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The Weekly Market Snapshot from Frazier Allen

Weekly Market Snapshot

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services

Most of the economic data reports were better than expected. The ISM surveys were strong, reflecting solid growth in new orders and employment, albeit with a further increase in input price pressures. The January Employment Report was confusing. Nonfarm payrolls rose by a disappointing 36,000 (median forecast was about +145,000) and average weekly hours edged down, but that likely reflected the impact of poor weather. Manufacturing payrolls rose by 49,000 and factory hours advanced, consistent with the inventory story that came out of the 4Q10 GDP report (that is, lean inventories suggest gains in production in the near term).

The unemployment rate fell unexpectedly to 9.0%, but not all of the drop could be explained by a drop in labor force participation. The employment-to-population ratio, a better measure of slack in the labor market, edged only slightly higher (suggesting improvement, but not as much as the drop in the unemployment rate would seem to suggest). In his speech to the National Press Club, Fed Chairman Bernanke was optimistic that the pace of the economic recovery would improve, but cautioned that it would be years before the job market returned to normal.

The markets were bewildered by the January job market data. While weather and seasonal adjustment added to the uncertainty of the data, the report was consistent with an improving economic outlook. Other information has signaled a very low rate of job destruction and suggests that new hiring may be starting to pick up. The bond market seemed to figure it out, sending bond yields higher. The stock market has continued to struggle with good economic news.

Next week, the economic calendar is relatively thin. Bernanke will testify to the House Budget Committee on the economic outlook on Wednesday. Friday’s trade figures could imply some revision to the 4Q11 GDP growth estimate, but won’t tell us much about growth going forward. The following week will be more eventful, with key data on inflation, retail sales, and industrial production.

Indices

  Last Last Week YTD return %
DJIA 12062.26 11989.83 4.19%
NASDAQ 2753.88 2755.28 3.81%
S&P 500 1307.1 1299.54 3.93%
MSCI EAFE 1722.97 1715.65 3.90%
Russell 2000 798.63 795.43 1.91%

Consumer Money Rates

  Last 1-year ago
Prime Rate 3.25 3.25
Fed Funds 0.18 0.15
30-year mortgage 4.89 5.11

Currencies

  Last 1-year ago
Dollars per British Pound 1.615 1.592
Dollars per Euro 1.365 1.391
Japanese Yen per Dollar 81.450 91.120
Canadian Dollars per Dollar 0.990 1.061
Mexican Peso per Dollar 12.039 12.953

Commodities

  Last 1-year ago
Crude Oil 90.54 76.98
Gold 1354.22 1109.40

Bond Rates

  Last 1-month ago
2-year treasury 0.74 0.64
10-year treasury 3.63 3.40
10-year municipal (TEY) 5.42 5.29

Treasury Yield Curve – 2/4/2011 

Treasury Yield Curve – 2/4/2011

S&P Sector Performance (YTD) – 2/4/2011 

S&P Sector Performance (YTD) – 2/4/2011

Economic Calendar

February 9th  —  Bernanke Testimony (“Economic Outlook”)
February 10th  —  Jobless Claims (week ending February 5th)
February 11th  —  Trade Balance (December)
Consumer Sentiment (mid-January)
February 15th  —  Retail Sales (January)
February 16th  —  Producer Price Index (January)
Building Permits, Housing Starts (January)
Industrial Production (January)
FOMC Minutes (January 25th-26th)
February 17th  —  Consumer Price Index (January)
February 21st  —  Presidents’ Day (markets closed)
March 4th  —  Employment Report (February)
March 15th  —  FOMC Meeting

Treasury Yield Curve – 1/28/2011

Treasury Yield Curve – 1/28/2011

S&P Sector Performance (YTD) – 1/28/2011

S&P Sector Performance (YTD) – 1/28/2011

Economic Calendar

January 31st — Personal Income and Spending (December)
Chicago Purchasing Managers Index (January)
February 1st — ISM Manufacturing Index (January)
Construction Spending (December)
Motor Vehicle Sales (January)
February 2nd — Announce Corporate Layoff Intentions (January)
ADP Payroll estimate (January)
February 3rd — Jobless Claims (week ending January 29th)
Nonfarm Productivity (4Q10, preliminary)
ISM Non-Manufacturing Index (January)
Bernanke Speech (and Q&A) to National Press Club
February 4th — Employment Report (January)
February 15th — Retail Sales (January)
February 17th — Consumer Price Index (January)
February 21st — Presidents Day (markets closed)
March 15th — 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 February 3rd, 2011.

©2011 Raymond James Financial Services, Inc. member FINRA / SIPC.

Frazier Allen
Frazier Allenhttp://www.raymondjames.com/frazierallen
Frazier Allen, WMS, CRPS, Financial Advisor with F&M Bank 50 Franklin Street | Clarksville, TN 37040 | 931-553-2048
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