Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic calendar was thin. The Institute for Supply Management (ISM) Non-Manufacturing Index fell more than expected in June, consistent with a moderation in the pace of the recovery – still positive, just somewhat slower – but the stock market took the news in stride. The U.S. Department of the Treasury refrained from declaring China a currency manipulator, but indicated that China’s official currency, the renminbi, remains undervalued and promised to closely monitor its appreciation.
The stock market rallied in the new quarter, partly because it wasn’t battered by a further string of disappointing economic news and partly because a lot of disappointing economic news is already baked into the cake.
Next week, there are several potentially market-moving data releases, but most of the weight will likely be placed on the reports concerning retail sales (Wednesday) and the Consumer Price Index (Friday). Retail sales in June are expected to be limited by a drop in unit vehicle sales and by lower gasoline prices. The CPI is likely to be about flat in June, reflecting lower gasoline prices – the year-over-year pace should drop to about 1.3% (from 2.0%) as higher energy prices roll off the back end of the 12-month calculation.
After conducting more than 40 regional meetings on small business lending, the Federal Reserve will hold a conference to sum things up on Monday. Chairman Ben Bernanke will deliver opening comments. The lack of expansion in small business credit – which appears to be as much a function of demand as supply – is a key concern for the Fed. The Federal Open Market Committee (FOMC) meeting minutes on Wednesday will garner more attention than usual, as senior Fed officials revised their projections of growth, unemployment and inflation at the June meeting (most likely, officials revised lower their forecasts of near-term gross domestic product [GDP] growth and saw risks to the outlook as tilted more to the downside).
|Last||Last Week||YTD return %|
Consumer Money Rates
|Dollars per British Pound||1.512||1.600|
|Dollars per Euro||1.265||1.385|
|Japanese Yen per Dollar||88.400||92.290|
|Canadian Dollars per Dollar||1.045||1.171|
|Mexican Peso per Dollar||12.819||13.530|
|10-year municipal (TEY)||4.54||4.65|
Treasury Yield Curve – 7/9/2010
S&P Sector Performance Charts – 7/9/2010
|July 12||—||Bernanke Speaks (“credit to small business”)|
|July 15||—||Jobless Claims (week ending July 10)
Producer Price Index (June)
Empire State Manufacturing Index (July)
Industrial Production (June)
Fed Nomination Hearing (Yellen, Diamond, Raskin)
Philly Fed Index (July)
|Mid-July (TBD)||—||Bernanke Monetary Policy Testimony|
|July 22||—||Existing Home Sales (June)
FOMC Minutes (June 22-23)
|July 30||—||Real GDP (2Q10, advance estimate)|
|August 6||—||Employment Report (July)|
|August 10||—||FOMC Meeting|
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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 June 10th, 2010.