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Weekly Market Update for October 18, 2019

by JM Hanley

The Dow was down on Friday, falling 256 points to close at 26,770. For the week, the Dow was down 0.2% (SP500 +0.5%) and year-to-date is now up 14.8% (SP500 +19.1%). The yield on the 10-year Treasury (an important interest-rate indicator) rose two basis points, closing at 1.75%.  The price of crude oil fell 2% this week to $54 a barrel – up 20% YTD.

Last Friday, the Administration agreed to suspend tariffs on Chinese goods scheduled to come into effect this week in exchange for China’s purchasing more US agricultural goods. That seemed to signal that negotiations were going well, but plenty of specifics remain to be ironed out. Rumblings about a Congressional resolution supporting Hong Kong’s protestors have apparently upset Beijing. Elsewhere, British and European negotiators settled on a new Brexit deal, though its passage tomorrow in Parliament looks far from assured. Settling this long-running drama would ease some uncertainty across the Atlantic, and could provide a badly-needed fillip to the Continent’s moldering growth prospects.

Economic data this week painted a muddled, but slightly negative, picture of the US economy. Manufacturing data, like industrial production and business inventories, came in slightly worse than expected. Uncertainty due to the trade war seemed mostly to blame. Consumers may share the sentiment, as retail sales didn’t increase as expected last month. More positively, lower interest rates continue to catalyze more home-buying activity, and builders have picked up the pace of new construction as a result. Data on China’s economy is similarly mixed. The economy grew more slowly than expected in the third quarter, but industrial production and retail sales picked up in September.

The first week of third quarter earnings reports went better than feared. Results at JP Morgan were among the highlights. Investment banking and foreign exchange trading were particularly impressive, though lower interest rates have hurt profits from lending. At Goldman Sachs, success on the trading desk was offset by poor performance of the firm’s equity holdings and less lucrative investment banking.  Shares of United Health rose after better-than-expected profits proved the value of the insurer’s diversified business model. Investors had been concerned the cost of healthcare would spike next year, but the management said growth would continue apace.

The pace of earnings will accelerate next week. Centene, Euronet, Amazon, Visa, and 3M are all scheduled to report.

*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.