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Weekly Market Update for September 7, 2018

by JM Hanley

The Dow was down on Friday, falling seventy-nine points to close at 25,917. For the week, the Dow fell 0.2% (SP500 -1.0%) and year-to-date is now up 4.8% (SP500 +7.4%). The yield on the 10-year Treasury (an important interest-rate indicator) rose eight basis points, closing at 2.94%.

Mega-cap tech stocks suffered significant declines this week. The nominal reason was a Senate hearing on election interference that went poorly for Facebook and Twitter. Additionally, the Department of Justice announced an inquiry into political bias on social media platforms. More to the point, Big Tech equities have ridden upwards for years uninterrupted.  Investors have still been willing to pay up to own these businesses, which are growing faster than almost any others. But steep multiples and ambitious growth estimates might have exhausted their optimism.

The week brought no reprieve in tensions across the Pacific. Plans to impose tariffs on an additional $200 billion in Chinese imports will likely come to pass. And today the Administration hinted it might impose duties on $267 billion more. Meanwhile, a deal with America’s northern neighbor remains elusive. Disagreements over dairy exports and intellectual property stand in the way of a NAFTA rewrite with Canada. A text of the agreement is due in Congress by the end of the month.

The labor market continues to surge unabated, political turmoil notwithstanding. Payrolls increased by over 200,000 last month. Wages are up about 3% from August of last year. But labor force participation (the percent of adults who are employed or looking for work) dropped a bit, and unemployment has settled around 4%. Only tariffs marred an otherwise rosy report: jobs in manufacturing and autos went down for the first time in a year. The rising cost of materials also bears some blame.

The price of crude oil fell 3% this week to $67 a barrel – up 12% YTD. US crude stockpiles showed a larger-than-expected draw – of 4.3m barrels – while product inventories of gasoline (+1.8m bls) and diesel (+3.1m bls) both rose. Oil prices briefly spiked Tuesday morning on rig evacuations in the Gulf of Mexico by Anadarko, Chevron, and Exxon in advance of Tropical Depression Gordon. But prices then fell throughout the middle of the week as refining operations on the Gulf Coast were largely unaffected, crude product inventories edged higher, and India suggested they would look to cut oil consumption and promote electric vehicles. Broader trade headlines also didn’t help the crude demand picture.

Highlights on next week’s economic calendar include PPI on 9/12 and CPI on 9/13 (both measures of inflation), retail sales on 9/14, and consumer sentiment on 9/14.

*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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