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Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The “Crisis in Cyprus” dampened the U.S. stock market mood early in the week. Why is Cyprus important? Its economy is a little bigger than Scranton. However, like Iceland and Ireland, it has an outsized banking system, several times larger than the overall economy. Even a moderate contraction in the banking system can have a huge impact.
The biggest fear is contagion. The decision to tie aid to a haircut on deposits led to fears of runs on the banks in other countries, but there’s been little evidence of that so far.
There were no surprises from Fed policymakers. The Federal Open Market Committee did not change its forward guidance (on the federal fund rate target, still not expected to start rising until 2015), nor did it alter its asset purchase plans (still $85 billion per month).However, Chairman Bernanke said that the FOMC could vary the pace of asset purchases amid progress towards its objectives or if the assessment of the efficacy and costs of the program were to change. He added that changes to the pace of asset purchases would not be made frequently.
The economic data showed strength in residential construction, although homebuilder sentiment declined. Housing is improving, but sales have been restrained by supply constraints and problems with appraisals and mortgage credit.
Next week, reports on durable goods orders and new home sales will help fill in the 1Q13 economic picture. The markets will be closed on Friday, but the government will release personal income and spending numbers for February (which should help in gauging the current strength on the household sector).
Consumer Money Rates
Treasury Yield Curve – 03/22/2013
S&P Sector Performance (YTD) – 03/22/2013
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 March 21st, 2013.
TopicsBritish Pound, Crude Oil, Cyprus, DJIA, Euro, gold, Iceland, Japanese Yen, Mexican Peso, MSCI EAFE, Nasdaq, Raymond James Investment Services, Russell 2000, S&P 500, Scott J. Brown, U.S. Stock Market, Weekly Market Snapshot
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