Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data reports were mixed. Real GDP rose at a 3.0% annual rate in the 2nd estimate for 4Q11 (vs. +2.8% in the advance estimate), with slight upward revisions to consumer spending and business fixed investment. The details of the report showed a significant upward revision to estimates of personal income for both 3Q11 and 4Q11 (that news, suggesting that the trend in income wasn’t especially strong, but a lot less weak than previously estimated, went largely unnoticed by the markets).
Consumer spending was softer than expected in February, held down partly by a weather-related decrease in energy consumption (ex-energy, spending rose 0.4%). Still, adjusted for inflation, consumer spending was flat for the third consecutive month in January. Since consumer spending accounts for 70% of overall GDP, these data suggest that first quarter growth may be a lot weaker than was hoped for earlier.
Unit auto sales jumped to a 15.0 million seasonally adjusted annual rate in February, up from 14.1 million in January and 13.0 million a year ago. The February ISM Manufacturing Index fell. Consumer confidence improved, but the survey missed much of the recent increase in gasoline prices.
In his semi-annual testimony on monetary policy, Fed Chairman Bernanke said that recent information “is consistent with growth proceeding, in coming quarters, at a pace close to or somewhat above the pace that was registered during the second half of last year (about 2¼%).” Bernanke noted that “continued improvement in the job market is likely to require stronger growth in final demand and production” and added that “strains in global financial markets pose significant downside risks to the economic outlook.” However, the markets focused on what he didn’t say – that is, there was no hint of further asset purchases in the near term.
Next week, the focus is expected to be on Friday’s job market report. Seasonal adjustment will remain an important factor in February, adding, along with the weather, considerable uncertainty to the payroll estimate. However, it’s unclear whether mild weather has pulled forward gains that normally would have occurred in March and April (as is often the case). More troublesome, high gasoline prices, if sustained, are likely to dampen the pace of hiring for smaller firms.
Indices
 | Last | Last Week | YTD return % |
DJIA | 12980.30 | 12984.69 | 6.24% |
NASDAQ | 2988.97 | 2956.98 | 14.73% |
S&P 500 | 1374.09 | 1363.46 | 9.26% |
MSCI EAFE | 1570.58 | 1559.01 | 11.19% |
Russell 2000 | 815.22 | 829.23 | 10.03% |
Consumer Money Rates
 | Last | 1-year ago |
Prime Rate | 3.25 | 3.25 |
Fed Funds | 0.12 | 0.16 |
30-year mortgage | 3.93 | 4.83 |
Currencies
 | Last | 1-year ago |
Dollars per British Pound | 1.595 | 1.628 |
Dollars per Euro | 1.332 | 1.381 |
Japanese Yen per Dollar | 81.140 | 81.860 |
Canadian Dollars per Dollar | 0.985 | 0.974 |
Mexican Peso per Dollar | 12.739 | 12.094 |
Commodities
 | Last | 1-year ago |
Crude Oil | 108.84 | 99.63 |
Gold | 1717.68 | 1428.55 |
Bond Rates
 | Last | 1-month ago |
2-year treasury | 0.27 | 0.23 |
10-year treasury | 1.98 | 1.93 |
10-year municipal (TEY) | 2.93 | 2.66 |
Treasury Yield Curve – 3/02/2012
S&P Sector Performance (YTD) – 3/02/2012
Economic Calendar
March 5th |
 — |
ISM Non-Manufacturing Index (February) |
March 7th |
 — |
ADP Payroll Estimate (February) |
March 8th |
 — |
Jobless Claims (week ending March 3rd) |
March 9th |
 — |
Employment Report (February) |
March 13th |
 — |
Retail Sales (February) FOMC Policy Decision (no press briefing) |
March 16th |
 — |
Consumer Price Index (February) |
April 6th |
 — |
Good Friday (stock market closed, bonds open half a day) Employment Report (March) |
April 25th |
 — |
FOMC Policy Decision Bernanke Press Briefing |
Important Disclosures
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 March 1st, 2012.
©2012 Raymond James Financial Services, Inc. member FINRA / SIPC.