Clarksville Weekly Market Snapshot from Frazier Allen for the week of February 7th, 2016

Clarksville, TN – The economic data were mixed. The ISM Manufacturing Index remained below the break even level in January, with a pickup in new orders and a softening in employment.

The ISM’s Non-Manufacturing Index slowed more than anticipated. The January Employment Report seemed to have something for everybody. Nonfarm payrolls rose less than forecast.

However, the unemployment rate edged lower, hours moved higher and average hourly earnings advanced – all likely to catch the attention of Fed policymakers.

Seasonal adjustment adds uncertainty in January (we lost nearly three million jobs before adjustment, reflecting the end of the holiday shopping season and school year issues), so one should take the adjusted figures with a grain of salt (reduced hiring in manufacturing and retail in 2015 led to fewer seasonal layoffs in January, which shows up as gains after seasonal adjustment).

The markets have written off further Fed rate hikes, but the reduction in slack suggests that officials should remain in tightening mode – looking to tighten further, but proceeding cautiously.

Next week, the People’s Bank of China reports its currency reserves on Sunday (the Shanghai market will be closed for the week due to the Lunar New Year). The PBOC still has plenty of reserves, but it is burning through them rapidly.

The focus in the U.S. is expected to be on Yellen’s monetary policy (before the House Committee on Financial Services on Wednesday and before the Senate Banking Committee on Thursday), but anyone expecting the Fed chair to wave a white flag and apologize for raising rates in December will likely go away disappointed.

Yellen should present an optimistic outlook for the economy, but will also concede that the balance of risks is weighted predominately to the downside. It’s an election year and the House committee is huge – so expect some yellin’ at Yellen.

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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 February 4th, 2016.

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