The Weekly Market Snapshot from Frazier Allen for the week of July 30th, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data was mediocre, but the financial markets apparently had expected worse. Real GDP rose at a 1.5% annual rate, matching expectations. There were no surprises in the key components – consumer spending growth slowed and business fixed investment was positive but not especially strong. New home sales fell unexpectedly in June, but figures for the three previous months were revised higher.
Jobless claims dropped, but the weekly figures are unreliable in July (due to difficulties adjusting for summer plant retooling shutdowns in the auto industry) – the underlying trend remains moderate. Durable goods orders were mixed in June, with strength in aircraft and weakness in most other sectors.
Equity markets took encouragement from comments by ECB President Draghi, who said that “the ECB will do whatever it takes to preserve the euro.” Investors took this to mean that the ECB would likely renew its bond-buying program.
Next week, the focus is expected to be on the Fed. There’s little cost in the Fed extending its forward guidance (likely to late 2015) and QE3 (most likely in mortgage-backed securities) remains a possibility. The markets will also be interested in the economic data. The ISM Manufacturing Index (Wednesday) has market-moving potential, but the non-manufacturing data (Friday) will be overshadowed by the Employment Report. Nonfarm payrolls are expected to have risen moderately, but seasonal adjustment could generate some noise (last July, we lost 1.4 million education jobs before seasonal adjustment). The unemployment rate should hold steady and is expected to decrease only gradually over the next several months.
|Last||Last Week||YTD return %|
Consumer Money Rates
|Dollars per British Pound||1.568||1.639|
|Dollars per Euro||1.228||1.450|
|Japanese Yen per Dollar||78.280||78.070|
|Canadian Dollars per Dollar||1.010||0.944|
|Mexican Peso per Dollar||13.421||11.616|
|10-year municipal (TEY)||2.85||3.15|
Treasury Yield Curve – 7/27/2012
S&P Sector Performance (YTD) – 7/27/2012
|Employment Cost Index (2Q12)
Personal Income and Spending (June + benchmark revisions)
S&P/Case-Shiller Home Price Index (May)
Chicago Purchasing Managers Index (July)
Consumer Confidence (July)
|ADP Payroll Estimate (July)
Construction Spending (June)
ISM Manufacturing Index (July)
Fed Policy Decision (no Bernanke press briefing)
Motor Vehicle Sales (July)
|BOE Policy Meeting
Challenger Layoffs (July)
ECB Policy Meeting
Jobless Claims (week ending 7/28)
|Employment Report (July)
ISM Non-Manufacturing Index (July)
|Retail Sales (July)|
|Fed Policy Meeting
Bernanke Press Briefing
[320left]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.
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 July 26th, 2012.