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Weekly Market Update for August 10, 2018

The Dow finished down on Friday, falling 196 points to close at 25,313. Energy was the only positive sector on the day. For the week, the Dow fell 0.6% and year-to-date is now up 2.4%, while the S&P 500 posted its first weekly decline (-0.2%) in six weeks (+6.0% YTD). The yield on the 10-year Treasury (an important interest-rate indicator) dropped six basis points on Friday to 2.87%, and was down eight basis points for the week, further flattening the yield curve.

It was relatively quiet on the US economic data front this week other than some inflation readings. On Friday, July core CPI inflation rose 0.2% month over month, in line with estimates; however, the annualized gain of 2.4% was the largest reported since 2008. Despite this metric supporting the Fed’s plan for two more rate hikes this year, we saw a fall in the 10-year yield. The yield was likely pressured by a flight to safety in the midst of shakiness in emerging market currencies and announced US sanctions on Russia.

The price of crude oil fell 1% this week, crossing through $68 a barrel – up 12% YTD. US crude stockpiles showed a smaller-than-expected draw – of 1.4m barrels – while product inventories of gasoline (+2.9m bls) and diesel (+1.2m bls) both rose. Oil prices were holding up well before a sharp $3 move lower on Wednesday driven by China demand concerns. China crude oil imports have slowed dramatically since May while fear of a potential Chinese-proposed tariff on US gasoline and diesel stoked geopolitical demand risk. The inventory report added fuel to the fire.

In our busiest week of second-quarter earnings, we saw strong reports out of Hortonworks, CVS, NuStar, and Daseke.  Hortonworks, a relative new equity name in our portfolios, jumped over 25% following their big, beat & raise report driven by accelerated revenue growth and expanded partnerships with major cloud players. Axon Enterprise had a rougher week despite a very solid report as sentiment had gotten a bit ahead of the stock fundamentals in recent months. Next week, we will see quarterly results from a pair of our Chinese companies, Tencent and Alibaba. With the large majority of company earnings reports now in the books and few economic data points in the coming weeks, the balance of summer may feel quite slow.

 

*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

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