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The Weekly Market Snapshot from Frazier Allen

Weekly Market Snapshot

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services

The week began with concerns on the international front. International Monetary Fund (IMF) managing Director, and potential French presidential candidate, Dominique Strauss-Kahn, was arrested over the weekend on charges of sexual battery and resigned a few days later. The change in leaderships at the IMF (and potential struggle to select a new #1) adds to the uncertainty about Europe’s debt crisis and the news added to the recent volatility in the financial markets. The minutes of the April 26-27 FOMC meeting had a slightly hawkish tilt. The minutes showed that “a majority of participants now judged the inflation risks as weighted to the upside” and “a few members viewed the increase in inflation risks as suggesting that economic conditions might well evolve in a way that would warrant the Committee taking steps toward less-accommodative policy sooner than currently anticipated.” Note that the presidents of all 12 Fed district banks participate at the FOMC meetings, but only five are members of the FOMC and have a vote on monetary policy.

The economic data reports were generally on the soft side of expectations, but added little clarity to the overall picture. Residential construction activity weakened in April. Industrial production was flat, supported by an increase in utility output, with factory output down 0.4% due to supply-chain disruptions in the auto industry (a consequence of Japan’s earthquake and tsunami). Ex-autos, manufacturing output rose 0.2%. Homebuilder sentiment remained depressed in May and existing home sales fell in April. The Index of Leading Economic Indicators fell 0.3% in April – one month does not a trend make, but the figure was consistent with some slowing in economic growth in the near term.

Next week, once again, the markets could react to any surprises in the data, but the releases aren’t going to add much clarity to the overall economic picture. The estimate of 1Q11 GDP growth is expected to be revised higher. Note that there is typically a high level of noise in new home sales and durable goods orders. The economic calendar will be more meaningful after the Memorial Day holiday.

Indices

  Last Last Week YTD return %
DJIA 12605.32 12695.92 8.88%
NASDAQ 2823.31 2863.04 6.42%
S&P 500 1343.60 1348.65 6.84%
MSCI EAFE 1713.75 1725.10 3.34%
Russell 2000 835.16 847.53 6.57%

Consumer Money Rates

  Last 1-year ago
Prime Rate 3.25 3.25
Fed Funds 0.10 0.19
30-year mortgage 4.60 4.94

Currencies

  Last 1-year ago
Dollars per British Pound 1.619 1.440
Dollars per Euro 1.431 1.234
Japanese Yen per Dollar 81.740 91.530
Canadian Dollars per Dollar 0.969 1.048
Mexican Peso per Dollar 11.653 12.849

Commodities

  Last 1-year ago
Crude Oil 98.44 69.87
Gold 1493.05 1192.93

Bond Rates

  Last 1-month ago
2-year treasury 0.53 0.66
10-year treasury 3.18 3.38
10-year municipal (TEY) 3.99 4.77

Treasury Yield Curve – 5/20/2011 

Treasury Yield Curve – 5/20/2011

S&P Sector Performance (YTD) – 5/20/2011 

S&P Sector Performance (YTD) – 5/20/2011

Economic Calendar

May 24th  —  New Home Sales (April)
May 25th  —  Durable Goods Orders (April)
May 26th  —  Jobless Claims (week ending May 21st)
Real GDP (1Q11, 2nd estimate)
May 27th  —  Personal Income and Spending (April)
Consumer Sentiment (May)
Pending Home Sales Index (April)
May 30th  —  Memorial Day Holiday (markets closed)
May 31st  —  Consumer Confidence (May)
June 1st  —  ISM Manufacturing Index (May)
June 3rd  —  Employment Report (May)
June 21st-22nd  —  FOMC Meeting
Bernanke Press Conference

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 May 19th, 2011.

©2011 Raymond James Financial Services, Inc. member FINRA / SIPC.

Frazier Allen
Frazier Allenhttp://www.raymondjames.com/frazierallen
Frazier Allen, WMS, CRPS, Financial Advisor with F&M Bank 50 Franklin Street | Clarksville, TN 37040 | 931-553-2048
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