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The Weekly Market Snapshot from Frazier Allen for the week of August 7th

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

Leaders in Washington reached an agreement to raise the debt ceiling, averting a self-inflicted financial disaster. However, with the debt ceiling nonsense out of the way, investors were free to focus on the U.S. economic recovery and Europe’s debt crisis – and the outlook doesn’t look so hot. The U.S. economy has slowed and the downside risks to the growth outlook have increased. Although it still appears that the U.S. is likely to avoid a recession, the odds have increased. The European debt crisis appears to be enveloping Spain and Italy, which will be much bigger problems for the big banks in Europe. Stocks fell broadly around the world.

The July Employment report was consistent with the broad range of economic data releases of the last few weeks, suggesting a subpar economic recovery, but not a recession. Nonfarm payrolls rose by 117,000 – well above the +85,000 consensus forecast and, more importantly, not as bad as feared. The unemployment rate edged down to 9.1%, but would have risen if not for people exiting the labor force. After digesting the report, the stock market gave up gains made in an initial (positive) reaction to the report. Bonds yields fell. The dollar was mixed following efforts by the Swiss and the Japanese to weaken their currencies.

Next week, the economic calendar thins out. The focus is likely to be on the Fed policy meeting. The Fed could announce a few small steps to support growth. Another round of asset purchases (what most people would call “QE3” is likely to be discussed, but it’s too soon to expect the Fed to pull the trigger on such a move – that would depend on a renewed threat of deflation, and we’re not there yet. Retail sales should have improved in July, but the pace is likely to be unimpressive.

Indices

  Last Last Week YTD return %
DJIA 11383.68 12240.11 -1.67%
NASDAQ 2556.39 2766.25 -3.64%
S&P 500 1200.07 1300.67 -4.58%
MSCI EAFE 1547.43 1684.27 -6.69%
Russell 2000 726.80 799.34 -7.25%

Consumer Money Rates

  Last 1-year ago
Prime Rate 3.25 3.25
Fed Funds 0.10 0.13
30-year mortgage 4.31 4.57

Currencies

  Last 1-year ago
Dollars per British Pound 1.630 1.588
Dollars per Euro 1.416 1.316
Japanese Yen per Dollar 78.770 86.250
Canadian Dollars per Dollar 0.975 1.019
Mexican Peso per Dollar 11.986 12.545

Commodities

  Last 1-year ago
Crude Oil 86.63 82.47
Gold 1654.75 1199.58

Bond Rates

  Last 1-month ago
2-year treasury 0.29 0.53
10-year treasury 2.49 3.18
10-year municipal (TEY) 3.82 3.99

Treasury Yield Curve – 8/5/2011

Treasury Yield Curve – 8/5/2011

S&P Sector Performance (YTD) – 8/5/2011

S&P Sector Performance (YTD) – 8/5/2011

Economic Calendar

August 9th

 — 

Small Business Optimism (July)
Productivity (2Q11, preliminary)
FOMC Meeting (no press conference)
August 11th

 — 

Jobless Claims (week ending August 6th)
Trade Balance (June)
August 12th

 — 

Retail Sales (July)
Consumer Sentiment (mid-August)
Business Inventories (June)
August 15th

 — 

Empire St. Manf. Index (August)
Homebuilder Sentiment (August)
August 16th

 — 

Import Prices (July)
Building Permits, Housing Starts (July)
Industrial Production (July)
August 17th

 — 

Producer Price Index (July)
August 18th

 — 

Consumer Price Index (July)
Existing Home Sales (July)
Philadelphia Fed Index (August)
Leading Economic Indicators (July)
September 2nd

 — 

Employment Report (August)
September 5th

 — 

Labor Day (markets closed)

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 August 4th, 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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