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

Clarksville, 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.

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

Important Disclosures

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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 December 4th, 2014.

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