The Weekly Market Snapshot from Frazier Allen for the week of July 10th

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

The June Employment Report was weaker than expected, with no bright spots. Nonfarm payrolls rose just 18,000, while the two previous months were revised a net 44,000 lower. Private-sector payrolls rose by 57,000 – a 65,000 average for May and June, following a +240,000 average for February, March, and April. Manufacturing rose by 6,000. Construction fell by 9,000. Retail added 5,200. State and local government payrolls dropped another 25,000 (following -46,000 in May) and the federal government shed 14,000 (ex-census, down 18,000, or 0.6%, from a year ago). The unemployment rate edged up to 9.2% (from 9.1% in May) and the employment/population ratio slipped to 58.2% (vs. 58.4% in May and 58.5% a year ago). Average weekly hours edged down to 34.3 (from 34.4). Average hourly earnings were essentially unchanged (up 1.9% y/y). Average weekly earnings fell 0.3% (+2.1% y/y). [Read more]

Weekly Market Snapshot from Frazier Allen for the week of July 3rd

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

The economic data were mixed. Personal income and spending figures shower a sharp small decline in inflation-adjusted consumer spending in both April and May. The trend suggests an annual rate of growth of less than 1% in Q2 2011 in consumer spending, which accounts for 70% of Gross Domestic Product. Consumer confidence fell in June. Weekly jobless claims remained moderately high. The ISM Manufacturing Index rebounded partly in June, but the details were mixed.

The stock market picked among the economic news, ignoring the poor economic data and embracing the favorable reports. Progress on an austerity package in Greece reduced near-term worries about the European sovereign debt situation, helping to fuel stock market gains. Bond prices fell, pushing the 10-year Treasury note yield back above 3.20% (after dipping below 2.90% on Monday). [Read more]

The Weekly Market Snapshot from Frazier Allen

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

The Federal Open Market Committee left short-term interest rates unchanged and retained its conditional commitment to keep rates low for “an extended period.” The FOMC also repeated that its $600 billion asset purchase program will be completed by the end of this month. The FOMC noted that the economic recovery is continuing, but “somewhat more slowly” than had been expected. The slower pace of the recovery “reflects in part factors that are likely to be temporary, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan.”

In his post-FOMC press briefing, Fed Chairman Bernanke said that while Fed policymakers expects growth to pick up into 2012, “we don’t have a precise read on why this slower pace of growth is persisting.” The FOMC lower its expectations of GDP growth for this year (2.7%-2.9%) and next (3.3%-3.7%). The FOMC expects that the unemployment rate will to continue to decline, “but the pace of progress remains frustratingly slow.” [Read more]

The Weekly Market Snapshot from Frazier Allen

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

The economic data calendar was thin, but stock market participants continued to express concerns about the outlook. Bonds rallied, with the 10-year Treasury yield pushing below 3%. The European Central Bank left short-term interest rates unchanged, but ECB President Trichet said that “strong vigilance is warranted,” a signal that rates will almost certainly be raised in July.

The trade deficit narrowed in April, suggesting that net exports may add to GDP growth in 2Q11. The Fed’s Beige Book indicated that “economic activity generally continued to expand, though a few districts indicated some deceleration.” Loan demand was “steady to stronger,” especially in the commercial and industrial sector, while “widespread improvement” was reported in credit quality – a good sign. [Read more]

The Weekly Market Snapshot from Frazier Allen

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

The economic data were mixed, but mostly on the soft side of expectations. Durable goods orders fell 3.8% in April, reflecting supply-chain disruptions from Japan and a pullback in civilian aircraft orders (which tend to be erratic). Ex-transportation, orders fell 1.5%, but that followed a 2.5% gain in March. New home sales rose 7.3% in April, but it’s not hard to get a large percentage increase when the level is so low (note: the April change was not statistically significant from zero). The Pending Home Sales Index, which measures signed contracts, sank 11.6% in April – not good, and consistent with other signs of a disappointing spring season in housing. Consumer sentiment improved. Jobless claims were higher than anticipated.

Real GDP growth rose at a 1.8% annual rate in the 2nd estimate for 1Q11, the same as in the advance estimate (vs. a median forecast of +2.1%). Consumer spending was unexpectedly revised down to a 2.2% annual rate (vs. +2.7% in the advance estimate and +4.0% in 4Q10). [Read more]

The Weekly Market Snapshot from Frazier Allen

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

The week began with concerns on the international front. International Monetary Fund (IMF) managing Director, and potential French presidential candidate, Dominique Strauss-Kahn, was arrested over the weekend on charges of sexual battery and resigned a few days later. The change in leaderships at the IMF (and potential struggle to select a new #1) adds to the uncertainty about Europe’s debt crisis and the news added to the recent volatility in the financial markets. The minutes of the April 26-27 FOMC meeting had a slightly hawkish tilt. The minutes showed that “a majority of participants now judged the inflation risks as weighted to the upside” and “a few members viewed the increase in inflation risks as suggesting that economic conditions might well evolve in a way that would warrant the Committee taking steps toward less-accommodative policy sooner than currently anticipated.” Note that the presidents of all 12 Fed district banks participate at the FOMC meetings, but only five are members of the FOMC and have a vote on monetary policy. [Read more]

