Market Commentary by Scott J. Brown, Ph.D., Chief Economist for Raymond James Investment Services
The economic data were generally soft, consistent with a lackluster-to-moderate pace of economic growth. The Federal Reserve’s Beige Book noted that “economic activity continued to improve since the last report,” although most Fed districts described the pace of growth as “modest.” Retail sales were much weaker than anticipated, falling by 1.2% in May, down 1.1% excluding autos. Weakness was concentrated in building materials, which could reflect the acceleration in March and April (due to the pending expiration of the homebuyer tax credit). Ex-autos, building materials and gasoline, sales edged up 0.1% following a 0.2% decline in April.
The stock market mood remained negative, with plenty of intraday volatility. However, Chinese export data suggested that the European debt crisis has not had a major impact on foreign trade. Global equity markets improved on that news and short-covering may have exaggerated the impact in the United States. The disappointing retail sales figures dampened the mood again on Friday.
Next week, there will be plenty of economic data, but none of the reports seems likely to significantly alter – or add much clarity to – the overall economic outlook. Core inflation figures are expected to have remained low in May.
Indices
| Last | Last Week | YTD return % | |
|---|---|---|---|
| DJIA | 10172.53 | 10255.28 | -2.45% |
| NASDAQ | 2218.71 | 2303.03 | -2.22% |
| S&P 500 | 1086.84 | 1102.83 | -2.53% |
| MSCI EAFE | 1354.77 | 1374.52 | -14.30% |
| Russell 2000 | 639.79 | 667.37 | 2.30% |
Consumer Money Rates
| Last | 1-year ago | |
|---|---|---|
| Prime Rate | 3.25 | 3.25 |
| Fed Funds | 0.25 | 0.25 |
| 30-year mortgage | 4.84 | 5.74 |
Currencies
| Last | 1-year ago | |
|---|---|---|
| Dollars per British Pound | 1.466 | 1.633 |
| Dollars per Euro | 1.208 | 1.399 |
| Japanese Yen per Dollar | 91.060 | 98.210 |
| Canadian Dollars per Dollar | 1.033 | 1.111 |
| Mexican Peso per Dollar | 12.744 | 13.636 |
Commodities
| Last | 1-year ago | |
|---|---|---|
| Crude Oil | 75.48 | 71.33 |
| Gold | 1224.45 | 952.93 |
Bond Rates
| Last | 1-month ago | |
|---|---|---|
| 2-year treasury | 0.74 | 0.79 |
| 10-year treasury | 3.25 | 3.47 |
| 10-year municipal (TEY) | 4.68 | 4.83 |
Treasury Yield Curve – 6/11/2010
S&P Sector Performance Charts – 6/11/2010
Economic Calendar
| June 15 | — | Import Prices (May) Empire State Manufacturing Index (June) |
| June 16 | — | Producer Price Index (May) Residential Construction (May) |
| June 17 | — | Jobless Claims (week ending June 12) Consumer Price Index (May) Real Weekly Earnings (May) Current Account (1Q10) Philadelphia Fed Index (June) Leading Economic Indicators (May) |
| June 22 | — | Existing Home Sales (May) FOMC Policy Meeting Begins |
| June 23 | — | New Home Sales (May) FOMC Policy Decision |
| June 24 | — | Durable Goods Orders (May) |
| July 5 | — | Independence Day Holiday (markets closed) |
Important Disclosures
Past performance is not a guarantee of future results. There are special risks involved with global investing related to market and currency fluctuations, economic and political instability, and different financial accounting standards. The above material has been obtained from sources considered reliable, but we do not guarantee that it is accurate or complete. There is no assurance that any trends mentioned will continue in the future. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Investing involves risk and investors may incur a profit or a loss.
US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the US government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments.
Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.
Material prepared by Raymond James for use by its financial advisors.
The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business June 10th, 2010.
