Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Anxieties about Europe intensified as borrowing costs in Italy ramped up, generating worries about the country’s ability to roll over its existing debt. U.S. investors relaxed toward the end of the week on signs that the Italian government was making some progress on austerity efforts. However, a further meltdown in Italy is a huge risk for the euro zone and for the global financial system. Much depends on whether the ECB will signal a more substantial backstop for Italian debt, but that does not seem likely at this point.
The economic data calendar was sparse. The trade deficit was narrower than expected in September, implying (all else equal) an upward revision to the third quarter GDP growth figure (+2.5% in the advance estimate). However, wholesale inventories were much lower than anticipated, implying (all else equal) and downward revision to the GDP estimate. Consumer sentiment improved in the mid-November assessment. Jobless claims moved below the 400,000 level, but the figures are a bit suspect at this time of year due to difficulties in the seasonal adjustment.
Next week, there are a number of potentially market-moving data releases, including the retail sales and CPI reports – but none of these is likely alter the bigger picture of the economy (that is, growth is expected to be enough to absorb the growth in the working-age population, but not strong enough to make up much of the ground lost during the downturn). The news out of Europe will remain important and investors may are likely to pay more attention to the Joint Select Committee on Deficit Reduction (aka “the super committee”), which has a November 23 deadline to come up with $1.2 trillion in deficit reduction over the next 10 years (and the committee’s progress has been disappointing so far).
Indices
| Â | Last | Last Week | YTD return % |
| DJIA | 11893.79 | 12044.47 | 2.73% |
| NASDAQ | 2625.15 | 2697.97 | -1.04% |
| S&P 500 | 1239.69 | 1261.15 | -1.43% |
| MSCI EAFE | 1423.78 | 1464.76 | -14.14% |
| Russell 2000 | 725.50 | 751.53 | -7.42% |
Consumer Money Rates
| Â | Last | 1-year ago |
| Prime Rate | 3.25 | 3.25 |
| Fed Funds | 0.07 | 0.20 |
| 30-year mortgage | 4.09 | 4.39 |
Currencies
| Â | Last | 1-year ago |
| Dollars per British Pound | 1.595 | 1.609 |
| Dollars per Euro | 1.361 | 1.374 |
| Japanese Yen per Dollar | 77.630 | 82.530 |
| Canadian Dollars per Dollar | 1.017 | 1.002 |
| Mexican Peso per Dollar | 13.549 | 12.249 |
Commodities
| Â | Last | 1-year ago |
| Crude Oil | 97.78 | 87.81 |
| Gold | 1752.95 | 1395.33 |
Bond Rates
| Â | Last | 1-month ago |
| 2-year treasury | 0.23 | 0.20 |
| 10-year treasury | 2.06 | 2.15 |
| 10-year municipal (TEY) | 3.45 | 3.37 |
Treasury Yield Curve – 11/11/11
S&P Sector Performance (YTD) – 11/11/2011
Economic Calendar
| November 15th |
 — |
Producer Price Index (October) Retail Sales (October) Empire State Manufacturing Index (November) |
| November 16th |
 — |
Consumer Price Index (October) Industrial Production (October) |
| November 17th |
 — |
Jobless Claims (week ending November 12th) Building Permits, Housing Starts (October) Philadelphia Fed Index (November) |
| November 18th |
 — |
Leading Economic Indicators (October) |
| November 21st |
 — |
Existing Home Sales (October) |
| November 22nd |
 — |
Real GDP (3Q11, 2nd estimate) FOMC Minutes (November 1st-2nd) |
| November 23rd |
 — |
Personal Income, Spending (October) Durable Goods Orders (October) Consumer Sentiment (November) |
| November 24th |
 — |
Thanksgiving Holiday (markets closed) |
| December 2nd |
 — |
Employment Report (November) |
| December 13th |
 — |
FOMC Policy Decision (no press briefing) |
| December 26th |
 — |
Christmas Holiday (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 November 10th, 2011.
©2011 Raymond James Financial Services, Inc. member FINRA / SIPC.
