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Clarksville, TN – Fear of Fed tapering hung over the stock market. Market participants believed that the November Employment Report would be the deciding factor for whether the Fed will begin to reduce the pace of asset purchases this month.
The jobs report was stronger than anticipated, but not as bad as feared. Payrolls rose by 203,000, a bit more than expected (median forecast: +180,000), with a mild net revision of +8,000 to the two previous months. Job gains were relatively broad-based.The unemployment rate sank to 7.0%, vs. 7.3% in October and 7.2% in September, with improvement concentrated in the teenage and young adult categories. Average weekly hours edged up. Average hourly earnings rose 0.2%, up 2.0% y/y (in comparison, the CPI rose 0.9% over the 12 months ending in October).
The rest of the week’s economic figures were mixed. The ISM Manufacturing Index surprised to the upside, but the nonmanufacturing survey disappointed. Real GDP rose at a 3.6% annual rate in the second estimate for 3Q13 (vs. +2.8% in the advance estimate), but most of that was due to faster inventory growth (which is likely to slow in 4Q13, subtracting significantly from GDP growth).
The Fed’s Beige Book described growth as “modest to moderate” – the same phrase used in the four previous assessments. The Beige Book noted that hiring remained “modest” across the 12 Federal Reserve districts. Wage and price pressures were “contained.”
Next week, the economic calendar is thin, with a clear focus on Thursday’s retail sales data. Investors may be encouraged by the mini budget deal coming out of Washington. Details are still pending, but a compromise should avoid another government shutdown and unnecessary showdown over the debt ceiling.
This isn’t exactly what the budget committee was tasked with (a long-term budget deal), but it should suffice. Spending is expected to be authorized for the full fiscal year (and possibly FY15), preserving the level of sequester cuts, but allowing more leeway in deciding what gets cut. There should be increases in revenue, but not through higher tax rates (closing loopholes, etc.).
Consumer Money Rates
Treasury Yield Curve – 12/6/2013
S&P Sector Performance (YTD) – 12/6/2013
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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 December 5th, 2013.
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