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Weekly Market Update – February 19, 2016

The Dow pulled back on Thursday and Friday after a three-day rally. For the week the Dow was up 1.1%, marking the best weekly gain to date in 2016, and for the year the index is now down 6%.

Stocks’ gain was largely attributed to a rebound in the financial, technology and retail sectors. US bank stocks continued to recover, with the bank stock index BKX rising by 2.2% for the week. European bank preferreds also rebounded, after the European Central Bank Chief, Mario Draghi, calmed the markets by stating that EU banks are now better protected from a collapse than before the financial crisis. Mr Draghi also mentioned that the ECB is “ready to do its part” to strengthen the wider Eurozone economy, hinting at further monetary stimulus. As another encouraging sign, European banks have begun selling bonds again after weeks of limited access to funding, with ING Group and Nordea Bank both launching senior unsecured bank bonds. Preferreds and trust preferreds had a strong week.

Treasury yields were up slightly on Friday as strong economic indicators suggest a possible rate hike at the next Fed meeting. January’s Consumer Price index excluding food and fuel rose the most in four years, signaling increased pricing power by companies. January industrial production rose to .9% after three consecutive months of declines, beating expectations of .4%.

Oil started the week in a positive direction due to a possible production freeze agreement among Russia and Saudi Arabia, the biggest crude oil exporters. However, the commodity pulled back on Friday to below $30 / barrel as enthusiasm subsided with Iraq’s and Iran’s reluctance to freeze output.

Next week’s economic calendar highlights include existing home sales on Tuesday (Feb 23), jobless claims on Thursday (Feb 25), and the second estimate for 2015 fourth quarter GDP on Friday (Feb 26).

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Ulland Investment Advisors

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