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Weekly Market Snapshot from Frazier Allen for the week of February 3rd, 2013

 

Weekly Market Snapshot

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

Scott J. Brown Ph.D., Chief Economist Raymond James Investment ServicesWith so many economic reports, some surprises were likely. Real GDP fell at a 0.1% annual rate in the advance estimate for 4Q12, smacked down by slower inventory growth and a 22.2% drop in defense spending (otherwise, GDP would have risen 2.5%). Consumer spending rose at a 2.2% pace in 4Q12, while business fixed investment advanced 8.4%. Residential construction added 0.4 percentage points to GDP. Exports fell.

Consumer Confidence tanked in January, while the Consumer Sentiment Index improved. The ISM Manufacturing Index was stronger than anticipated. Personal income jumped 2.6%, reflecting a 34.3% spike in dividend income and earlier bonus payments. Spending rose 0.2%. The PCE Price Index was flat overall (+1.3%) and ex-food and energy (+1.4% y/y) – trending well below the Fed’s 2% goal.

The Federal Open Market Committee did not alter its forward guidance on the overnight lending rate, nor did it curtail its asset purchase program (QE3). The FOMC noted that “growth in economic activity paused in recent months,” but said that was due to the weather and other transitory factors. Note that the December FOMC minutes showed that “several” Fed policymakers were concerned about QE3’s possible impact on financial stability – there was no evidence of that in the latest policy statement, but we should see this discussion continue in the minutes for the January meeting (released in a few weeks).

Next week, the economic calendar thins out considerably. The ISM Non-Manufacturing Index has some market-moving potential. On Thursday, Fed Governor Jeremy Stein will speak on “financial stability” – so the Fed’s internal debate on QE may be going public.

Indices

  Last Last Week YTD return %
DJIA 13860.58 13825.33 5.77%
NASDAQ 3142.13 3130.38 4.06%
S&P 500 1498.11 1494.82 5.04%
MSCI EAFE 1687.33 1664.41 5.20%
Russell 2000 902.09 900.19 6.21%

Consumer Money Rates

  Last 1-year ago
Prime Rate 3.25 3.25
Fed Funds 0.16 0.10
30-year mortgage 3.42 3.87

Currencies

  Last 1-year ago
Dollars per British Pound 1.587 1.575
Dollars per Euro 1.358 1.307
Japanese Yen per Dollar 91.330 76.290
Canadian Dollars per Dollar 0.997/td> 1.004
Mexican Peso per Dollar 12.709 13.025

Commodities

  Last 1-year ago
Crude Oil 97.49 98.48
Gold 1662.65 1730.98

Bond Rates

  Last 1-month ago
2-year treasury 0.27 0.26
10-year treasury 1.96 1.93
10-year municipal (TEY) 3.05 3.06

Treasury Yield Curve – 02/01/2013

Treasury Yield Curve – 02/01/2013

S&P Sector Performance (YTD) – 02/01/2013

S&P Sector Performance (YTD) – 02/01/2013

Economic Calendar

February 3rd

 —

Super Bowl XLVII
February 5th

 —

ISM Non- Manufacturing Index (January)
February 7th

 —

Jobless Claims (week ending February 2nd)
Productivity (4Q12, preliminary)
Fed Governor Stein Speaks (“financial stability”)
February 13th

 —

Retail Sales (January)
February 15th

 —

Industrial Production (January)
February 18th

 —

Presidents Day Holiday (markets closed)
February 20th

 —

FOMC minutes (January 29th-30th)
March 8th

 —

Employment Report (February)
March 20th

 —

FOMC Policy Decision, 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 January 31st, 2013.

©2013 Raymond James Financial Services, Inc. member FINRA / SIPC.


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