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Weekly Market Update – March 24, 2016

The Dow closed 13 points higher on Thursday in a fairly uneventful trading day ahead of Easter. The Dow was down 0.4% for the week, ending the five-week rally. Commodity prices were under pressure and strong labor data pointed to a possible April interest rate hike, both of which provided a headwind for the market. For the year the Dow is still up 0.5%, however.

US equity markets remained fairly resilient after the terrorist attack in Brussels on Tuesday. Even though jobless claims rose by 6,000 to 256,000 last week, revisions to the prior weeks’ data showed a much stronger labor market than initially expected: Claims for the week ended Mar 5 reached the lowest point since November 1973. A strong labor market coupled with firming inflation rates led to comments from Fed officials suggesting a rate hike as early as April. Philadelphia Fed President Harker said he would rather see more than two rate hikes this year. Healthier economic data calmed fears of a recession in the US. Corporate as well as personal balance sheets remain strong; the ratio of US corporate debt to profits is no higher than back in the early 1970’s and banks have never been better capitalized.

The optimistic tone from the Fed’s comments had a positive impact on the US dollar but caused weakness in commodity prices. Crude settled at $39.52 per barrel, down 1% for the week on an unexpected inventory build to a new record. An International Energy Agency executive expressed skepticism about the ability of an oil freeze agreement to help the market, as fears surfaced that US shale producers may use the recent rebound to hedge and boost production.

Surprisingly, the Fed’s comments failed to push Treasury interest rates higher. 10-year Treasury yields ended largely constant at 1.9% at the end of the week. Preferred and Trust preferred securities responded positively.

Our office and the market will be closed Friday, Mar 25 in observance of Good Friday. Next week’s economic calendar highlights include crude inventories (Mar 30), initial jobless claims report (Mar 31), and non-farm payrolls and unemployment rate (Apr 1). This will draw Q1 to a close. Expect corporate earnings from Q1 to start being released by April 11.

Have a nice weekend,

Natalie Do

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Ulland Investment Advisors

4550 IDS Center · Eighty South Eighth Street · Minneapolis MN 55402 · Telephone: 612-312-1400 · Facsimile: 612-204-3464