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Weekly Market Update for September 1, 2017

The Dow finished up on Friday, rising 39 points to close at 21,988. For the week, the Dow rose 0.8% (S&P 500 +1.4%) and year-to-date is now up 11.3% (S&P 500 +10.6%).  A jobs report that was about as expected, along with good numbers on consumer spending and manufacturing, nudged the indices higher.  There was little news from Washington this week.  The administration made its opening pitch for tax reform, but most details of the plan are still being negotiated. The yield on the 10-year Treasury fell two basis points on the week, closing at 2.15%.

US economic data offered a mixed picture this week. Hurricane Harvey’s long-term economic impact will likely be minimal.  August’s jobs report, released Friday, earned the most attention. Nonfarm payrolls increased by 156,000 during the month. That was about seventeen percent less than what markets had expected.  However, initial estimates for August are typically inaccurate because of issues related to the summertime season.  The number has been revised substantially upwards in years past.  Elsewhere in the jobs report, unemployment rose slightly to 4.4%.  It had been expected to remain at 4.3%. 

Average hourly earnings increased, though not as much as economists had predicted. This unusual combination – healthy labor market growth accompanied by paltry wage gains – prolongs a pattern that has puzzled investors and vexed federal policymakers for the past eighteen months. The probability that the Federal Reserve will raise interest rates at its December meeting fell to thirty-nine percent after the report’s release. Equities climbed as a result.

Despite sluggish earnings growth, monthly numbers released Monday revealed consumer confidence was higher than expected, and had increased since July.  Personal spending increased this month, at a faster clip than in the month before.  And the ISM manufacturing index, which tracks industrial activity, rose to its highest level since June of 2011.  The only bad news came in auto sales. They were down across the board in August. Most analysts blamed Hurricane Harvey, since Houston accounts for a little under two percent of domestic car sales.

The price of crude oil fell 1% this week, to $47 a barrel – down 12% YTD. US crude stockpiles showed a larger-than-expected draw – of 5.3m barrels – and product inventories of gasoline were flat while diesel rose (+0.8m). Hurricane Harvey curtailed a sizeable amount of production in the Eagle Ford play in south central Texas while also curbing imports/exports and shutting down refinery infrastructure.  Those effects likely were not captured in this week’s inventory results, but could materially distort next week’s numbers.

Next week’s economic calendar is comparatively light.  Highlights include July factory orders on 09-5, durable goods orders on 09/05, initial jobless claims on 09/7, and wholesale inventories on 09/08. 

Have a great weekend!

J.M. Hanley

 *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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