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Weekly Market Update for March 15, 2019

by JM Hanley

The Dow was up on Friday, rising 139 points to close at 25,849. For the week, the Dow was up 1.6% (SP500 +2.9%) and year-to-date is now up 10.8% (SP500 +12.6%). The yield on the 10-year Treasury (an important interest-rate indicator) fell four basis points, closing at 2.59%.

American manufacturing data released today was weak. New orders and shipments were particularly disappointing. These suggest a more muted pace of business investment this quarter. But employment in manufacturing remains strong, and consumers in the US are upbeat (particularly since the shutdown ended). The timing of the Chinese New Year distorted economic data in China. Adjusted, industrial production looked better than expected, but consumer lending was weak.

The narrative about an imminent trade deal with China – one of three main contributors to the market’s impressive rally this year – hasn’t changed much. The economic costs of the trade war, and their political ramifications, have grown steep. With China’s economy wilting, Beijing wants to protect its huge export sector. But negotiations are slow going. A deal-signing ceremony currently scheduled for the end of this month may be pushed to April.

The price of crude oil rose 4% this week to $58 a barrel – up 29% YTD. US crude stockpiles showed a surprise draw – of 3.8m barrels – while product inventories of gasoline fell (-4.6m bls) and diesel rose slightly (+0.4m bls). The energy sector benefitted from comments by Saudi Arabia suggesting they may extend production cuts for longer. Favorable market reports from OPEC and the IEA contributed as well. Shares of US domestic producers were lifted along with the commodity, rising 6%.

Cloud computing firm Cloudera reported passable quarterly results Wednesday. The firm’s sales forecast for 2019 disappointed Wall Street. General Electric didn’t break much new ground at its annual presentation to investors. The profit outlook for 2019 was lower than expected growth will accelerate in 2020 and 2021.The news was generally better for holders of debt. Improving profits in coming years should ease worries that the firm won’t be able to meet its obligations; moreover, management intends to make paying down debt a top priority.

Next week, the interminable Brexit saga will continue with another vote on the Prime Minister’s deal scheduled in Parliament. Most assume the country will avoid a deeply disruptive no-deal departure, but any eventuality would have limited repercussions for US firms’ earnings. The Fed’s meeting next Wednesday is the more important event. Investors are keen to learn about the Fed’s plans to sell its holdings of Treasury bonds. The start of this policy last fall slowed the economy and contributed to the steep decline in equity prices.

*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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