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Clarksville Weekly Market Snapshot from Frazier Allen for the week of December 7th, 2014

 

F&M Investment Services - Raymond James - Clarksville, TNClarksville, TN – In recent weeks, the U.S. stock market has reacted negatively to bad economic news out of Japan, China, and the euro area and positively to efforts by the corresponding central banks to spur growth. The European Central Bank did not make that extra effort on Thursday.

After strong hints that quantitative easing is on the way, the ECB’s Governing Council disappointed by failing to launch QE. ECB President Draghi indicated that further extraordinary measures could be employed “if needed.” The ECB staff and euro systems have stepped up technical preparations for QE, but Draghi seemed to suggest that there is no haste toward QE.

Frazier Allen

Frazier Allen

The vote (to not implement QE) was not unanimous, which suggests that Draghi does not have the votes – and may not get the votes – for QE.

The November Employment Report was a lot stronger than expected. Nonfarm payrolls were reported to have risen by 321,000, with a net upward revision to September and October of +44,000. One should take that with a grain of salt (figures are subject to revision, the payroll figure is reported accurate to 90,000, seasonal adjustment can be quirky, and weather effects can distort), but it is encouraging.

The unemployment rate held steady at 5.8%, with no change in labor force participation or in the employment/population ratio. Average hourly earnings rose 0.4%, up 2.1% y/y (note that the monthly figures are often revised and the trend is relatively lackluster). Strong job growth is good news, but might be interpreted as pulling forward the date of the Fed’s first increase in short-term interest rates.

Next week, the economic calendar thins, with Thursday’s retail sales report being the only important release for the markets. Unit auto sales picked up sharply in November, which should boost the total retail sales figure. Lower gasoline prices will subtract. Seasonal adjustment is a bit tricky as the holiday shopping season gets underway.

While Black Friday sales were disappointing, that may reflect retailer efforts to pull sales forward ahead of the short period between Thanksgiving and Christmas.

However, it could reflect the weak trend in average earnings. Lower gasoline prices will help to boost consumer spending in the near term, but the lackluster growth in average wages, a sign of slack in the labor market, is a restraint

Indices

Last Last Week YTD return %
DJIA 17912.62 17827.75 8.06%
NASDAQ 4774.47 4787.317 14.32%
S&P 500 2074.33 2072.83 12.23%
MSCI EAFE 1831.41 1848.79 -4.39%
Russell 2000 1179.01 1190.62 1.32%

 Consumer Money Rates

Last 1 year ago
Prime Rate 3.25 3.25
Fed Funds 0.12 0.07
30-year mortgage 3.92 4.46

 Currencies

Last 1 year ago
Dollars per British Pound 1.567 1.641
Dollars per Euro 1.233 1.357
Japanese Yen per Dollar 119.370 102.810
Canadian Dollars per Dollar 1.138 1.066
Mexican Peso per Dollar 14.119 13.232

 Commodities

Last 1 year ago
Crude Oil 67.38 96.04
Gold 1204.36 1220.39

 Bond Rates

Last 1 month ago
2-year treasury 0.63 0.51
10-year treasury 2.31 2.35
10-year municipal (TEY) 3.28 3.36

 Treasury Yield Curve – 12/05/2014

Treasury Yield Curve – 12/05/2014

 

S&P Sector Performance (YTD) – 12/05/2014

S&P Sector Performance (YTD) – 12/05/2014

 

Economic Calendar

December 9th Small Business Optimism Index (November)
December 11th Retail Sales (November)
December 12th Producer Price Index (November)
December 15th Industrial Production (November)
December 16th Building Permits, Housing Starts (November)
December 17th Consumer Price Index (November)
FOMC Policy Decision (Yellen Press Conference)
Revised Fed Projections
January 9th Employment Report (December)
January 22nd ECB Policy Meeting
January 28th FOMC Policy Decision (no press conference)

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 December 4th, 2014.

©2014 Raymond James Financial Services, Inc. member FINRA / SIPC.


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