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Weekly Market Update – October 14, 2016

The Dow was up 39 points on Friday after J.P. Morgan, Citigroup, and Wells Fargo reported better-than-expected earnings. For the week the Dow was down 0.6%. Year-to-date the Dow is up 4%.

This is a quiet week for U.S. economic data. Retail sales rose 0.6% in September from the previous month, in line with expectations. Job openings fell to an 8 month low in August to 5,440,000, down from 5,830,000 in July and below the 5,800,000 consensus. Professional and business services had the largest decrease at 223,000. The quit rate was 2.1%, the same as the prior month, while the layoffs rate was 1.1%. Small business sentiment ticked lower, as the National Federal Independent Business (NFBI) Small Business Index for September fell to 94.1 from 94.4 in August, with strong gains in expected business conditions offset by weak inventories. The NFIB President commented “We improved from awful to bad” and “the bottom line is that small business owners are deeply uncertain about the future, and that is affecting their decisions.”

Minutes from the September Federal Open Market Committee (FOMC) meeting provided little new insights on the policy outlook. Participants generally agreed that economic activity had picked up and that a “reasonable argument” could be made either for an immediate hike or a delay. However, many of the participants expressed the view that recent evidence suggested that some slack remained in the labor market. With inflation continuing to run below the FOMC’s target and few signs of increased pressure on wages and prices, most of these participants thought it would be appropriate to await further evidence of continued progress towards their objectives. The most likely time for a 25bps rate increase is December. For the week, the U.S. Preferred Index was down 0.77%. Our preferred continue to outperform this index.

The price of crude oil extended its gains this week on supportive comments from Russia. Russian President Putin told the World Energy Congress in Istanbul that Russia is ready to participate in joint measures to limit output and wants other oil exporters to do the same. He noted that given the current situation, a freeze or even a cut in production is probably the only proper way to stabilize the market. Saudi Arabia’s energy minister, who said it is “not unthinkable” that oil will rise to $60 a barrel by the end of 2016. He also expressed optimism about finalizing the production cut deal by the end of November. Crude was up 1% for the week.

Next week’s economic calendar highlights include Consumer Price Index (Oct. 18), Crude Inventories (Oct. 19), and Initial Jobless Claims and Existing Home Sales (Oct. 14). Q3 earning reports will continue next week for widely held companies like Bank of America, Yahoo, Intuitive Surgical Inc., etc. The election continues to get closer, but has yet to add much volatility to the market.

Have a great weekend,
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