Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data reports were mixed. The ISM surveys were on the weak side of expectations. Consumer confidence improved in April, but has remained range-bound with a low trend in recent months. The ADP payroll estimate for April disappointed, but the Employment Report was stronger than anticipated. Nonfarm payrolls rose by 165,000, better than the median forecast (+150,000), but more importantly, not as bad as feared. Payroll figures for February and March were revised a net 114,000 higher.
The unemployment rate edged down to 7.5% (from 7.6% in March and 8.1% a year ago) and for once that was not due to a decrease in labor force participation. The employment/population ratio edged up, but the trend has remained flat over the last few years. The April payroll figures helped boost share prices.
The Federal Open Market Committee left short-term interest rates and the asset purchase program unchanged, no surprise. In its policy statement, the FOMC noted that “fiscal policy is restraining economic growth.” While much of the recent debate has been about when to begin tapering the pace of asset purchases, the FOMC indicated that it is “prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes.” The FOMC minutes helped fuel a rally in bonds, but yields snapped higher following the April employment figures.
Next week, the economic calendar thins out considerably. Fed Chairman Bernanke speaks on Friday regarding “monitoring finance.” One concern for the Fed is that its policies may fuel excessive risk-taking, which could then unravel unpleasantly at some point. Bernanke is expected to give us an update on what the Fed sees, with some implications for when policymakers may begin to taper the rate of asset purchases. Treasury budget figures for April will be released on Friday afternoon. These should show a sizable surplus (reflecting higher tax payments).
|Last||Last Week||YTD return %|
Consumer Money Rates
|Dollars per British Pound||1.553||1.620|
|Dollars per Euro||1.307||1.317|
|Japanese Yen per Dollar||98.030||80.200|
|Canadian Dollars per Dollar||1.008||0.987|
|Mexican Peso per Dollar||12.166||12.952|
|10-year municipal (TEY)||2.91||3.25|
Treasury Yield Curve – 05/03/2013
S&P Sector Performance (YTD) – 05/03/2013
|Jobless Claims (week ending May 4th)|
|Bernanke Speaks (“monitoring finance”)
Treasury Budget (April)
|Retail Sales (April)|
|Retail Sales (April)|
|Producer Price Index (April)
Industrial Production (April)
|Consumer Price Index (April)
Residential Construction (April)
|Memorial Day Holiday – markets closed|
|Employment Report (May)|
|FOMC Policy Decision, Bernanke Press Briefing|
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 May 2nd, 2013.