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Weekly Market Update for October 6, 2017

by JM Hanley

The Dow was essentially unchanged on Friday, falling 2 points to close at 22,774. For the week, the Dow rose 1.65% (S&P 500 +1.19%) and year-to-date is now up 15.2% (S&P 500 +13.9%). There was little major corporate news this week. Financial stocks performed the best. Investors anticipate that rising interest rates will benefit banks, energy companies, and industrial firms, among others. The yield on the 10-year Treasury rose four basis points this week, closing at 2.35%.

This week’s economic data presented a mixed picture. Today’s jobs report earned the most attention. Nonfarm payrolls declined by 33,000 in September. This marks the first time jobs numbers have declined since September of 2010. Economists surveyed had expected the economy to add 88,000. Hurricanes Irma and Harvey seemed to be to blame, as the steepest declines came in food services, drinking establishments, and other industries most adversely affected by the storms. Next month’s jobs number should show a restoration of storm-related lost jobs. The unemployment rate actually declined to 4.2% and wages rose.

Additionally, August’s jobs figure was revised upwards, which was expected. But it was more than offset by a downward correction to the July numbers. Better news came in cars and manufacturing. Both reported better-than-expected sales in September.

Commentary from Federal Reserve members reinforced the belief that the board will raise interest rates in December. Most blame the slow inflation seen recently on cyclical factors, and expect that low unemployment and steady growth will push it back on track. Strong wage growth this past month strengthens their case. Markets now put the odds of a December rate hike at 93%. Elsewhere in Washington, Congressional leaders continue to negotiate the details of tax reform legislation, which continues to fuel a strong stock market.

The price of crude oil fell 5% this week to $49 a barrel – down 8% YTD. US crude stockpiles showed a larger-than-expected draw – of 7.0m barrels – and product inventories of gasoline rose (+1.6m bls) while diesel fell (-2.6m bls). Refinery utilization is now in line with the 3-year average for this time of year, although Tropical Storm Nate could develop into a hurricane and make landfall near refineries in the Gulf. Oil prices were pressured by a production restart of a large field in Libya, as well survey results that showed a rise in OPEC production this month.

Highlights on next weeks’ economic calendar include small business optimism (10/10), September CPI (10/13), a measure of inflation, retail sales (10/13), and consumer sentiment (10/13). Q3 earnings releases start next week with banks among the first on Thursday and Friday.

 *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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