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Weekly Market Update for April 6, 2018

by JM Hanley

The Dow was down on Friday, falling 572 points to close at 23,933. For the week, the Dow fell 0.7% (SP500 -1.4%) and year-to-date is now off 3.2% (SP500 -2.6%). The yield on the 10-year Treasury, an important interest-rate indicator, was up slightly, closing at 2.78%. Consumer staples and consumer discretionary stocks did well. Tech, healthcare, industrials, and financials weighed on the market.

As China and America continue to squabble over their trading relationship, Wall Street remains wary. On Tuesday evening, the US Trade Representative released a proposal to levy tariffs on an additional $50 billion in Chinese manufactured goods. China, in turn, proposed its own tariffs on $50 billion worth of imports from America. The Administration responded to China’s gambit with an announcement that it was considering duties on an additional $100 billion of imported goods. Since none of these proposals has been enacted, the received wisdom dismissed these announcements as a negotiating tactic as the world’s two largest economies hammer out a new trading relationship. But the prospect of more such announcements in the following weeks, and accompanying uncertainty, dismayed investors.

For the first time in a long time, today’s jobs report disappointed. 103,000 workers were added to payrolls last month. That marked a slowdown from the torrid pace of job creation in the first two months of the year. The silver lining is that inflation pressure may ease. Average earnings rose only slightly. Labor force participation fell, while unemployment and the length of the average work week were unchanged. In other economic news, March car sales were better than expected, a beneficiary of buoyant consumer spending. Manufacturing managers continue to report that labor shortages and high raw material costs have cramped productivity.

The price of crude oil fell 4% this week to $62 a barrel – up 3% YTD. US crude stockpiles showed a surprise draw this week – of 4.6m barrels – while product inventories of gasoline fell (-1.1m bls) and diesel rose (+0.5m bls). Despite the positive inventory report, oil was weak as tensions between Saudi Arabia and Iran caused energy investors to question the stability of the OPEC agreement. Also pressuring the commodity and equities were soft vehicle miles traveled in January and the announcement of Bahrain’s largest ever oil discovery in the Middle East.

Highlights on next week’s economic calendar include small business optimism on 4/10, CPI inflation data on 4/11, and the University of Michigan’s consumer sentiment tracker on 4/13.

*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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