The Weekly Market Snapshot from Frazier Allen

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

The economic data held few surprises. Retail sales rose 0.5% in April, boosted by higher gasoline prices (ex-gasoline, retail sales rose just 0.2%). Weekly claims for unemployment insurance benefits fell back following a spike in the previous week, but the underlying trend is higher. The monthly inflation reports reflected higher gasoline prices (no surprise), but the impact was tempered by the seasonal adjustment (which expects increases in gasoline prices in the spring). An increase in motor vehicle prices, which could reflect difficulties in the seasonal adjustment, but seem unlikely to re-occur, added to both the CPI and PPI. The CPI rose 0.4% in April (+3.2% y/y), with gasoline accounting for about half of the monthly increase (and more than half of the year-over-year increase). Ex-food & energy, the CPI rose 0.2% (+0.1854% before rounding), a 2.1% annual rate in the first four months of 2011 (vs. a +0.8% pace in the last six months of 2010) – that’s not “runaway” inflation. [Read more]

The Weekly Market Snapshot from Frazier Allen

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

News of the death of Osama bin Laden had only a fleeting positive effect on the stock market on Monday. The economic data were mixed, with some disappointment in the ISM Non-Manufacturing Index and weekly jobless claims, but there was an upside surprise in nonfarm payrolls. Commodity prices tumbled sharply on Thursday, reflecting a partial unwinding of the speculative element.

Nonfarm payrolls rose by 244,000 (median forecast: +195,000), with a 46,000 upward revision to the two previous months. Private-sector payrolls rose by 268,000 – a 233,000 average over the last three months (vs. +104,000 in the three months before that) and gains were broad-based. State and local government payrolls fell by 22,000, down 272,000 (or -1.4%) over the last 12 months. The unemployment rate rose to 9.0%, from 8.8% (it was 9.8% in November), but these figures have been unreliable in recent months. The employment-to-population ratio, a better measure of capacity utilization in the labor market, edged down to 58.4%, little changed over the last year.

Next week, the important economic data bunch up at the end of the week. The seasonal adjustment anticipates increase in the wholesale and retail price of gasoline in April. Hence, the impact on the headline PPI and CPI will be limited. Core inflation is expected to remain relatively low, although at a somewhat higher trend than in 2010. Retail sales figures are adjusted for shifts in the timing of Easter, but it’s tough to get it precisely right. Higher gasoline prices should add to the retail sales total. However, sales results were generally better than expected last month.

Indices

	Last	Last Week	YTD return %
DJIA	12584.17	12763.31	8.69%
NASDAQ	2814.72	2872.53	6.10%
S&P 500	1335.10	1360.48	6.16%
MSCI EAFE	1755.56	1792.80	5.87%
Russell 2000	829.24	861.55	5.82%

Consumer Money Rates

	Last	1-year ago
Prime Rate	3.25	3.25
Fed Funds	0.10	0.21
30-year mortgage	4.62	5.07

Currencies

	Last	1-year ago
Dollars per British Pound	1.642	1.513
Dollars per Euro	1.458	1.289
Japanese Yen per Dollar	80.160	94.160
Canadian Dollars per Dollar	0.967	1.026
Mexican Peso per Dollar	11.690	12.646

Commodities

	Last	1-year ago
Crude Oil	99.80	79.97
Gold	1481.60	1172.25

Bond Rates

	Last	1-month ago
2-year treasury	0.61	0.89
10-year treasury	3.22	3.50
10-year municipal (TEY)	4.28	5.11

Treasury Yield Curve – 5/6/2011

S&P Sector Performance (YTD) – 5/6/2011

Economic Calendar

May 10th	—	Small Business Sentiment (April) Import Prices (April)
May 11th	—	Trade Balance (March)
May 12th	—	Jobless Claims (week ending May 7th) Producer Price Index (April) Retail Sales (April)
May 13th	—	Consumer Price Index (April) Consumer Sentiment (mid-May)
May 17th	—	Building Permits, Housing Starts (April) Industrial Production (April)
May 30th	—	Memorial Day Holiday (markets closed)
June 21st-22nd	—	FOMC Meeting Bernanke 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 May 5th, 2011.

©2011 Raymond James Financial Services, Inc. member FINRA / SIPC.

The Weekly Market Snapshot from Frazier Allen

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

The economic calendar was thin. The stock market continued to shrug off worries for the most part. The threat of a government shutdown and a continued surge in oil prices did not seem to generate much concern, but another earthquake in Japan caused a brief reaction in U.S. markets. The European Central Bank raised short-term interest rates, as expected. Oil prices continued higher. West Texas Intermediate rose to over $110.00 per barrel, but Brent (which is more representative of the global price of oil and more important for gasoline prices) exceeded $125.00. Gasoline futures suggested that the average retail price may near $4.00 per gallon soon.

The minutes of the March 15th FOMC policy meeting showed that Fed officials felt that the inflationary impact from higher food and energy prices was likely to be “transitory.” Risks to the growth outlook were seen as “roughly balanced,” but officials noted that a more substantial increase in oil prices would add downside risk to growth and upside risk to inflation. [Read more]

The Weekly Market Snapshot from Frazier Allen

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

The March Employment Report was good, but not great. Nonfarm payrolls rose by 216,000 – a 159,000 monthly pace in 1Q11 (about 130,000 would correspond to trend growth in the working-age population, and we’d rather see +300,000 per month for a couple of years to make up for the jobs lost during the recession). Private-sector payrolls rose by 230,000, up 1.5% from a year ago. State and local government shed 15,000, following a 46,000 decline in February (-282,000, or -1.4%, from a year ago). The unemployment rate edged down to 8.8%, vs. 8.9% in February and 9.8% in November. The employment-population ratio, a better measure of capacity utilization in the labor market, edged up to 58.5%, trending gradually higher in recent months, but little changed from a year ago. Average hourly earnings and average weekly earnings were flat (up 1.7% year-over-year and 2.3% year-over-year respectively – note that the Consumer Price Index rose 2.1% in the 12 months ending in February). [Read more]

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