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The Weekly Market Snapshot from Frazier Allen for the week of July 30th, 2012

Weekly Market Snapshot

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment ServicesThe economic data was mediocre, but the financial markets apparently had expected worse. Real GDP rose at a 1.5% annual rate, matching expectations. There were no surprises in the key components – consumer spending growth slowed and business fixed investment was positive but not especially strong. New home sales fell unexpectedly in June, but figures for the three previous months were revised higher.

Jobless claims dropped, but the weekly figures are unreliable in July (due to difficulties adjusting for summer plant retooling shutdowns in the auto industry) – the underlying trend remains moderate. Durable goods orders were mixed in June, with strength in aircraft and weakness in most other sectors.

The Fed policy implications of the economic data were unclear. The data was not strong, but may not have been weak enough to force the Fed’s hand. In their public comments, officials have generally been leaning toward doing more. At next week’s policy meeting, Federal Open Market Committee members will debate the potential benefits (QE3 would have a smaller impact than QE2) and costs (possible interference with normal market functioning) of further action.

Equity markets took encouragement from comments by ECB President Draghi, who said that “the ECB will do whatever it takes to preserve the euro.” Investors took this to mean that the ECB would likely renew its bond-buying program.

Next week, the focus is expected to be on the Fed. There’s little cost in the Fed extending its forward guidance (likely to late 2015) and QE3 (most likely in mortgage-backed securities) remains a possibility. The markets will also be interested in the economic data. The ISM Manufacturing Index (Wednesday) has market-moving potential, but the non-manufacturing data (Friday) will be overshadowed by the Employment Report. Nonfarm payrolls are expected to have risen moderately, but seasonal adjustment could generate some noise (last July, we lost 1.4 million education jobs before seasonal adjustment). The unemployment rate should hold steady and is expected to decrease only gradually over the next several months.

Indices

  Last Last Week YTD return %
DJIA 12887.93 12943.36 5.49%
NASDAQ 2893.25 2965.90 11.06%
S&P 500 1360.02 1376.51 8.14%
MSCI EAFE 1402.63 1434.68 -0.70%
Russell 2000 777.11 802.17 4.88%

Consumer Money Rates

  Last 1-year ago
Prime Rate 3.25 3.25
Fed Funds 0.16 0.10
30-year mortgage 3.55 4.52

Currencies

  Last 1-year ago
Dollars per British Pound 1.568 1.639
Dollars per Euro 1.228 1.450
Japanese Yen per Dollar 78.280 78.070
Canadian Dollars per Dollar 1.010 0.944
Mexican Peso per Dollar 13.421 11.616

Commodities

  Last 1-year ago
Crude Oil 89.39 99.59
Gold 1614.88 1614.85

Bond Rates

  Last 1-month ago
2-year treasury 0.24 0.31
10-year treasury 1.50 1.64
10-year municipal (TEY) 2.85 3.15

Treasury Yield Curve – 7/27/2012

Treasury Yield Curve – 7/27/2012

S&P Sector Performance (YTD) – 7/27/2012

S&P Sector Performance (YTD) – 7/27/2012

Economic Calendar

July 30th

 —

Employment Cost Index (2Q12)
Personal Income and Spending (June + benchmark revisions)
S&P/Case-Shiller Home Price Index (May)
Chicago Purchasing Managers Index (July)
Consumer Confidence (July)
August 1st

 —

ADP Payroll Estimate (July)
Construction Spending (June)
ISM Manufacturing Index (July)
Fed Policy Decision (no Bernanke press briefing)
Motor Vehicle Sales (July)
August 2nd

 —

BOE Policy Meeting
Challenger Layoffs (July)
ECB Policy Meeting
Jobless Claims (week ending 7/28)
August 3rd

 —

Employment Report (July)
ISM Non-Manufacturing Index (July)
August 14th

 —

Retail Sales (July)
September 13th

 —

Fed Policy Meeting
Bernanke Press Briefing

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 26th, 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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