Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic calendar was thin. The December trade deficit was narrower than expected, implying (all else equal) a small upward revision to the fourth quarter GDP growth figure. Consumer sentiment edged up in the mid-February reading, still relatively low by historical standards.
In testimony to the House Budget Committee, Fed Chairman Bernanke repeated that “we have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold,” but continued to caution that “it will be several years before the unemployment rate has returned to a more normal level.” He said that the Federal Open Market Committee will continue to review its current asset purchase program, but gave no indication that the program (which is set to finish at the end of June) would be cut short.
Investors kept a close eye on developments in Egypt, seemingly encouraged by Egyptian President Mubarak’s resignation. Bond yields came up against a key resistance level and held – on a fundamental basis, long-term interest rates normally rise in an economic recovery, but they shouldn’t rise so fast that they threaten the recovery.
Next week, the economic calendar heats up with a number of important data releases. However, many of the figures may show some impact from the weather. Retail sales are expected to have advanced at a moderate pave in early 2011. Industrial production should be strong (some temperature-related pullback in the output of utilities, but a good pop in manufacturing). Inflation figures should reflect higher energy costs (and some food price increases), elevated pipeline pressures, but relatively mild core inflation at the consumer level.
Indices
| Last | Last Week | YTD return % | |
| DJIA | 12229.29 | 12062.26 | 5.63% |
| NASDAQ | 2790.45 | 2753.88 | 5.19% |
| S&P 500 | 1321.87 | 1307.1 | 5.11% |
| MSCI EAFE | 1725.59 | 1722.97 | 4.06% |
| Russell 2000 | 812.7 | 798.63 | 3.71% |
Consumer Money Rates
| Last | 1-year ago | |
| Prime Rate | 3.25 | 3.25 |
| Fed Funds | 0.16 | 0.13 |
| 30-year mortgage | 5.06 | 5.13 |
Currencies
| Last | 1-year ago | |
| Dollars per British Pound | 1.612 | 1.561 |
| Dollars per Euro | 1.363 | 1.374 |
| Japanese Yen per Dollar | 83.210 | 89.980 |
| Canadian Dollars per Dollar | 0.997 | 1.065 |
| Mexican Peso per Dollar | 12.091 | 13.041 |
Commodities
| Last | 1-year ago | |
| Crude Oil | 86.73 | 74.52 |
| Gold | 1362.02 | 1074.09 |
Bond Rates
| Last | 1-month ago | |
| 2-year treasury | 0.80 | 0.58 |
| 10-year treasury | 3.64 | 3.27 |
| 10-year municipal (TEY) | 5.51 | 5.26 |
Treasury Yield Curve – 2/11/2011
S&P Sector Performance (YTD) – 2/11/2011
Economic Calendar
| February 14th | — | Valentine’s Day |
| February 15th | — | Import Prices (January) Retail Sales (January) Empire State Manufacturing Index (February) Business Inventories (December) Homebuilder Sentiment (February) |
| February 16th | — | Producer Price Index (January) Building Permits, Housing Starts (January) Industrial Production (January) FOMC Minutes (January 25th-26th) |
| February 17th | — | Jobless Claims (week ending February 12th) Consumer Price Index (January) Real Weekly Earnings (January) Philadelphia Fed Index (January) Leading Economic Indicators (January) Bernanke Testimony (financial sector reforms) |
| February 18th | — | Bernanke Panel Discussion (global imbalances) |
| February 21st | — | Presidents’ Day (markets closed) |
| February 22nd | — | Consumer Confidence (February) |
| February 24th | — | Durable Goods Orders (January) |
| March 4th | — | Employment Report (February) |
| 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 10th, 2011.
©2011 Raymond James Financial Services, Inc. member FINRA / SIPC.
