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Weekly Market Snapshot from Frazier Allen for the week of May 26th, 2013

Weekly Market Snapshot

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment ServicesThe financial markets were confused by the April 30th – May 1st FOMC minutes, which noted that “a number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently strong and sustained growth.”

That’s not a majority view. In his testimony before the Joint Economic Committee, Fed Chairman Bernanke gave a balanced assessment but strongly suggested that monetary policy would unlikely be changed anytime soon. Bernanke told Congress that it was doing fiscal policy wrong, significantly restraining the pace of recovery in the near term, while doing little to address the long-term problems in the budget outlook. Stocks sold off sharply following the FOMC minutes, but recovered.

The federal debt ceiling went back into effect on May 19th. In a letter to Congress, Treasury Secretary Lew said that his department has the ability (though extraordinary measures) to fund the government at least through Labor Day.

The economic data were mostly better than expected. Existing home sales improved, although the pace continued to be restrained by credit and inventory issues. New home sales picked up, but results varied across regions. Jobless claims fell back after spiking in the previous week. Durable goods orders rose more than expected, but monthly changes in these data are volatile.

Next week, there are a few potentially market-moving data releases in the holiday-shortened week. Consumer confidence is likely to improve, although sentiment varies considerably across the income scale. The estimate of real GDP growth for 1Q13 is likely to be revised slightly higher, but the underlying story shouldn’t change much. Personal income and spending figures will help fill in the picture for 2Q13 GDP growth.

Income is expected to have been relatively soft in April, restrained by weak wage income growth. Spending is likely to have been weak (note that cold weather lead to a jump in the consumption of household energy in March, which should unwind in April). The PCE Price Index is expected to fall further, with the year-over-year increase pushing below 1%. Core inflation is trending lower.

Indices

  Last Last Week YTD return %
DJIA 15294.50 15233.22 16.72%
NASDAQ 3459.42 3465.24 14.57%
S&P 500 1650.51 1650.47 15.73%
MSCI EAFE 1734.35 1772.81 8.13%
Russell 2000 984.28 985.34 15.89%

Consumer Money Rates

  Last 1-year ago
Prime Rate 3.25 3.25
Fed Funds 0.09 0.15
30-year mortgage 3.59 3.78

Currencies

  Last 1-year ago
Dollars per British Pound 1.512 1.569
Dollars per Euro 1.293 1.256
Japanese Yen per Dollar 101.900 79.410
Canadian Dollars per Dollar 1.031 1.027
Mexican Peso per Dollar 12.479 14.012

Commodities

  Last 1-year ago
Crude Oil 93.96 89.60
Gold 1388.07 1544.56

Bond Rates

  Last 1-month ago
2-year treasury 0.25 0.22
10-year treasury 2.01 1.67
10-year municipal (TEY) 3.17 2.95

Treasury Yield Curve – 05/24/2013

Treasury Yield Curve – 05/24/2013

S&P Sector Performance (YTD) – 05/24/2013

S&P Sector Performance (YTD) – 05/24/2013

Economic Calendar

May 27th

 —

Memorial Day Holiday – markets closed
May 28th

 —

S&P/Case-Shiller Home Price Index (March)
Consumer Confidence (May)
May 30th

 —

Jobless Claims (week ending May 25th)
Real GDP (1Q13, 2nd estimate)
Pending Home Sales Index (April)
May 31st

 —

Personal Income and Spending (April)
Chicago Purchasing Managers Index (May)
Consumer Sentiment (May)
June 3rd

 —

ISM Manufacturing Index (May)
June 5th

 —

ISM Non-Manufacturing Index (May)
Fed Beige Book
June 7th

 —

Employment Report (May)
June 19th

 —

FOMC Policy Decision, 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 May 23rd, 2013.

©2013 Raymond James Financial Services, Inc. member FINRA / SIPC.

Frazier Allen
Frazier Allenhttp://www.raymondjames.com/frazierallen
Frazier Allen, WMS, CRPS, Financial Advisor with F&M Bank 50 Franklin Street | Clarksville, TN 37040 | 931-553-2048
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