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Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were mixed, but generally stronger than expected. Retail sales popped 0.8% (overall and ex-autos) in July, following weak reports in April, May, and June. The CPI was flat overall in July and up only mildly ex-food & energy. However, higher prices of food and energy are expected to show through more in the report for August. Industrial production advanced, fueled by strength in autos (seasonal adjustment issues?) and hot weather (higher output of utilities).
Residential construction figures were mixed. Housing starts slipped, but single-family building permits (which are reported more accurately) rose further.
Europe and the fiscal cliff remain significant risks to the U.S. economic growth outlook, but fear has subsided to some extent in the last few weeks. Lawmakers are discussing the fiscal cliff and are aware of the economic consequences. European leaders have continued to show a strong resolve about keeping the Eurozone together, although we need to see some action in September.
Next week, the economic calendar thins out a bit. Home sales (new and existing) are expected to rebound in July, following disappointing results in June. On Wednesday, the Congressional Budget Office will release revised budget projections. These projections are based on current law, which includes the full fiscal cliff. The FOMC policy meeting minutes may shed some light on the Fed’s current thinking and provide some insight into the likelihood of further policy action. However, following the recent string of better economic data, the odds of QE3 have decreased.
Consumer Money Rates
Treasury Yield Curve – 8/17/2012
S&P Sector Performance (YTD) – 8/17/2012
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 August 9th, 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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