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Weekly Market Update – November 23, 2016

The Dow was up 59 points on Wednesday after the index closed above 19,000 for the first time in history with hopes that new economic policies will lead to higher growth. For the week the Dow was up 1.1%. Year-to-date the Dow is up 9.5%.

The interest rate spike has been reversing this week as investors calmed down from previous expectations. Preferred stock prices recovered some from the previous week’s decline. The bond market has been under pressure since Trump’s victory in the presidential election, as investors expect increased inflation related to expansionary fiscal policy. The market focus continues to be the complexity of tax reform, fiscal stimulus, worries about growth headwinds from tighter financial conditions, a higher U.S. dollar, and restrictive trade.

October’s existing home sales report continued strong with sales increasing 2% sequentially to 5,600,000, the best level since February 2007. Sales increased 6% from last year across geographic regions with median price up 6% to $232,000. The number of first-time buyers slowed down to 33% of October sales from 34% in the prior month. The report was also positive on labor market dynamics and signs of greater economic expansion.

The price of crude oil was 5.3% higher this week, following an unexpected decline in the U.S. inventories and the renewed optimism surrounding OPEC’s ability to finalize a preliminary production cut agreement reached in late September. Iraq officials said the country would cut production along with OPEC, and Iran’s oil minister indicated that OPEC is “highly likely” to reach a final agreement at its Nov. 30 meeting. Stronger U.S. dollars will continue to be a headwind for oil prices.

Corporate earnings are running ahead of expectations with upside surprises from Dollar Tree, Analog Devices, Hormel Foods, and Burlington Stores. Q3 earning reports will continue next week for widely held companies like Valspar, GUESS Inc., Tuniu Corp, Express Inc., etc.

Our office and the market will be closed Thursday, November 24, and Friday afternoon, November 25, in observance of Thanksgiving. Next week’s economic calendar highlights include Second Estimate of GDP and Consumer Confidence (Nov. 29), Crude Inventory (Nov. 30), Initial Jobless Claims and Auto-Sales (Dec. 1), and Non-farm Payrolls (Dec. 2). Among these, the Non-farm Payrolls will have the biggest impact on the market.

Have a great weekend and happy Thanksgiving,

Yansong Pang

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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