Weekly Market Snapshot from Frazier Allen for the week of February 24th, 2013

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

The FOMC minutes from the January 29th-30th policy meeting showed a greater level of discomfort regarding the Fed’s large-scale asset purchases. “Many participants,” suggesting a majority, “expressed some concerns about potential costs and risks arising from further asset purchases.”

Several participants “discussed the possible complications that additional purchases could cause for the eventual withdrawal of policy accommodation, a few mentioned the prospect of inflationary risks, and some noted that further asset purchases could foster market behavior that could undermine financial stability.” Several others “argued that the potential costs of reducing or ending asset purchases too soon were also significant, or that asset purchases should continue until a substantial improvement in the labor market outlook had occurred.”

The stock market took a little time to think about it, but then fell following the FOMC minutes. All else equal, an earlier end to QE3 would take some of the air out of share prices. However, while Fed officials may be increasingly uncomfortable with asset purchases, they aren’t likely to pull the plug on the program anytime soon.

The economic data were mostly inconsequential, although the Philly Fed Index surprised sharply to the downside.

Next week, focus is expected to be on Bernanke’s semiannual monetary policy testimony to Congress. However, the week will be bookended by Italian elections on Sunday and Monday and by the sequester at the end of the week. In between, we’ll receive a ton of economic data. Italian elections are expected to result in a divided government, making reforms more difficult, and reigniting the euro area crisis. Bernanke will be representing all Fed officials, not just himself, so he’ll likely lay out the potential costs and benefits of QE3. The estimate of 4Q12 GDP growth should be revised higher. Durable goods orders likely plunged, reflecting a sharp drop in volatile aircraft orders. The ISM Manufacturing Index is likely to have softened a bit in February.

Indices

	Last	Last Week	YTD return %
DJIA	13880.62	13973.39	5.93%
NASDAQ	3131.49	3198.66	3.71%
S&P 500	1502.42	1521.38	5.35%
MSCI EAFE	1650.26	1672.63	2.88%
Russell 2000	905.40	923.76	6.60%

Consumer Money Rates

	Last	1-year ago
Prime Rate	3.25	3.25
Fed Funds	0.16	0.08
30-year mortgage	3.53	3.95

Currencies

	Last	1-year ago
Dollars per British Pound	1.526	1.580
Dollars per Euro	1.320	1.325
Japanese Yen per Dollar	92.890	79.730
Canadian Dollars per Dollar	1.019/td>	0.996
Mexican Peso per Dollar	12.767	12.762

Commodities

	Last	1-year ago
Crude Oil	92.44	105.84
Gold	1579.04	1751.98

Bond Rates

	Last	1-month ago
2-year treasury	0.25	0.26
10-year treasury	1.98	1.91
10-year municipal (TEY)	2.89	2.89

Treasury Yield Curve – 02/22/2013

S&P Sector Performance (YTD) – 02/22/2013

Economic Calendar

February 26th	—	S&P/Case-Shiller Home Price Index (December) New Home Sales (January) Consumer Confidence (February) Bernanke Monetary Policy Testimony (Senate)
February 27th	—	Durable Goods Orders (January) Pending Home Sales Index (January) Bernanke Monetary Policy Testimony (House)
February 28th	—	Jobless Claims (week ending February 23rd) Real GDP (4Q12, 2nd estimate) Chicago PM Index (February)
March 1st	—	Personal Income, Spending (January) Consumer Sentiment (February) ISM Manufacturing Index (February) Motor Vehicle Sales (February)
March 5th	—	ISM Non-Manufacturing Index (February)
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 February 14th, 2013.

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