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Weekly Market Update – April 22, 2016

The Dow finished up 21 points on Friday. For the week the Dow was up 0.6% and year-to-date the index is 3.3% higher.

Earnings season continued this week with corporate news driving market actions. The technology sector underperformed with Microsoft down 7% and Alphabet down 5% after both companies released earnings late Thursday that fell short of analyst expectations. A weaker dollar lifted the basic materials sector and stronger crude prices led to an outperformance in the energy sector, continuing the risk-on environment observed in the past few months.

Economic data came mixed this week as March existing-home sales rebounded and jobless claims fell to its lowest level since 1973, while housing starts and permits were both below consensus. However, firms’ forecasts for the next six months showed continued improvement, suggesting that the recent growth slowdown is expected to be temporary. On the global front, the European Central Bank kept its key policy settings unchanged during its April meeting. Rumors circulated that the Bank of Japan may be considering paying banks to lend, which corresponded with the market’s expectations for more policy support.

Crude oil ended at $44 per barrel, up 10% this week. Although the much anticipated Doha meeting among the world’s major oil producers failed to reach a production freeze deal as Iran declined to participate, oil rebounded with Kuwait temporarily lowering crude output from 2.8 million barrels per day to 1.1 million barrels per day on Sunday as Kuwait oil workers went on a strike protesting cuts in wages and benefits. The Energy Information Administration (EIA) report on Wednesday showed a lower-than-expected crude inventory increase. OPEC members and other producers were planning to meet in Russia in May to revive the proposed production freeze. However, Russian Energy Minister Novak is doubtful on any freeze deal in the foreseeable future and added that Russia has not been invited to OPEC’s scheduled June meeting.

Next week’s economic calendar highlights include New Home Sales (Apr 25th), Consumer Confidence (Apr 26th), FOMC Rate Decision (Apr 27th), and Initial Jobless Claims (Apr 28th).

Have a good weekend,

Natalie Do

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Ulland Investment Advisors

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