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Weekly Market Update for March 16, 2018

by JM Hanley

The Dow was up on Friday, rising 73 points to close at 24,946. For the week, the Dow fell 1.5% (SP500 -1.2%) and year-to-date is now up 0.9% (SP500 +2.9%). Healthcare providers, tech firms, and energy companies performed relatively well. Banks and industrial firms did poorly. The yield on the 10-year Treasury, an important interest-rate indicator, fell five basis points, closing at 2.82%.

Economic indicators proved mostly positive this week. Inflation accelerated in January, and investors were concerned that the trend would continue.  But prices rose only 0.2% last month. Middling inflation likely won’t dissuade members of the Federal Reserve from raising interest rates at their meeting next week. Meanwhile, retailers’ woes continue.  Sales in February fell for the third straight month. Construction of new houses also slowed. However, industrial firms again increased production to keep pace with strong demand.  That may be a product of optimism about the economy. Consumers report feeling better than they have in fourteen years. Small-business owners’ optimism is near all-time highs.

The Federal Reserve’s Open Market Committee will have Wall Street’s full attention when it meets next Wednesday.  Most expect an interest rate hike; futures markets put the odds at 94%.  More uncertainty surrounds the new “dot plot” of anticipated rate increases. A booming economy and higher government spending have increased the chances of an extra hike.  If the Fed concurs, investors would prefer it come next year.

The price of crude oil was flat this week at $62 a barrel – up 3% YTD. US crude stockpiles showed a larger-than-expected build this week – of 5.0m barrels – while product inventories of gasoline (-6.3m bls) and diesel (-4.4m bls) saw large draws. Oil prices were down most of the week following headlines that OPEC members have differing price targets; however, prices spiked higher on Friday possibly on the belief that harsher sanctions would be imposed on Venezuela. Monthly reports from both the IEA and OPEC were also favorable, as demand continues to track above expectations. US oil producers largely followed the price of crude, roughly flat versus the prior week.

Highlights on next week’s economic calendar include existing home sales on 3/21, Markit’s survey of manufacturers on 3/22, durable goods on 3/23, and new home sales on 3/23.

*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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