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Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were mixed. Third quarter GDP growth rose at a 0.4% annual rate in 4Q12 (vs. +0.1% in the 2nd estimate and -0.1% in the advance estimate), but consumer spending growth was revised down (suggesting less momentum into 1Q13). Consumer confidence fell in March, with a sharp drop in expectations (which are thought to be a factor in big-ticket purchases). Durable goods orders jumped, reflecting a rebound in aircraft, but were mixed and generally soft otherwise. Home prices continued to rise. Weekly claims for unemployment benefits rose unexpectedly, which could signal a lagged impact from the payroll tax increase and higher gasoline prices, but it’s only one week.
The Dutch finance minister said that the Cyprus bank bailout could serve as a model for other countries, although he tried to walk those comments back shortly after. Most observers see the Cypriot bailout as a disaster and are now looking at the possibility of similar debacles in the smaller eurozone countries (Malta, Slovenia, perhaps even Luxembourg with its outsized banking industry). It’s going to be another long year for Europe.The stock market continued to embrace the good economic news and downplay the bad. The bond market appears to have weighed the economic data more evenly and sees downside risks from Europe. The two markets often diverge for a while, but there may be reconciliation at some point (somebody’s going to be wrong).
Next week, we’ll get fresh economic figures for March. The ISM surveys have market-moving potential, but the focus should be on the employment data. The early consensus is looking for a moderate gain in nonfarm payrolls (around 195,000), with little impact from the sequester – but remember that monthly changes in payrolls are reported accurate to ±90,000. There’s strong speculation that the impact of the payroll tax hike and higher gasoline prices will show up in the data with a lag – this week’s figures may help to inform that debate.
Consumer Money Rates
Treasury Yield Curve – 03/28/2013
S&P Sector Performance (YTD) – 03/28/2013
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 March 27th, 2013.
Frazier Allen, WMS, CRPS, Financial Advisor with F&M Bank
Web Site: http://www.raymondjames.com/frazierallen
TopicsBritish Pound, Crude Oil, Cyprus, DJIA, Euro, gold, Iceland, Japanese Yen, Mexican Peso, MSCI EAFE, Nasdaq, Raymond James Investment Services, Russell 2000, S&P 500, Scott J. Brown, U.S. Stock Market, Weekly Market Snapshot
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