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Weekly Market Update – April 1, 2016

The Dow closed 171 points higher on Friday and 1.6% higher for the week. The first quarter marked the strongest comeback since 1933 for the index, as it recovered to a 2.1% gain year-to-date.

This week’s US economic data added to the narrative that the US economy is not moving towards another recession. Total nonfarm payroll employment rose by 215,000 in March, beating the consensus of 205,000. Average hourly wage also surprised to the upside, coming in at 0.3% and reversing the recent decline in February. As another bright spot, the ISM manufacturing index was above 50 for the first time in seven months, suggesting a stronger manufacturing sector despite earlier headwinds caused by a strong dollar and low oil prices. The unemployment rate slightly edged up to 5%; however, the increase can be attributed to an expanding labor force, a sign of improving conditions in the job markets. Initial unemployment claims increased from the week before, but still continuing a 56-week streak of readings below 300,000.

Crude oil declined 7% for the week on continued concerns of oversupply and complications to the potential output freeze by OPEC members. US inventories were a record high for the seventh straight week and OPEC crude output rose by 0.1M barrels in March. In addition, Saudi Arabia’s deputy crown prince stated that they would only freeze its output if Iran and other major producers reduced their output, which came as a surprise to the market. 

On Tuesday, Fed Chair Janet Yellen reassured the market that the pace of rate increases was expected to be “somewhat slower”, in contrast with comments from several Fed members last week. As a result of her remarks, the 10-year Treasury yield declined by 11 basis points to 1.77%.

Next week’s economic calendar highlights include the EIA petroleum status report (Apr 6), Fed minutes (Apr 6), and jobless claims data (Apr 7).

Have a nice weekend,

Natalie Do

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Ulland Investment Advisors

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