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Weekly Market Update – August 12, 2016

The Dow finished 37 points lower on Friday after disappointing data on July retail sales. For the week the Dow was up 0.18%. Year-to-date the index is up 6.6%.

This week’s domestic economic data surprised to the downside. The U.S. retail sales released by the Commerce Department on Friday came in flat vs. an expected 0.5% rise, indicating a potential hurdle for economic growth in the second half of the year. Productivity declined for the third straight quarter and fell at a 0.5% annualized rate in Q2 following a 0.6% decline in Q1 while consensus expected a 0.5% increase. Unit Labor costs increased by 2%, slightly ahead of consensus. High rates of retirements and slow population growth were cited as reasons for the slowdown in productivity growth. Neither the dollar nor Treasury yields had much change. Next Wednesday’s Federal Open Market Committee (FOMC) Minutes will shed more light on the issue. For the week, the U.S. Preferred Stock Index was flat.

Crude oil surged on Thursday following a Saudi Energy Minister statement that OPEC members and nonmembers would discuss the market situation on the sidelines of the International Energy Forum in Algeria next month and could also cover “any possible action that may be required to stabilize the market.” The Saudi Energy Minister also noted that the market is on the right track toward rebalancing, but that the process of clearing inventories will take time. Many were skeptical about the possibility of a revived production freeze, and this month’s IEA report slightly reduced the global demand forecast for 2017. For the week, the crude was up 6.8%.
Earnings continued to be released for Q2 by several well-known and widely held companies. Following earnings, AMG share price was -3%, Disney +1%, and Alibaba +5%. Q2 reports have mostly concluded by this week.
Next week’s economic calendar highlights include Core Consumer Price Index (Aug. 16th), Crude Inventory and Federal Open Market Committee Minutes (Aug. 17th), and Initial Jobless Claims and Natural Gas Inventories (Aug. 18th). The rest of August normally has low trading volume as Well Street heads off for vacations.

Have a great weekend,
Yansong Pang (庞岩松)

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Ulland Investment Advisors

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