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The Weekly Market Snapshot from Frazier Allen for the week of April 1st, 2012

 

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 a speech by Fed Chairman Bernanke, where he noted that “further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies.”Many interpreted this to mean that further asset purchases (QE3) were still on the table (if somewhat unlikely). Concerns about softer global growth seemed to weigh against equity market sentiment through the middle of the week. Quarter-end likely window-dressing added a bit to market volatility. Bond yields fell.

The economic data reports were mixed. The personal income and spending figures were probably the most important, but were not fully appreciated by the markets.

A month ago, inflation-adjusted consumer spending (roughly 70% of Gross Domestic Product) was reported flat in November, December, and January – suggesting an unexpectedly soft first quarter. However, inflation-adjusted spending was reported to have risen 0.5% in February, and December and January figures were revised higher. As a result, consumer spending appears to be on a 2.0% to 2.5% track (annual rate) in 1Q12, vs. the 1.0% to 2.0% pace seen a month ago. Economists are expected to revise their first quarter GDP growth forecasts higher.

Next week, key labor market data will arrive at the end of the week. The stock market will be closed for the Good Friday holiday, but the bond market will be open half the day. An unusually mild winter boosted payroll figures for January and February. There may be some payback (a somewhat slower rate of job growth) in March and April. However, the trend is expected to remain strong. While weather has certainly played a roll, easier bank credit to consumers and small businesses has been an important factor fueling the expansion. Higher gasoline prices are a threat, but the impact depends on the magnitude and duration of the increase (and the impact usually arrives with a lag).

Indices

  Last Last Week YTD return %
DJIA 13145.82 13046.14 7.60%
NASDAQ 3095.36 3063.32 18.82%
S&P 500 1403.28 1392.78 11.58%
MSCI EAFE 1542.83 1553.81 9.22%
Russell 2000 832.22 821.44 12.32%

Consumer Money Rates

  Last 1-year ago
Prime Rate 3.25 3.25
Fed Funds 0.10 0.14
30-year mortgage 3.97 4.85

Currencies

  Last 1-year ago
Dollars per British Pound 1.592 1.599
Dollars per Euro 1.327 1.408
Japanese Yen per Dollar 82.400 82.450
Canadian Dollars per Dollar 0.998 0.976
Mexican Peso per Dollar 12.821 11.964

Commodities

  Last 1-year ago
Crude Oil 102.78 104.79
Gold 1651.39 1416.75

Bond Rates

  Last 1-month ago
2-year treasury 0.33 0.29
10-year treasury 2.15 2.01
10-year municipal (TEY) 3.29 2.84

Treasury Yield Curve – 3/30/2012

Treasury Yield Curve – 3/30/2012

S&P Sector Performance (YTD) – 3/30/2012

S&P Sector Performance (YTD) – 3/30/2012

Economic Calendar

April 1st

 —

ISM Manufacturing Index (March)
April 2nd

 —

FOMC Minutes (March 13th)
Motor Vehicle Sales (March)
April 4th

 —

ADP Payroll Estimate (March)
ISM Non-Manufacturing Index (March)
April 5th

 —

Jobless Claims (week ending March 31st)
April 6th

 —

Good Friday (stock market closed, bonds open half a day)
Employment Report (March)
April 11th

 —

Fed Beige Book
April 12th

 —

Producer Price Index (March)
April 13th

 —

Consumer Price Index (March)
Industrial Production (March)
April 25th

 —

FOMC Policy Decision
Bernanke Press Briefing
April 27th

 —

Real GDP (1Q12, advance estimate)
June 20th

 —

Bernanke Press Briefing

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 March 29th, 2012.

©2012 Raymond James Financial Services, Inc. member FINRA / SIPC.


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