Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were mixed. The ISM Manufacturing Index weakened. Unit autos sales roared back in November from the Sandy-related decline in October. The Employment Report was moderate. Nonfarm payrolls rose by 146,000, more than expected, but the two previous months were revised a net 49,000 lower.
The unemployment rate fell to 7.7% (from 7.9%), but the drop was due entirely to a drop in labor force participation. The Bureau of Labor Statistics said that Hurricane Sandy did not have a significant impact on the numbers, but details of the Household Survey showed a spike in the number of people unable to get to work due to adverse weather.There was little accomplished on the fiscal cliff. Both sides continued to dig in, but Republicans appeared to be less united and more disorganized. If a deal is going to get done before the end of the year, we’ll need to see it happen relatively soon.
Next week, the focus is expected to be on the Fed policy meeting. The Federal Open Market Committee is widely expected to announce that it will add Treasury purchases to QE3 beginning in 2013. The Fed is currently buying $45 billion per month in long-term Treasury as part of Operation Twist, financed by sales of short-term Treasuries out of its portfolio (leaving the size of the balance sheet unchanged).
In QE3, the Fed would finance such purchases with newly created money. Fed officials will debate whether to add economic thresholds to its forward guidance (such as a specific level of unemployment), but any changes to the guidance would more likely be made at a future meeting. Inflation figures will reflect lower gasoline prices. November retail sales and industrial production are expected to rebound from Sandy’s hit to the October figures.
|Last||Last Week||YTD return %|
Consumer Money Rates
|Dollars per British Pound||1.604||1.558|
|Dollars per Euro||1.295||1.340|
|Japanese Yen per Dollar||82.380||77.720|
|Canadian Dollars per Dollar||0.992||1.012|
|Mexican Peso per Dollar||12.925||13.496|
|10-year municipal (TEY)||2.66||3.00|
Treasury Yield Curve – 12/7/2012
S&P Sector Performance (YTD) – 12/7/2012
|Trade Balance (October)|
|FOMC Policy Decision, Bernanke Press Briefing|
|Producer Price Index (November)
Retail Sales (November)
|Consumer Price Index (November)
Industrial Production (November)
|Building Permits, Housing Starts (November)|
|Real GDP (3Q12, 3rd estimate)|
|Christmas Holiday (markets closed)|
|New Year’s Holiday (markets closed)|
|Employment Report (December)|
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 November 29th, 2012.