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Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The June Employment Report was weaker than expected, with no bright spots. Nonfarm payrolls rose just 18,000, while the two previous months were revised a net 44,000 lower. Private-sector payrolls rose by 57,000 – a 65,000 average for May and June, following a +240,000 average for February, March, and April. Manufacturing rose by 6,000. Construction fell by 9,000. Retail added 5,200. State and local government payrolls dropped another 25,000 (following -46,000 in May) and the federal government shed 14,000 (ex-census, down 18,000, or 0.6%, from a year ago). The unemployment rate edged up to 9.2% (from 9.1% in May) and the employment/population ratio slipped to 58.2% (vs. 58.4% in May and 58.5% a year ago). Average weekly hours edged down to 34.3 (from 34.4). Average hourly earnings were essentially unchanged (up 1.9% y/y). Average weekly earnings fell 0.3% (+2.1% y/y).
In the last couple of weeks, stock market participants have generally embraced good economic reports and looked past the bad. However, the June jobs data were hard to ignore. Following a stronger-than-expected ADP report of private-sector payrolls, the markets were led to expect a relatively strong jobs report from the Bureau of labor Statistics. This wasn’t the first time that the ADP numbers faked out the market. Caught leaning the other way, equities fell on the news and bonds rallied.
Next week, the focus should be on Bernanke’s monetary policy testimony, although we’re unlikely to learn much new from the Fed chairman (following the release of the Fed’s economic projections and Bernanke’s press briefing in late June). The mid-month economic reports will be important, with an emphasis on the retail sales and CPI reports. Retail sales may be a mixed bag in June (unit auto sales were reported lower, but chain-stores reported better-than-expected results). Lower gasoline prices should dominate the CPI in June, pushing the headline figure slightly into negative territory. While the core CPI picked up in the first half of the year, we should see the pace fall back in the second half.
Consumer Money Rates
Treasury Yield Curve – 7/08/2011
S&P Sector Performance (YTD) – 7/08/2011
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.
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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.
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 July 7th, 2011.
Frazier Allen, WMS, CRPS, Financial Advisor with F&M Bank
Web Site: http://www.raymondjames.com/frazierallen
TopicsCapacity Utilization, Consumer Price Index, Economic Data, European Debt, Federal Open Market Committee, Financial Markets, Frazier Allen, Global Equity Markets, Gross Domestic Product, Index of Leading Economic Indicators, Manufacturing Output, Raymond James, Raymond James Investment Services, Scott J. Brown, Seasonal Adjustment, Short-Term Interest Rates, Volatility, Weekly Market Snapshot
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