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Weekly Market Update for November 10, 2017

by JM Hanley

The Dow was up on Friday, rising 40 points to close at 23,422. For the week, the Dow fell 0.50% (S&P 500 -0.21%) and year-to-date is now up 18.52% (S&P 500 +15.3%). Major indexes marked their first weekly decline in eight weeks, though volumes were relatively light. Markets mulled new developments in the push for tax reform. Poor earnings reports in some financial and healthcare names also weighed on the indexes. The yield on the 10-year Treasury rose seven basis points, closing at 2.40%.

The Senate released its version of tax reform legislation this Thursday. It differs from the House bill in a few ways. Both would cut the corporate tax rate to 20%, but the Senate bill would delay the cut until 2019. The Senate’s legislation would also fully repeal the deduction for state and local taxes. It would maintain the current structure of seven individual income tax brackets. Further revisions to the bill are expected, since it cannot add to the deficit in the long term. Once passed, the House and Senate legislation would need to be reconciled with each other before being enacted into law.

In other policy news, William Dudley, president of the Federal Reserve in New York, announced that he would retire next summer. There was otherwise little change to the prevailing belief that that the Fed will raise rates at its meeting on December 13. Investors put the odds at 99%.

The price of crude oil rose 2% this week to over $56 a barrel – up 6% YTD. US crude stockpiles showed a surprise build of 1.5m barrels. However, product inventories of gasoline (-3.3m bls) and diesel (-3.3m bls) both declined more than expected. Upheaval of the status quo in Saudi Arabia over the weekend and throughout this week is injecting some newfound geopolitical risk into the price of oil, at a time when oil supply vs. demand balances are making steady improvement. According to media reports, the government of Saudi Arabia has arrested or detained over 200 princes, sitting ministers, and former ministers in an anti-corruption crackdown. The kingdom alleges over $100 billion was misused or embezzled over several decades.

Third-quarter earnings reports brought more good news. In Ulland portfolios, Playa Resorts rose after it reported strong revenues despite the impact of hurricane season. Shares of Air Lease were also up after the company reported better-than-expected expansion of their profit margins. Priceline did not perform as well. While the company showed strong results, its management noted they will need to spend more on advertising because the online travel business is growing more competitive. Earnings season will begin to wind down next week. Tencent, Viacom, and L Brands, among others, are expected to report.

*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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Ulland Investment Advisors

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