Receive Weekly Market Updates via Email

shadow

Weekly Market Update – December 18, 2015

A second-consecutive “Red Friday” saw the Dow tumble 367 points as hopes for a Santa Claus rally dimmed heading toward the Christmas holiday.  For the week the Dow was down .6% and for the year the index is now down 3.8%.

Markets rose early in the week in anticipation of the Fed’s interest rate decision and reacted in kind on Wednesday when the body announced a .25% interest rate hike – a move that was widely anticipated.  In the announcement, the Fed reiterated that rates would continue to rise, though at a gradual pace, and hinted that, barring any great change in the US economy, four additional quarter-point increases would most likely occur next year, bringing the federal funds rate to 1.5% by the end of 2016.  The Fed-related rally lasted only a day as markets trended downward both Thursday and Friday, weighed by energy and global growth concerns and softer-than-anticipated US manufacturing and services activity. 

Overseas, the Bank of Japan announced a surprise expansion of its stimulus program on Friday in a continuing effort to bolster the world’s third-largest economy, one that for years has been plagued by low growth and deflation.  The Nikkei briefly surged on the news but reversed course quickly and ended the day down 1.9%. 

Oil fell 22 cents Friday to $34.73 per barrel, its lowest level since February of 2009. Not helping matters was the release of an unfavorable drill rig report which showed an increase in the number of rigs in operation this week (17 rigs came online).  Supply in the US remains at near-record levels while warmer-than-normal weather continues to hold sway over much of the US, reducing demand.  Factor in OPEC’s resolve to continue pumping at normal volumes and the expectation of Iranian oil entering the market in 2016 and the prospect of a recovery in oil prices in the near future remains bleak.

The yield on the 10-year Treasury fell 4 basis points (bps) Friday to 2.20%, up 6 bps for the week and now up 3 bps for the year.  In anticipation of the Fed’s interest rate hike, trust preferred shares declined Monday and Tuesday but recovered as the week progressed.

Next week’s economic calendar highlights include the third estimate of Q3 GDP and November existing home sales on Tuesday, a consumer confidence reading and November new home sales on Wednesday and weekly jobless claims on Thursday.  Expect Q3 GDP to remain at 2.1%, existing and new home sales to increase in volume from October, consumer sentiment to hold steady from the previous reading and weekly jobless claims to again settle in the 270-280,000 range (from 271,000 this week). 

If you would like to review your 2015 gains and losses please let us know posthaste.

Next week, markets and our offices will be open until noon on Christmas Eve (Thursday) and closed the entirety of Christmas Day (Friday). 

shadow
 

Ulland Investment Advisors

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