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Weekly Market Update for April 13, 2018

by JM Hanley

The Dow was down on Friday, falling 123 points to close at 24,360. For the week, the Dow rose 1.8% (SP500 +1.7%) and year-to-date is now off 1.5% (SP500 -0.7%). The yield on the 10-year Treasury, an important interest-rate indicator, rose five basis points, closing at 2.83%. Energy, technology, and healthcare firms performed particularly well. Banks, utilities, and industrial companies underperformed.

American consumers grew a little more bearish on the economy last month. Higher interest rates and trade disputes have taken a toll. They’re still quite optimistic by historic standards. Inflation also chugged a bit higher in March. Healthcare, housing, and transportation all cost more. With the economy growing at a healthy pace, members of the Federal Reserve cautioned they might need to raise interest rates more forcefully to tame inflation.

The price of crude oil rose 8% this week to $67 a barrel – up 11% YTD. US crude stockpiles showed a surprise build this week – of 3.3m barrels – while product inventories of gasoline rose (+0.5m bls) and diesel fell (-1.0m bls). Despite the negative inventory report, oil showed considerable strength as conflict in the Middle East has surfaced and global oil demand has been robust.

Yemen launched unsuccessful drone strikes on a Saudi Aramco oil refinery in Jazan, while Saudi Arabia intercepted ballistic missiles over Riyadh. An oil tanker and airport were also targeted in the past week. Such attacks raise supply risks at the same time that OPEC production has dipped lower and estimates of demand are being revised higher by most agencies. Energy producers kept pace with the jump in oil this week, rising 8%, but have been lackluster YTD, up 1%.

America’s largest banks reported their first-quarter earnings today, signaling the start of earnings season. Profits in Wells Fargo’s core business disappointed expectations. Moreover, the bank continues to wrangle with sanctions, decrees, and fines new and old imposed by regulators after Wells Fargo violated consumer lending laws. Rising interest rates also cramped the sizable mortgage lending unit.

JP Morgan did much better. Modest loan losses, improved trading revenue (thanks to the volatile stock market), and the corporate tax cut helped it post the largest quarterly profit ever recorded by an American bank. United Health Group, Goldman Sachs, and General Electric, 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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