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Weekly Market Update – October 21, 2016

The Dow was down 17 points on Friday after the second week of corporate earnings. For the week the Dow was flat. Year-to-date the Dow is up 4.1%.

U.S. economic data was mixed for the week. Manufacturing output was slightly higher in September, increasing by 0.2%. September headline CPI increased 0.3% from August, in line with consensus. Housing starts dropped 9.0% month over month to 1,047,000. However, much of the headline decline has been ascribed to the 38.9% decline in starts for multifamily units. In contrast, the number of single-family starts rose 8.1% month over month after posting a 5.9% decline in August. Existing-home sales rose 3.2% from August to a 5,470,000 with the median sales price of $234,200. First-time buyers made up 34% of all transactions, the biggest share in four years. Initial jobless claims rose 13,000 to 260,000. October’s Philadelphia Fed Index beat expectations, coming in at +9.7 vs +6.0 consensus and compared to +12.8 prior.

Fed officials continue to signal that a December tightening is likely. Comments also reinforced expectations for a very gradual tightening path. Boston Fed President Eric Rosengren downplayed the impact of the presidential election on market conditions and stated that it makes little economic difference bypassing November and waiting until December to hike rates. The market is currently expecting a 70% probability for a December hike. For the week, the U.S. Preferred Index was up 1.27%. Our preferred continue to outperform this index.

The price of crude oil settled at a 15-month high of $51.60/barrel this Wednesday following EIA inventory data showing a crude draw of 5,300,000 barrels vs. an expectation for an increase. The data showed a gasoline build of 2,500,000 barrels while distillates declined 1,200,000 barrels. Refinery utilization dropped to near multiyear lows at 85%. Crude was up 0.6% for the week.

Corporate earnings are running ahead of expectations with upside surprises from PayPal, Microsoft, American Express, United Health Group, and E*Trade Financial.

Next week’s economic calendar highlights include Consumer Confidence (Oct. 25), Crude Inventories (Oct. 26), Initial Jobless Claims and New Home Sales (Oct. 27), and Advance Estimate for Q3 GDP (Oct. 28). Q3 earning reports will continue next week for widely held companies like Apple, Google, Amazon, Sprint, etc.

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