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The Weekly Market Snapshot from Frazier Allen for the week of January 22nd, 2012

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

The data remained consistent with moderate economic growth in the near term. Industrial production rose 0.4% in December, but was held back by a 2.7% decline in the output of utilities (a function of moderate temperatures) – manufacturing output rose 0.9%, partly reflecting a rebound from a soft November. Residential construction figures were mixed, with an improving trend in single-family housing starts and building permits, but softness in the multi-family sector (which is volatile).

Note that seasonal adjustment may have exaggerated the impact of mild weather. The Consumer Price Index was unchanged for a second consecutive month in December, up 3.0% year-over-year (vs. +1.5% in 2010). Ex-food & energy, the CPI rose 0.1%, up 2.2% in 2011 (vs. a historic low of +0.8% in 2010).

Next week, the focus is expected to be on the Fed policy statement and Chairman Bernanke’s press briefing. However, Friday’s GDP estimate has some market-moving potential. The Fed is expected to leave monetary policy unchanged. A number of Fed officials have spoken in recent months about the possibility of another round of asset purchases, which would be made more effective by enhanced communications from the Fed. We’re about to get such enhancements. In addition to releasing the four-times-per-year projections of GDP growth, unemployment, and inflation, the Fed will begin publishing its forecasts of the federal funds rate target.

There’s always a lot of uncertainty in the advance GDP estimate. Investors should focus on the key components (consumer spending and business fixed investment) and the story behind those components. However, market participants rarely look behind the headline figure, which will be revised in February, and again in March, and again in July when annual benchmark revisions are incorporated. GDP growth is expected to have been moderately strong in 4Q11 (somewhere between 2.5% and 3.5%).

Indices

  Last Last Week YTD return %
DJIA 12623.98 12471.02 3.33%
NASDAQ 2788.33 2724.70 7.03%
S&P 500 1314.50 1295.50 4.52%
MSCI EAFE 1464.78 1423.02 3.70%
Russell 2000 782.37 770.49 5.59%

Consumer Money Rates

  Last 1-year ago
Prime Rate 3.25 3.25
Fed Funds 0.08 0.10
30-year mortgage 3.92 4.78

Currencies

  Last 1-year ago
Dollars per British Pound 1.547 1.599
Dollars per Euro 1.293 1.348
Japanese Yen per Dollar 77.230 81.920
Canadian Dollars per Dollar 1.011 0.996
Mexican Peso per Dollar 13.246 12.085

Commodities

  Last 1-year ago
Crude Oil 100.39 90.86
Gold 1652.80 1370.85

Bond Rates

  Last 1-month ago
2-year treasury 0.23 0.28
10-year treasury 1.98 2.00
10-year municipal (TEY) 2.70 2.90

 

Treasury Yield Curve – 1/20/2012

Treasury Yield Curve – 1/20/2012

S&P Sector Performance (YTD) – 1/20/2012

S&P Sector Performance (YTD) – 1/20/2012

Economic Calendar

January 24h

 —

State of the Union Address
January 25th

 —

FOMC Policy Meeting
Bernanke Press Briefing
January 26th

 —

Jobless Claims (week ending January 21st)
Durable Goods Orders (December)
New Home Sales (December)
Leading Economic Indicators
January 27th

 —

Real GDP (4Q11, advance estimate
Consumer Sentiment (January)
January 31st

 —

Consumer Confidence (January)
February 1st

 —

ISM Manufacturing Index (January)
February 3rd

 —

Employment Report (January)

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 December 19th, 2012.

©2012 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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