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Clarksville, TN – Retail sales were flat in July, reflecting a weak start to 3Q14. Industrial production rose 0.4%, restrained by lower output of utilities (cooler than normal temperatures). Manufacturing output rose 1.1%, reflecting a 10.1% jump in auto production.
However, seasonal adjustment in autos is tricky in July (prior to seasonal adjustment, auto production fell 18.0%, vs. -26.8% in July 2013). Seasonal plant closings were much more moderate this year, trimming weekly jobless claims as well. The Job Opening and Labor Market Turnover Survey data for June showed gradual improvement in hiring and quit rates (although both remain well below normal levels).Real GDP growth in the euro area was flat in 2Q14, and Ukraine/Russia tensions are expected to be a drag in 3Q14. Japan contracted at a 6.8% annual rate, following a 6.1% pace in the previous quarter (reflecting the timing of a tax increase).
U.S. financial markets were driven largely by shifting Fed policy expectations and by geopolitical tensions (mostly in Ukraine). Military action in the Ukraine contributed to a flight to safety into U.S. Treasuries, pushing yield sharply lower.
Next week, the focus will be on the Fed. The FOMC minutes (released Wednesday) may provide some insight into the Fed’s debate, but Yellen’s Jackson Hole speech on Friday will be critical. The markets appear to be anticipating a “dovish” tone from Yellen.
However, investors looking for Yellen to provide solid clues about the exact timing of the first Fed rate hike will be disappointed. Rather, Yellen’s speech should be viewed as the definitive guide on how monetary policy will respond to labor market developments in the months ahead.
Consumer Money Rates
Treasury Yield Curve – 8/15/2014
S&P Sector Performance (YTD) – 8/15/2014
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 August 14th, 2014.
Frazier Allen, WMS, CRPS, Financial Advisor with F&M Bank
Web Site: http://www.raymondjames.com/frazierallen
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