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Weekly Market Update for November 1, 2019

by JM Hanley

The Dow was up on Friday, rising 301 points to close at 27,347. For the week, the Dow was up 1.4% (SP500 +1.5%) and year-to-date is now up 17.2% (SP500 +22.3%). The yield on the 10-year Treasury (an important interest-rate indicator) fell nine basis points, closing at 1.71%. The price of crude oil fell less than a percent this week to $56 a barrel – up 24% YTD.

Market reaction to the Fed’s Wednesday meeting was relatively muted.  The Fed cut rates by a quarter point, as expected, marking the third such cut this year. Chairman Powell’s press conference implied it may be the last this year.  Powell noted that consumer spending has remained robust, and that the situation vis a vis Brexit and the US-China trade war had improved.  He suggested it would probably take an abrupt slowing of economic growth, or a dramatic escalation of the trade conflict, for him to change his mind.

Domestic economic data was mostly positive this week. Third quarter GDP grew 1.9%. While this marks a slowdown, it was actually better than expected, though it came more as a result of firms stockpiling inventory than investing in new capabilities.  Today’s payrolls report showed that job creation in October was much better than expected. Moreover, revisions to prior months suggested that an apparent slowdown in the labor market had in fact been illusory. Housing news was mixed: while prices declined (in August), pending home sales rose last month. A national survey of manufacturing poked back into positive territory, albeit by less than expected.

Third quarter earnings reports continued this week. Business is booming at the Chinese ecommerce giant Alibaba, which has proven resilient to the slowdown in China’s economy. The firm’s concerted effort to reach customers outside the largest metro areas, along with improvements to the algorithm that targets ads at shoppers, has paid dividends. Selling ads is also as lucrative as ever stateside, as this week’s results from Google testify. A major upgrade to Google search was one reason why. Facebook also did well, its political travails notwithstanding. Subsidiaries like Instagram are seen as the future growth driver, but this time it was “normal” Facebook that did better than expected.

Electronic Arts, the well-known video game designer, had success with existing franchises but delayed the debut of a new World War II-themed title. Shares of WellCare had been in something like purgatory of late as the private Medicaid administrator waited for a buyout by larger competitor Centene to close. But the firm reported strong earnings as a result of improvements on an old Medicaid contract in Illinois, which boosted its own shares and those of Centene alike.

Fidelity Information Services, CVS, Playa Resorts, Axon, and most of our energy companies will report earnings next week.

*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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