Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Recent economic data have remained consistent with a moderate pace of economic growth in the near term. Europe and the fiscal cliff remain the two key uncertainties and the major downside risks to the growth outlook. Responding to these downside risks, the Federal Reserve extended Operation Twist through the end of the year.
Officials are poised to do more, which may make QE3 a close call for the policy meeting later this month (decision due on August 1st). For further information, refer to the Monthly Economic Outlook by Raymond James Chief Economist, Scott Brown.
Next week, the economic calendar is packed. Retail sales are expected to have been relatively soft in June. The Consumer Price Index should reflect lower gasoline prices (partly offset by the seasonal adjustment). The Fed Chairman’s semi-annual monetary policy testimony was traditionally a big deal for the markets, but thanks to increased Fed communication, we have the Fed’s economic projections and the June FOMC minutes already in hand. Still, the markets will be listening for any clues about whether the Fed may opt for QE3 at the next policy meeting.Indices
| Last | Last Week | YTD return % | |
| DJIA | 12597.43 | 12896.67 | 2.91% |
| NASDAQ | 2860.05 | 2976.12 | 10.02% |
| S&P 500 | 1335.91 | 1367.58 | 6.14% |
| MSCI EAFE | 1410.93 | 1429.12 | -1.94% |
| Russell 2000 | 787.99 | 817.43 | 6.57% |
Consumer Money Rates
| Last | 1-year ago | |
| Prime Rate | 3.25 | 3.25 |
| Fed Funds | 0.18 | 0.09 |
| 30-year mortgage | 3.65 | 4.50 |
Currencies
| Last | 1-year ago | |
| Dollars per British Pound | 1.543 | 1.591 |
| Dollars per Euro | 1.220 | 1.400 |
| Japanese Yen per Dollar | 79.309 | 79.329 |
| Canadian Dollars per Dollar | 1.019 | 0.967 |
| Mexican Peso per Dollar | 13.459 | 11.793 |
Commodities
| Last | 1-year ago | |
| Crude Oil | 86.08 | 97.41 |
| Gold | 1571.73 | 1566.89 |
Bond Rates
| Last | 1-month ago | |
| 2-year treasury | 0.25 | 0.28 |
| 10-year treasury | 1.50 | 1.59 |
| 10-year municipal (TEY) | 3.09 | 3.06 |
Treasury Yield Curve – 7/13/2012
S&P Sector Performance (YTD) – 7/13/2012
Economic Calendar
| July 16th |
— |
Retail Sales (June) Empire State Manufacturing Index (July) Business Inventories (July) |
| July 17th |
— |
Consumer Price Index (June) Industrial Production (June) Homebuilder Sentiment (July) Bernanke Monetary Policy Testimony (Senate) |
| July 18th |
— |
Building Permits, Housing Starts (June) Bernanke Monetary Policy Testimony (House) Fed Beige Book |
| July 19th |
— |
Jobless Claims (week ending July 14th) Philly Fed Index (July) Leading Economic Indicators (June) Existing Home Sales (June) |
| July 27th |
— |
Real GDP (2Q12 advance + benchmark revisions) |
| August 1st |
— |
Fed Policy Decision (No Bernanke press briefing) |
| August 3rd |
— |
Employment Report (July) |
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 July 12th, 2012.
©2012 Raymond James Financial Services, Inc. member FINRA / SIPC.
