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Weekly Market Update – October 2, 2015

After losing 250 points early in the day Friday in response to a tepid September jobs report, the Dow recovered and managed to finish 200 points in the black.  For the week the Dow was up 1% and for the year the index is now down 8.2%.

The September jobs report showed the addition of 142,000 jobs in the month, well below expectations of 200,000.  The August and July numbers were revised lower as well, from 173,000 to 136,000 and from 245,000 to 243,000, respectively.  The unemployment rate remained at 5.1%.  Markets fell heavily in early trading in reaction to the report but recovered as the day progressed and the report was digested. 

With stocks coming off their worst quarter in four years in response to global and specifically Chinese growth concerns and continued weakness in commodity prices, the continuing market turbulence and weaker-than-expected data may prompt the Fed to wait until next year to begin raising rates (previous conventional thought projected the first rate hike to occur this December).  Rates will be lower for longer thus helping preferred and trust preferred performance going forward.

Q3 earnings season begins next week and attention will be closely paid to the results, especially from multinational firms, to gauge to what extent the perceived economic slowdown in China and other struggling nations had on corporate revenues. 

The yield on the 10-year Treasury fell 5 basis points Friday to 1.99%, down 18 bps for the week and down 19 bps for the year.  Oil rose 1.8% Friday to settle at $45.54 after the weekly drill rig report showed the number of drilling rigs in operation fell by 26 to a five-year low.  There are currently 62% fewer rigs operating since a record 1,609 rigs were in operation last October.  During the last two weeks we have reduced the Magnum Hunter position in most portfolios due to increasing credit risks at the company.  

Next week’s economic calendar is quiet with weekly jobless claims on Thursday the only data release of note.  Expect weekly jobless claims to again settle in the 270-280,000 range (from 277,000 this week).

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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