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Weekly Market Update – November 6, 2015

The Dow managed a gain of 47 points Friday on the heels of a better-than-expected October jobs report.  For the week the Dow was up 1.4% and for the year the index is now up .5%.

The October jobs report showed the addition of 271,000 jobs in the month, well above expectations of 180,000 and the largest gain since December of 2014.  The August and September jobs numbers were adjusted upwardly by a combined 12,000 while hourly wages rose 9 cents, a 2.5% year-over-year increase – the largest since 2009.  The unemployment rate fell to 5.0%, its lowest rate since 2008. 

The strong jobs report greatly increases the odds of a December rate hike by the Fed, as it was thought that any jobs number above 150,000 would prove enough to drive Fed action.  The hourly wage data strengthens this view as it gives the Fed confidence that inflation will move toward its target rate of 2%.  In addition, the unemployment rate, now at 5.0%, is in a range consistent with the Fed’s definition of full employment.  The Fed’s next policy meeting is December 15th and 16th. 

The yield on the 10-year Treasury rose 9 basis points Friday to 2.33%, up 18 bps for the week and now up 16 bps for the year.  This put some pressure on the fixed income securities.  Oil fell 2% Friday to settle at $44.29 due to a rally in the dollar after the release of the jobs report.  The dollar is up 5% since the beginning of October and closed Friday at a 6 ½-month high against a basket of currencies.  The weekly drill rig report showed the number of drilling rigs in operation fell by 6 (its 10th-consecutive weekly decline) to a five-year low, though an inventory report earlier in the week again showed a weekly build in US oil supply. 

Next week’s economic calendar highlights include weekly jobless claims on Thursday and October inflation data, October retail sales and a consumer confidence reading on Friday.  Expect weekly jobless claims to settle in the 250-260,000 range (from 269,000 this week), inflation to remain in check, retail sales to show a slight uptick from September and consumer sentiment to hold steady in relation to the prior reading.  The return of colder weather may help natural gas prices. 

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