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The Weekly Market Snapshot from Frazier Allen for the week of August 28th

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

In his speech at the Kansas City Fed’s annual monetary policy symposium in Jackson Hole, Fed Chairman Bernanke said that “the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus,” adding that “we discussed the relative merits and costs of such tools at our August meeting.” Bernanke said that Fed policymakers “will continue to consider those and other pertinent issues, including of course economic and financial developments, at our meeting in September, which has been scheduled for two days (the 20th and the 21st) instead of one to allow a fuller discussion.” He also noted that Fed officials expect inflation to “settle” over coming quarters at levels at below 2% (the upper end of the Fed’s comfort range. This inflation outlook, along with expectations of continued excess capacity, allowed the Federal Open Market Committee (on August 9) to make explicit the time frame (through the middle of 2013) that short-term interest rates are expected to remain exceptionally low.

The economic data were mixed. New home sales weakened in July. Durable goods orders jumped, reflecting a rebound in aircraft. Reduced seasonal plant shutdowns this year led to a large seasonally-adjusted gain in orders for motor vehicles. Ex-transportation and primary metals orders fell (orders for nondefense capital goods ex-aircraft fell 1.5%). The estimate of real GDP growth for the second quarter was revised to a 1.0% annual rate (vs. +1.3% in the advance estimate. However, the meat and potatoes (consumer spending and business fixed investment) were revised higher (exports and inventories were revised lower).

Next week, fresh figures for August begin to arrive. The focus will be on Friday’s employment data, but the ISM Manufacturing Index also has potential to move the markets. Regional manufacturing surveys have been weak, but declines in some of the major ones have led to expectations that the ISM Manufacturing Index will dip below the breakeven level (50). The Chicago Purchasing Managers Index, one day earlier, will be seen as a preview. The economy needs to generate about 135,000 payroll jobs each month to absorb the growth in the working-age population. The August payroll figure is expected to be a fair degree less than that, trimmed by strike activity and further contractions in state and local government.

Indices

  Last Last Week YTD return %
DJIA 11149.82 10990.58 -3.69%
NASDAQ 2419.63 2380.43 -8.79%
S&P 500 1159.27 1140.65 -7.82%
MSCI EAFE 1457.04 1465.90 -12.14%
Russell 2000 674.42 662.51 -13.94%

Consumer Money Rates

  Last 1-year ago
Prime Rate 3.25 3.25
Fed Funds 0.12 0.17
30-year mortgage 4.32 4.49

Currencies

  Last 1-year ago
Dollars per British Pound 1.629 1.546
Dollars per Euro 1.437 1.267
Japanese Yen per Dollar 77.430 84.510
Canadian Dollars per Dollar 0.986 1.063
Mexican Peso per Dollar 12.433 13.019

Commodities

  Last 1-year ago
Crude Oil 85.20 71.92
Gold 1766.30 1239.58

Bond Rates

  Last 1-month ago
2-year treasury 0.20 0.53
10-year treasury 2.15 3.18
10-year municipal (TEY) 3.37 3.99

Treasury Yield Curve – 8/26/2011

Treasury Yield Curve – 8/26/2011

S&P Sector Performance (YTD) – 8/26/2011

S&P Sector Performance (YTD) – 8/26/2011

Economic Calendar

August 29th

 — 

Personal Income and Spending (July)
Pending Home Sales Index (July)
August 30th

 — 

S&P/C-S Home Price Index (June)
Consumer Confidence (August)
FOMC Minutes (August 9th)
August 31st

 — 

ADP Payroll Estimate (August)
Chicago Purchasing Managers Index (August)
September 1st

 — 

Jobless Claims (week ending August 27th)
ISM Manufacturing Index
Motor Vehicle Sales (August)
September 2nd

 — 

Employment Report (August)
September 5th

 — 

Labor Day (markets closed)
September 6th

 — 

ISM Non-Manufacturing Index (August)
September 7th

 — 

Fed Beige Book
September 14th

 — 

Retail Sales (August)
September 15th

 — 

Consumer Price Index (August)
September 20th-21st

 — 

FOMC Policy Meeting (press briefing?)
November 1st-2nd

 — 

FOMC Policy Meeting
Bernanke Press Briefing

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 25th, 2011.

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

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