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The Weekly Market Snapshot from Frazier Allen for the week of September 9th, 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 were mixed. The ISM Manufacturing Index disappointed in August, but the Non-Manufacturing Index was a bit stronger than expected. Unit auto sales picked up. The ADP estimate of private-sector payrolls rose by 201,000. However, the BLS nonfarm payroll figure rose 96,000 (median forecast: +135,000), with a net revision of -42,000 to the two previous months. The unemployment rate fell to 8.1% (from 8.3%), but that was due to a drop in labor force participation (I wouldn’t read much into that, it’s well within the normal range of uncertainty).

The European Central Bank unveiled its bond-buying program (dubbed Outright Monetary Transactions). The OMT is designed to address dislocations in the government bond market (that is, higher borrowing costs in Italy and Spain). It’s not monetary stimulus, but it should improve the transmission of existing monetary policy. Bond purchases will be unlimited, concentrated in maturities of three to five years, and conditional on fiscal progress. The OMT averts a near-term crisis, but doesn’t solve the region’s underlying problems.

Next week, the calendar remains busy. The important economic data releases bunch up on Friday. However, the German Constitutional Court ruling and the Fed’s policy decision will carry much more weight. German justices will rule on the legality of the European Stability Mechanism and the Fiscal Pact. Fed officials were close to providing further accommodation at the previous policy meeting, but preferred to wait for more information.

Many FOMC members felt that further action would be warranted absent evidence of “a substantial and sustainable” improvement in the economy. Bernanke’s Jackson Hole speech noted that the labor market stagnation was “a grave concern.” The softer-than-expected employment report for August should push the Fed over the edge. Expect the Federal Open Market Committee to extend the forward guidance (lengthening the period for which officials expect short-term interest rates to remain exceptionally low). Additional asset purchases (QE3) are now seen as more likely than not.


  Last Last Week YTD return %
DJIA 13292.00 13000.71 8.79%
NASDAQ 3135.81 3048.71 20.37%
S&P 500 1432.12 1399.48 13.88%
MSCI EAFE 1484.75 1463.96 5.11%
Russell 2000 837.95 808.64 13.10%

Consumer Money Rates

  Last 1-year ago
Prime Rate 3.25 3.25
Fed Funds 0.17 0.13
30-year mortgage 3.54 4.18


  Last 1-year ago
Dollars per British Pound 1.593 1.595
Dollars per Euro 1.263 1.399
Japanese Yen per Dollar 78.940 77.550
Canadian Dollars per Dollar 0.983 0.991
Mexican Peso per Dollar 13.058 12.516


  Last 1-year ago
Crude Oil 95.53 86.02
Gold 1703.10 1878.00

Bond Rates

  Last 1-month ago
2-year treasury 0.24 0.26
10-year treasury 1.62 1.64
10-year municipal (TEY) 2.98 2.89

Treasury Yield Curve – 9/7/2012

Treasury Yield Curve – 9/7/2012

S&P Sector Performance (YTD) – 9/07/2012

S&P Sector Performance (YTD) – 9/07/2012

Economic Calendar

September 11


Small Business Optimism Index (August)
Trade Balance (July)
September 12


German Court rules on European Stability Mechanism
Import Prices (August)
FOMC Meeting begins
September 13


Jobless Claims (week ending September 8)
Producer Price Index (August)
Fed Policy Meeting
Bernanke Press Briefing
September 14


Consumer Price Index (August)
Retail Sales (August)
Industrial Production (August)
Consumer Sentiment (mid-September)
September 19


Building Permits, Housing Starts (August)
October 3


First Presidential Debate
October 5


Employment Report (September)

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 September 6th, 2012.

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

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