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Weekly Market Update – October 9, 2015

The Dow gained 34 points Friday, the average’s sixth straight day of gains and its longest streak since last December.  For the week the Dow was up 3.7% and for the year the index is now down 4.5%.

Markets enjoyed a relief rally this week, in part due to the belief that the Fed will postpone its initial interest rate hike until next year given the state of tumult global markets have been in recently.  The Fed minutes released Thursday strengthened this view as concerns about the health of the global economy and low inflation in the US highlighted the Fed’s “dovish” statement.  Factor in last week’s weaker-than-expected September jobs report and the prospect of a delay seems more likely.

Q3 earnings season officially kicked off this week with the release of Alcoa’s (metals and manufacturing) earning report.  The company’s quarterly sales were down over 10%, noting weakness globally but especially in China, where production growth was well below projections.  Profits of the S&P 500 companies are projected to fall 4.5% in the third quarter, which would be the biggest decline in six years.  Particular attention will be paid to the larger multinationals like Alcoa that participate heavily in China and other struggling European and Asian countries.  

The yield on the 10-year Treasury fell 1 basis points Friday to 2.10%, up 11 bps for the week and down 8 bps for the year.  Oil settled 20 cents higher Friday to end the day at $49.63, up over 8% for the week. The weekly drill rig report again showed a reduction in the number of drilling rigs in operation, dropping the count to 605.  One year ago the number was 1,609. 

Next week’s economic calendar highlights include September inflation data on Wednesday and Thursday, September retail sales on Wednesday, weekly jobless claims on Thursday and a consumer confidence reading on Friday.  Expect inflation to remain in check, retail sales to show a slight improvement from August, weekly jobless claims to settle in the 260-270,000 range (from 263,000 this week) and consumer confidence to rise.

In observance of the Columbus Day holiday, fixed income markets will be closed on Monday though equity markets and our offices will be open.

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Ulland Investment Advisors

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