Market Commentary by Scott J. Brown, Ph.D., Chief Economist
- Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
The economic data remained generally soft. Retail sales and industrial production fell in June. Consumer sentiment dropped sharply in mid–July. The Consumer Price Index (CPI) fell 0.1% in June (+1.1% year–over–year) but was up 0.2% ex-food and energy (+0.1588% before rounding). The CPI was up 0.9% year–over–year – and at a 0.6% annual rate in the first half of 2010. Earnings reports were generally good, helping the stock market along earlier in the week. But the major market averages faded on Friday.
The June 22nd-23rd Federal Open Market Committee (FOMC) minutes showed that policymakers believed that “the economic outlook had softened somewhat and a number of members saw the risks to the outlook as having shifted to the downside.” Still, “the changes to the outlook were viewed as relatively modest and as not warranting policy accommodation beyond that already in place.” However, “members noted that in addition to continuing to develop and test instruments to exit from the period of unusually accommodative monetary policy, the Committee would need to consider whether further policy stimulus might become appropriate if the outlook were to worsen appreciably.“
Next week, the focus is expected to be on Federal Reserve Chairman Ben Bernanke’s monetary policy testimony (to the Senate Banking Committee on Wednesday and to the House Financial Services Committee on Thursday). This testimony is often a big deal for the markets, but there is less suspense following the release of the June policy meeting minutes – which showed policymakers lowering the projections for growth and inflation. The residential construction and existing home sales data have some potential to move the markets. The Leading Economic Indicators (LEI) index is likely to have declined in June.
Indices
| Â | Last | Last Week | YTD return % |
|---|---|---|---|
| DJIA | 10359.31 | 10138.99 | -0.66% |
| NASDAQ | 2249.08 | 2175.4 | -0.88% |
| S&P 500 | 1096.48 | 1070.25 | -1.67% |
| MSCI EAFE | 1449.4 | 1410.4 | -8.31% |
| Russell 2000 | 634.62 | 620.27 | 1.48% |
Consumer Money Rates
| Â | Last | 1-year ago |
|---|---|---|
| Prime Rate | 3.25 | 3.25 |
| Fed Funds | 0.25 | 0.25 |
| 30-year mortgage | 4.59 | 5.41 |
Currencies
| Â | Last | 1-year ago |
|---|---|---|
| Dollars per British Pound | 1.536 | 1.641 |
| Dollars per Euro | 1.288 | 1.409 |
| Japanese Yen per Dollar | 87.450 | 94.320 |
| Canadian Dollars per Dollar | 1.041 | 1.119 |
| Mexican Peso per Dollar | 12.819 | 13.577 |
Commodities
| Â | Last | 1-year ago |
|---|---|---|
| Crude Oil | 76.76 | 61.54 |
| Gold | 1208.15 | 938.85 |
Bond Rates
| Â | Last | 1-month ago |
|---|---|---|
| 2-year treasury | 0.58 | 0.71 |
| 10-year treasury | 2.94 | 3.21 |
| 10-year municipal (TEY) | 4.42 | 4.91 |
Treasury Yield Curve – 7/16/2010
S&P Sector Performance Charts – 7/16/2010
Economic Calendar
| July 21 |  — | Bernanke Monetary Policy Testimony (Senate) |
| July 22 |  — | Jobless Claims (week ending July 17) Bernanke Monetary Policy Testimony (House) Existing Home Sales (June) Leading Economic Indicators (June) |
| July 27 |  — | Consumer Confidence (July) |
| July 28 |  — | Durable Goods Orders (June) Fed Beige Book |
| July 30 |  — | Real GDP (2Q10, advance estimate) |
| August 6 |  — | Employment Report (July) |
| August 10 |  — | FOMC Meeting |
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 10th, 2010.
©2010 Raymond James Financial Services, Inc. member FINRA / SIPC.
