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Weekly Market Update for October 13, 2017

by JM Hanley

The Dow was up on Friday, rising 31 points to close at 22,872. For the week, the Dow rose 0.43% (S&P 500 +0.15%) and year-to-date is now up 15.7% (S&P 500 +14.0%). The yield on the 10-year Treasury fell seven basis points this week, closing at 2.28%.Third quarter earnings reports began in earnest this week with most big banks announcing results. JP Morgan, Citibank, and Bank of America reported strong results.  Wells Fargo’s were less so, weighed down by falling profits.

Economic indicators brought largely positive news.  From investors’ perspective, Friday’s inflation report was most important.  Consumer prices in September increased 0.5% from the previous month.  While this was somewhat less than markets had expected, it was still faster than the pace in August.  Gasoline prices, which rose substantially this month as a consequence of hurricanes in the Gulf of Mexico, accounted for three-fourths of the increase. Prices rose 0.1% when food and energy were excluded.  The Federal Reserve is still expected to raise interest rates in December.

Better news came in retail. Sales in the sector increased the most since March of 2015.  Harvey and Irma made their influence felt here as well: auto sales were particularly strong, as car owners in Texas and Florida repaired and replaced their storm-damaged vehicles. Consumer confidence provided another bright spot. Sentiment in September reached its highest point since the beginning of 2004.

Policy discussion in Washington had little impact on markets. Congressional leaders continued to discuss which deductions should be curbed to fund tax reform. The President’s executive order deregulating individual marketplaces for health insurance pressured some hospital-related stocks.  However, the impact was limited to that part of the healthcare sector.

The price of crude oil rose 4% this week, back above $51 a barrel – down 4% YTD. US crude stockpiles showed a larger-than-expected draw – of 3.9m barrels – and inventories of gasoline rose (+2.5m bls) while diesel fell (-1.5m bls). Refinery utilization continued to improve driven by strong processing margins along the Gulf Coast, prompting more refineries to defer maintenance. Oil prices benefitted this week from Q3 production shortfalls from some US producers, as the North American rig count continued its slide. A large drop in European crude inventories and the decertification of the Iran nuclear agreement by the White House also contributed to the price rise.

Highlights on next week’s economic calendar include industrial production (10/18), housing starts (10/18), and existing home sales (10/20).  Third quarter earnings announcements will ramp up.  In Ulland portfolios, United Health Group, Intuitive Surgical, and Iberia Bank, among others, will 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

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