw its acquisition of Aetna start to pay off. The insurer bolstered CVS’s earnings in an otherwise tough quarter in the pharmacy business. Peer insurer WellCare also did well. But holders of that Medicare and Medicaid specialist are awaiting government approval of Centene’s proposed buyout as much as anything. International ATM and remittance servicer Euronet endured stiff headwinds on account of the strong dollar. However, the Kansas City firm looks to make out better than expected under Visa’s new rules for surcharging on foreign withdrawals.

Colony Capital, Daseke, Playa, and Callon Petroleum, 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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