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Weekly Market Update for December 8, 2017

by JM Hanley

The Dow was up on Friday, rising 118 points to close at 24,329. For the week, the Dow rose 0.4% (S&P 500 +0.35%) and year-to-date is now up 23.1% (S&P 500 +18.4%). The yield on the 10-year Treasury fell one basis point, closing at 2.38%.  After big gains last week, investors took stock of the new terrain. Financial firms continued to perform well. They are expected to benefit from lower corporate taxes and higher interest rates. Tech stocks – which had fallen last week as investors shifted to sectors that would benefit more from the tax bill – recovered, and finished the week up.

There were few political headlines of consequence this week. Congress is now finalizing tax cut legislation. The Senate and the House of Representatives passed different bills which they must merge together into a single proposal. The final product will need to pass both houses of Congress before it is signed into law. Congress also passed a spending bill which funds the government through December 22nd. Lawmakers will use the next two weeks to hammer out a longer-term spending proposal. In Europe, Britain’s prime minister and the European Union’s president reached a preliminary deal on the UK’s exit from the EU. Now the two can begin negotiating a trade agreement to take effect after Britain leaves. Foreign stocks rallied on the news.

Today’s jobs report interested markets the most. The economy added 228,000 jobs in November, which was a bit more than analysts had expected. Unemployment remained at 4.1%. That’s the lowest it’s been since 2000. Wages continue to grow less than historical data suggests they should. Even though employers added more jobs than expected last month, wages increased 0.2% – below expectations. When unemployment is low, firms normally increase pay to attract and retain employees. Today’s weak labor force participation may be to blame. More Americans start applying for work when there are more jobs to be had. Fresh competition keeps wages down.

Additionally, productivity growth remains slow, and large numbers of highly-paid baby boomers are now retiring. In any event, today’s jobs report didn’t change the market’s belief that the Federal Reserve will raise interest rates when it meets later this month.

The price of crude oil fell 2% this week to $57 a barrel – up 7% YTD. US crude stockpiles showed a larger-than-expected draw – of 8.0m barrels – while product inventories of gasoline (+6.8m bls) and diesel (+1.6m bls) rose more than expected. Crude inventories in Cushing, OK – a key hub that investors watch – has now materially declined four consecutive weeks. Oil news was relatively muted this week. PDVSA, the Venezuelan national oil company, continues to face escalating challenges. This week, reports suggested they are almost out of airplane fuel and are therefore restarting some refinery plants that haven’t passed proper safety checks.

*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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