Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were mixed, but consistent with lackluster-to-moderate growth in the near term (no recession). Headline inflation figures for August were boosted by higher food and energy costs, but the core CPI rose modestly. The 2012 adjustment to Social Security payments will be 3.6%, following no change in the last two years. Housing starts jumped 15% in September, reflecting the usual volatility in the multi-family sector – single-family building permits, the key figure in the report, edged down 0.2%.
The financial markets looked past the economic data, focusing instead on earnings reports and Europe. European leaders said that a plan to address the region’s problems would not be finished by Sunday, but may be completed following a second summit, by Wednesday at the earliest. The global markets have reacted to reports of bickering as the plan is cobbled together, but remains encouraged by the strong rhetoric by Germany’s Merkel and France’s Sarkozy.
Next week, there are a number of potentially market-moving data releases, with a likely focus on the initial estimate of third quarter GDP growth. However, earnings and Europe will remain important factors for the stock market (and the bond market will look partly to the stock market for direction). The advance GDP estimate is always an adventure, as we don’t have all the puzzle pieces. However, the two key components, consumer spending and business fixed investment, are likely to have risen at a moderate pace – positive, but not especially strong.
Indices
 | Last | Last Week | YTD return % |
DJIA | 11541.78 | 11478.13 | -0.31% |
NASDAQ | 2598.62 | 2620.24 | -2.04% |
S&P 500 | 1215.39 | 1203.66 | -3.36% |
MSCI EAFE | 1427.60 | 1449.68 | -13.91% |
Russell 2000 | 696.42 | 698.82 | -11.13% |
Consumer Money Rates
 | Last | 1-year ago |
Prime Rate | 3.25 | 3.25 |
Fed Funds | 0.08 | 0.07 |
30-year mortgage | 4.18 | 4.24 |
Currencies
 | Last | 1-year ago |
Dollars per British Pound | 1.575 | 1.586 |
Dollars per Euro | 1.371 | 1.396 |
Japanese Yen per Dollar | 76.930 | 81.020 |
Canadian Dollars per Dollar | 1.020 | 1.023 |
Mexican Peso per Dollar | 13.723 | 12.409 |
Commodities
 | Last | 1-year ago |
Crude Oil | 85.30 | 81.77 |
Gold | 1611.23 | 1346.33 |
Bond Rates
 | Last | 1-month ago |
2-year treasury | 0.27 | 0.20 |
10-year treasury | 2.22 | 1.74 |
10-year municipal (TEY) | 3.73 | 3.09 |
Treasury Yield Curve – 10/21/2011
S&P Sector Performance (YTD) – 10/21/2011
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Economic Calendar
October 24th |
 — |
Chicago Fed National Activity Index (September) |
October 25th |
 — |
S&P/Case-Shiller Home Price Index (August) Consumer Confidence (October) |
October 26th |
 — |
Durable Goods Orders (September) New Home Sales (September) |
October 27th |
 — |
Jobless Claims (week ending October 21st) Real GDP (3Q11, advance estimate) Pending Home Sales Index (September) |
October 28th |
 — |
Employment Cost Index (3Q11) Personal Income and Spending (September) |
October 31st |
 — |
Chicago Purchasing Managers Index (October) |
November 1st |
 — |
ISM Manufacturing Index (October) |
November 2nd |
 — |
FOMC Policy Decision (+Bernanke press briefing) |
November 4th |
 — |
Employment Report (October) |
November 11th |
 — |
Veterans Day (bond market closed) |
November 24th |
 — |
Thanksgiving Holiday (markets closed) |
December 13th |
 — |
FOMC Policy Decision (no 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 October 6th, 2011.
©2011 Raymond James Financial Services, Inc. member FINRA / SIPC.