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Weekly Market Update for March 1, 2019

by JM Hanley

The Dow was up on Friday, rising 110 points to close at 26,026. For the week, the Dow was flat (S&P 500 +0.4%) and year-to-date is now up 11.6% (S&P 500 +11.8%). The yield on the 10-year Treasury (an important interest-rate indicator) rose ten basis points, closing at 2.76%.

The week didn’t turn out as busy as forecast last Friday. Parliament’s vote on Brexit was postponed. So was the deadline for a trade deal with China. Jerome Powell made it to Capitol Hill to give his semi-annual testimony, but didn’t make much news. The market now takes his strategic patience for granted. And when asked about investors’ most pressing unanswered questions – when the Fed would stop selling its holdings of Treasury bonds, and whether or not it should reconsider its target of 2% inflation – Powell fudged his answer.

Other macroeconomic news was mixed. America’s economy grew 2.6% in the last three months of the year, which was better than expected. Manufacturing data from Chicago (which is typically representative of the nation as a whole) also looked healthy. This was partially contradicted by a weak February report from another industrial survey by the Institute for Supply Management. However, the University of Michigan’s survey of consumers showed they have unexpectedly grown a bit more pessimistic.  And data from China showed the tariffs taking a toll on small and medium-sized manufacturers.  Most investors are still confident that Beijing can spend and lend to keep the economy growing.

Corporate headlines, on the other hand, came fast and furious. CEO Larry Culp sold GE’s biopharmaceutical business to his old firm, Danaher. The deal was good news for holders of its bonds and preferred shares; the $21B proceeds substantially ease concerns GE wouldn’t be able to pay its debts.

News was worse at Nutanix. The software firm’s sales force has lost its focus because of the large number of new products. Growth will slow this quarter as they train on the company’s offerings. Axon, which makes Taser, made plenty of money last quarter, but also predicted they’d grow more slowly than analysts had hoped. Finally, health insurers and drug benefit managers like CVS had a rough week. Pending regulations have hurt the latter, while chatter about single-payer healthcare had investors selling the former.

The price of crude oil fell 2% this week to $56 a barrel – up 23% YTD. US crude stockpiles showed a greater-than-expected draw – of 8.7m barrels – while product inventories of gasoline (-1.9m bls) and diesel (-0.3m bls) declined as well. Driving the big “triple draw” was an impressive fall off in imports, particularly from Saudi Arabia and Venezuela. The weekly import number was, in fact, the lowest level since 1996. Exports were steady but saw China take its first cargo of US oil in months. A strong dollar and weak manufacturing data from China and the US forced crude lower in Friday trading.

*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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