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Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were mixed. Real GDP growth rose at a 1.8% annual rate in 3Q11 (revised down from +2.5% in the advance estimate and +2.0% in the 2nd estimate), with a downward revision to consumer spending growth. Personal income and spending rose modestly in November. Inflation–adjusted consumer spending (70% of GDP) appears to remain on track for a 2.5% to 3.0% annual pace in 4Q11. However, real disposable income was down 0.1% from a year ago. Residential construction and new home sales improved, helped by the seasonal adjustment.
Jobless claims continued to trend at a moderately low level, reflecting fewer-than-normal seasonal layoffs in manufacturing and construction. Existing home sales rose 4.0% in November, but benchmark revisions significantly reduced the level of reported sales back to 2007. Congress finally got around to extending unemployment insurance benefits and the payroll tax reduction, but only for two months.
The European Central Bank saw strong demand for its Long-Term Refinancing Operation (which allows banks to borrow for up to three years at the overnight rate). The influx of liquidity should help ease strains within Europe’s banking system, but didn’t do much for long-term interest rates. The Italian 10-year yield again flirted with 7%, a level which casts doubt about the country’s ability to roll over its existing debt.
Next week, market activity should be relatively quiet between the holidays. The consumer confidence figure could have some impact if we get a surprise. The calendar will heat up again in the first week of the new year, with a renewed focus on the job market (seasonal adjustment may make the payroll numbers look better than they really are).
Consumer Money Rates
Treasury Yield Curve – 12/23/2011
S&P Sector Performance (YTD) – 12/23/2011
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.
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 December 22nd, 2011.
TopicsCapacity Utilization, Consumer Price Index, Economic Data, European Debt, Federal Open Market Committee, Financial Markets, Frazier Allen, Global Equity Markets, Gross Domestic Product, Index of Leading Economic Indicators, Manufacturing Output, Raymond James, Raymond James Investment Services, Scott J. Brown, Seasonal Adjustment, Short-Term Interest Rates, Volatility, Weekly Market Snapshot
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