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Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were disappointing, but generally consistent with moderate growth in the near term. Nonfarm payrolls rose by a disappointing 80,000 in June, not far from the median forecast of +100,000. Seasonal adjustment is difficult in June, so one should take the figure with a grain of salt. However, it does raise concerns that uncertainties (the election, the fiscal cliff, Europe) may be weighing against new hiring.
There were a number of positive elements in the report. Average weekly hours advanced. Hourly and weekly earnings are now outpacing inflation, which should provide some support for consumer spending growth in the near term. Temp help employment continued to rise, suggesting that employers are still somewhat cautious, but such a rise typically presages a pickup in permanent hiring.The European summit in late June had a better than expected outcome, which means that European leaders dodged another bullet. However, while Europe may have been pushed to the back burner for U.S. investors, it’s still on the stove and likely to heat up again before long. Borrowing costs for Italy and Spain rose during the week, suggesting ongoing concerns.
Next week, the economic calendar thins out. May trade figures will help fill in the picture for 2Q12 GDP growth – however, exports are expected to soften in the months ahead as the global economy cools. The Producer Price Index is expected to reflect disinflationary pressure in June – the seasonal adjustment will offset much of the drop in wholesale gasoline prices. The June 19th-20th FOMC minutes may yield some insights into the likelihood that the Fed will undertake further accommodation (QE3). The following week will be more eventful.
Consumer Money Rates
Treasury Yield Curve – 7/6/2012
S&P Sector Performance (YTD) – 7/6/2012
Treasury Yield Curve – 6/29/2012
S&P Sector Performance (YTD) – 6/29/2012
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.
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 July 5th, 2012.
Frazier Allen, WMS, CRPS, Financial Advisor with F&M Bank
Web Site: http://www.raymondjames.com/frazierallen
TopicsCapacity Utilization, Consumer Price Index, Economic Data, European Debt, Federal Open Market Committee, Financial Markets, Frazier Allen, Global Equity Markets, Gross Domestic Product, Index of Leading Economic Indicators, Manufacturing Output, Raymond James, Raymond James Investment Services, Scott J. Brown, Seasonal Adjustment, Short-Term Interest Rates, Volatility, Weekly Market Snapshot
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