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Weekly Market Update – September 23, 2016

The Dow was down 131 points on Friday to end the week higher amid relief that global central banks did not raise interest rate. For the week the Dow was up 0.76%. Year-to-date the Dow was up 4.8%.

The Federal Open Market Committee (FOMC) meeting last Wednesday was this week’s event of focus. As widely expected, the FOMC held interest rate steady. The committee noted that the case for a rate hike has strengthened, and the risks to the near-term economic outlook appear “roughly balanced”. Federal Reserve Chairwomen Yellen said that the labor market was not overheating and still had “room to run”. Notably, three committee members disagreed and favored an immediate 25bps rate hike. The 2016 Federal Funds rate projection was reduced from 0.9% to 0.6%, the 2017 projection down from 1.6% to 1.1%, and the 2018 projection down from 2.4% to 1.9%. For the week, the U.S. Preferred Stock Index was down 1.2%.

Economic data was mixed this week. Homebuilder confidence jumped in September and the September housing market index was well above expectations. However, August existing-home sales fell for the second consecutive month, down 0.9% from July. Healthy labor markets should create sustained demand, but supply and affordability restrictions continue to keep would-be buyers on the sidelines. Housing starts were weaker after recent strength, down 5.8% from 1,120,000 in July. August building permits registered 1,139,000, missing consensus and coming in 2.3% below the downwardly revised July level.

The price of crude oil rose this week following a larger than expected inventory draw. The EIA’s data showed a draw of 6,200,000 barrels for crude oil, and a draw of 3,000,000 barrels for gasoline. The possibility of a coordinated crude production freeze of OPEC remains next week’s focus. On Monday, the Venezuelan president said that OPEC was close to an agreement on how to stabilize the market. OPEC’s General Secretary Barkindo commented that the cartel, along with non-member producers such as Russia, were likely to reach consensus on a one-year production freeze agreement in an attempt to rebalance the oil market, but decisions won’t be made until OPEC formally meets on November 30th. Crude was up 3.9% for the week.
Next week’s economic calendar highlights include New Home Sales (Sept. 26), Consumer Confidence (Sept. 27), Crude Inventories (Sept. 28), Initial Jobless Claims (Sept. 29), and Personal Income (Sept. 30). Q3 ends September 30th and earning reports will start to be announced two weeks from then.

Have a great weekend,
Yansong Pang

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Ulland Investment Advisors

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