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Clarksville, TN – The economic data were mixed, but mostly on the strong side of expectations. The ISM’s two monthly surveys surprised to the upside. Motor vehicle sales advanced
However, the August Employment Report disappointed. Nonfarm payrolls rose by 169,000 (vs. a median forecast of +180,000 and expectations of an upside surprise). Figures for June and July were revised a net 74,000 lower (July went from +162,000 to +104,000).
Manufacturing rose by 6,000. Construction was flat. Retail added 44,000. The unemployment rate fell to 7.3%, but that was due to lower labor force participation (the lowest since May 1978).The employment / population ratio edged down to 58.6% (vs. 58.7% in July and 58.4% a year ago). Average weekly hours edged back up, possibly reflecting sequester effects in July. Average hourly earnings rose 0.2% (+2.2% y/y), with average weekly earnings up 0.5% (+2.5% y/y).
Bond yields moved higher amid the stronger pieces of economic information, but fell back on the payroll figures. Higher long-term interest rates have been a restraining factor for the stock market. The August job market figures did not end the debate about whether the Fed will begin to reduce its rate of asset purchases this month (and if so, but how much).
The Fed’s decision is expected to be a close one. However, QE can’t last forever and we ought to see the Fed begin to taper with a small step and a promise to “wait and see” before tapering again.
Next week, the economic calendar is thin until Friday. Following the increase in unit auto sales, retail sales are expected to have risen at a moderately strong pace in August. With a paucity of economic data reports, the financial markets will have other things to focus on (Syria). Congress will be back in session.
Attention is likely to eventually turn to discussions on the budget and debt ceiling. For most market participants, it may be a case of “been there, done that.” Eventually Congress will get its act together to avoid a government shutdown, but the mere prospect of that should be enough to rattle the markets in the next few weeks.
Consumer Money Rates
Treasury Yield Curve – 09/06/2013
S&P Sector Performance (YTD) – 09/06/2013
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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 August 29th, 2013.
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