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Weekly Market Update – May 8, 2015

An April jobs report that was below the average monthly increase in 2014 sent markets higher Friday.  The Dow finished the day up 267 points.  For the week, the Dow gained 0.9% and for the year the index is now up 2.1%.

The April jobs report showed the addition of 223,000 jobs last month (vs. 85,000 in March) and a drop in the unemployment rate from 5.5% to 5.4%.  Average hourly earnings increased 0.1% in April, below expectations of 0.2% but up 2.2% year-over-year.  Markets reacted positively as the report confirmed continued growth both in jobs and earnings, but not to a level that would suggest an immediate interest rate hike by the Fed.  The most likely scenario is a gradual interest rate increase will begin later in the year or in 2016.  

The yield on the 10-year Treasury fell 4 bps Friday to 2.15%, up 3 bps for the week and now down 2 bps for the year.  Despite Friday’s drop, interest rates gradually have risen higher in the past weeks in anticipation of Fed action.  Through Thursday, May 7, our trust preferred portfolios were up approximately 2.5%, on average, versus .62% for the Barclays Aggregate Bond Index. 

Oil rose $.52 to $59.47 Friday, ending the week up 0.5%.  Friday’s drill rig report showed the number of rigs drilling for oil declined by 11 this week, dropping the total number in operation to 668, down from 1,528 at this time last year.  Earlier in the week, oil inventories fell for the first time in 2015, an indication that supply is finally decreasing. 

Next week’s economic calendar highlights include April retail sales on Tuesday, weekly jobless claims and an April inflation report on Thursday and a consumer confidence reading on Friday.  Expect retail sales to show a slight decline from March, weekly jobless claims to settle in the 280,000 – 290,000 range (from 265,000 this week), prices to remain steady and consumer confidence to rise slightly.

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Ulland Investment Advisors

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