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Clarksville Weekly Market Snapshot from Frazier Allen for the week of June 29th, 2014

 

F&M Investment Services - Raymond James - Clarksville, TNClarksville, TN – GDP growth was revised to a -2.9% annual rate in the third estimate for 1Q14 (vs. -1.0% in the 2nd estimate and +0.1% in the advance estimate).

Prior estimates showed that a slower rate of inventory accumulation and a wider trade deficit subtracted considerably from overall growth – the third estimate showed a somewhat larger subtraction of 3.2 percentage points from the headline GDP growth figure (Domestic Final Sales, GDP less net exports and the change in inventories, rose at a 0.3% annual rate).

Frazier Allen

Frazier Allen

A decrease (rather than an increase) in consumer spending on healthcare helped push the headline GDP figure lower. Investors were willing to dismiss the bad 1Q14 GDP number. After all, it was at odds with almost all other pieces of economic data, especially nonfarm payrolls and weekly jobless claims. There’s no indication of recession here.

However, personal income and spending figures for May suggested a restrained rebound in 2Q14. Inflation-adjusted consumer spending fell 0.1% in May, following a 0.2% decline in April.

These figures will be revised (annual benchmark revisions to the monthly figures are due on August 1), but taken at face value, they suggest that inflation-adjusted consumer spending (70% of GDP) is tracking at about a 1.4% annual rate – a lot less than was expected a month ago (despite good strength in motor vehicle sales). One major concern heading onto the second half of the year is that average wage gains are barely keeping pace with inflation – that limits the potential improvement in consumer spending growth.

Next week, we get fresh June figures in the holiday-shortened week. The focus is expected to be on the employment report, which has been moved up a day due to Friday’s holiday. Note that seasonal adjustment can be tricky in June, due to the end of the school year – so take any surprises with a grain of salt (they may be reversed in the report for July).

Janet Yellen will speak on “financial stability” to the International Monetary Fund on Wednesday – given the audience, this is unlikely to be a “message to the markets” kind of speech. The markets will close early on Thursday, ahead of the three-day weekend.

Indices

Last Last Week YTD return %
DJIA 16846.13 16921.46 1.63%
NASDAQ 4379.05 4359.326 4.85%
S&P 500 1957.22 1959.48 5.89%
MSCI EAFE 1963.27 1992.69 2.49%
Russell 2000 1180.71 1184.03 1.47%

Consumer Money Rates

Last 1-year ago
Prime Rate 3.25 3.25
Fed Funds 0.09 0.08
30-year mortgage 4.17 4.46

Currencies

Last 1-year ago
Dollars per British Pound 1.703 1.536
Dollars per Euro 1.361 1.302
Japanese Yen per Dollar 101.720 97.710
Canadian Dollars per Dollar 1.071 1.049
Mexican Peso per Dollar 13.015 13.252

Commodities

Last 1-year ago
Crude Oil 105.84 95.50
Gold 1310.00 1229.32

Bond Rates

Last 1-month ago
2-year treasury 0.45 0.38
10-year treasury 2.52 2.48
10-year municipal (TEY) 3.62 3.74

Treasury Yield Curve – 6/27/2014

Treasury Yield Curve – 6/27/2014

S&P Sector Performance (YTD) – 6/27/2014

S&P Sector Performance (YTD) – 6/27/2014

Economic Calendar

June 30th Chicago PM Index (June)
Pending Home Sales Index (May)
July 1st ISM Manufacturing Index (June)
Motor Vehicle Sales (June(
World Cup: Belgium vs. USA (June)
July 2nd ADP Payroll Estimate (June)
Yellen Speaks (“Financial Stability”)
July 3rd Jobless Claims (week ending June 28)
Employment Report (June)
Trade Balance (May)
ISM Non-Manufacturing Index (June)
Early Market Close
July 4th Independence Day Holiday (markets closed)
Mid-July (tbd) Yellen Monetary Policy Testimony
July 30th Real GDP (2Q14 advance and benchmark revisions)
FOMC Policy Decision, (no press conference)
September 17th FOMC Policy Decision, Yellen Press Conference

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 June 26th, 2014.

©2014 Raymond James Financial Services, Inc. member FINRA / SIPC.


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