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The Weekly Market Snapshot from Frazier Allen for the week of August 28th, 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 FOMC Minutes from the July 31st/August 1st policy meeting showed that Fed officials were worried about the deceleration in economic growth. “Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.” However, “several members noted the benefits of accumulating further information that could help clarify the contours of the outlook for economic activity and inflation as well as the need for further policy action.”

Meeting participants discussed three policy options: extending the forward guidance (the length of time which the Fed expects to keep short-term rate exceptionally low), undertaking another round of asset purchases, and lowering the interest rate the Fed pays on excess bank reserves. Extending the forward guidance appeared to have the least amount of internal resistance, but additional asset purchases had some support.

The economic data were mixed. Home sales rebounded in July. Durable goods orders jumped 4.2%, led by a surge in orders at Boeing. Ex-transportation, orders fell 0.4%, and June was revised to -2.2% (from -1.4%). Ex-transportation, unfilled orders declined and inventories picked up – not a good sign.

Next week, there are plenty of potentially market-moving data releases, but market reaction should be relatively limited ahead of Bernanke’s Jackson Hole speech. Investors will be looking for clearer signals of QE3, but may be disappointed. Governor Romney will deliver his acceptance speech on Thursday evening and presidential candidates normally get a brief pop in the polls after the convention.

Indices

  Last Last Week YTD return %
DJIA 13057.46 13250.11 6.87%
NASDAQ 3053.40 3062.39 17.21%
S&P 500 1402.08 1415.51 11.49%
MSCI EAFE 1495.65 1483.60 5.88%
Russell 2000 806.00 813.08 8.78%

Consumer Money Rates

  Last 1-year ago
Prime Rate 3.25 3.25
Fed Funds 0.15 0.12
30-year mortgage 3.55 4.26

Currencies

  Last 1-year ago
Dollars per British Pound 1.587 1.650
Dollars per Euro 1.258 1.442
Japanese Yen per Dollar 78.490 76.640
Canadian Dollars per Dollar 0.993 0.989
Mexican Peso per Dollar 13.143 12.327

Commodities

  Last 1-year ago
Crude Oil 95.97 85.27
Gold 1673.00 1857.20

Bond Rates

  Last 1-month ago
2-year treasury 0.26 0.24
10-year treasury 1.67 1.50
10-year municipal (TEY) 3.25 2.92

Treasury Yield Curve – 8/24/2012

Treasury Yield Curve – 8/24/2012

S&P Sector Performance (YTD) – 8/24/2012

S&P Sector Performance (YTD) – 8/24/2012

Economic Calendar

August 28th

 —

S&P/C-S Home Price Index (June)
Consumer Confidence (August)
August 29th

 —

Real GDP (2Q12, 2nd estimate)
Pending Home Sales Index (July)
Fed Beige Book
August 30th

 —

Jobless Claims (week ending 8/25th)
Personal Income and Spending (July)
Romney Acceptance Speech
August 31st

 —

Chicago Purchasing Managers Index (August)
Consumer Sentiment (August)
Bernanke Speaks (Jackson Hole)
September 1st

 —

ECB President Draghi speaks (Jackson Hole)
September 3rd

 —

Labor Day Holiday (markets closed)
September 6th

 —

Obama Acceptance Speech
September 7th

 —

Employment Report (August)
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 August 23rd, 2012.

©2012 Raymond James Financial Services, Inc. member FINRA / SIPC.


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