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Weekly Market Update for April 26, 2019

by JM Hanley

The Dow was up on Thursday, rising 81 points to close at 26,543. For the week, the Dow was down 0.1% (SP500 +1.2) and year-to-date is now up 13.8% (SP500 +17.3%). The yield on the 10-year Treasury (an important interest-rate indicator) fell six basis points, closing at 2.50%.

The US economy grew 3.2% annualized in the first quarter, which was better than expected. The picture was less rosy (though still good) under the hood. Exports experienced a sharp spike, and retailers built up inventories. Neither of these is likely to persist through the second quarter. Personal consumption and housing were below expectations. January’s government shutdown, however, probably depressed growth.

The price of crude oil fell 1% this week to $63 a barrel – up 39% YTD. US crude stockpiles showed a surprise build – of 5.4m barrels – while product inventories of gasoline (-2.2m bls) and diesel (-0.7m bls) both fell. Oil showed strength early in the week on news the US government unexpectedly would end all waivers for Iranian oil. But this strength faded later in the week as the administration once again called for Saudi Arabia to replace the lost barrels. Following Chevron’s offer to purchase Anadarko Petroleum, our largest energy position, two weeks ago, Occidental Petroleum made a competing bid this week at a 20% premium to the Chevron deal. Anadarko rose another 13% as a result, and we are actively contemplating our next plans for these proceeds.

This week was the busiest of fourth quarter earnings season. Amazon’s pace of hiring has slowed, and shareholders reaped the benefit again this quarter. While business is generally good, its core commerce platform has weakened of late. Perhaps relatedly, the firm will increase spending next quarter in an effort to turn two-day Prime shipping into one-day. Visa’s results were good despite a “strong” dollar causing foreign purchases of US goods and services to decrease. The firm also identified some future tax breaks it had not previously disclosed.

Business is booming at Facebook. User engagement with apps that the company owns, like Instagram, is even better than on Facebook itself. Zuckerberg and co. have just begun to run ads on some of these auxiliary platforms. The social media giant also has seen recent success reining in costs. The media made much of a $4B fine the FTC assessed against Facebook, but the firm can easily cover this out of its $45B in cash.

Over a third of companies in the US have reported earnings so far. It’s gone better than forecast. Profits had been expected to decline slightly, but on average, they have grown 5%. Euronet, WellCare, CVS, and Apple, 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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Ulland Investment Advisors

4550 IDS Center · Eighty South Eighth Street · Minneapolis MN 55402 · Telephone: 612-312-1400 · Facsimile: 612-204-3464