The Weekly Market Snapshot from Frazier Allen
March 27, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
February new home sales, existing home sales, and durable goods orders were all weaker than anticipated (new home sales hit a record low!), but the stock market didn’t care. Portugal’s government collapsed after a failure of a vote on austerity measures. Japan’s nuclear problems did not go away. The conflict in Libya continued. Apparently, there’s still plenty of cash in the market looking for something to do.
The Federal Reserve announced the Chairman Bernanke will hold press briefings four times per year to present the Federal Open Market Committee’s current economic projections and to provide additional context for the FOMC’s policy decisions. For 2011, these briefings will be held at 2:15pm following the FOMC decisions on April 27th, June 22nd, and November 2nd. On these days the release of the FOMC policy statement will be moved up to 12:30pm. The Fed said that “the introduction of regular press briefings is intended to further enhance the clarity and timeliness of the Federal Reserve’s monetary policy communication.” Fed officials were reported to have been taken off guard by the widespread criticism of policies undertaken in 2010. [Read more]
The Weekly Market Snapshot from Frazier Allen
March 23, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
There were plenty of economic data reports, but the focus was primarily on Japan. Worries about trade and supply-chain disruptions, as well as escalating problems at damaged Japanese nuclear reactors, sent global equity markets sharply lower. However, the U.S. stock market rebounded broadly. G7 finance ministers and central bankers agreed to rare coordinated intervention in the currency markets to prevent the yen from strengthening. Late Thursday, the U.N. Security Council agreed to set up a no-fly zone in Libya and there were reports of U.S. arms being supplied to the opposition thru Egypt, but on Friday, Qaddafi signaled a cease-fire.
The Federal Open Market Committee left short-term interest rates unchanged and kept its conditional commitment to keep rates low for “an extended period.” The FOMC recognized that higher prices of energy and other commodities will put upward pressure on consumer price inflation in the near term, but said that it expects the impact to be “transitory.” Still, the FOMC promised to watch the underlying trend in inflation and inflation expectations closely. [Read more]
The Weekly Market Snapshot from Frazier Allen
March 13, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
The economic calendar was thin. Retail sales rose about as anticipated in February, but January figures were revised higher. The trade deficit widened sharply in January, suggesting that net exports may make a significant subtraction from Q111 GDP growth. Claims for unemployment insurance rose, but seasonal adjustment made the figures questionable (the underlying trend is down). Consumer sentiment sank in the mid-month reading for March, with a sharp plunge in expectations for the next six months and a pickup in inflation expectations – this was the first economic report that could reflect the recent surge in gasoline prices, and the results were not good.
Oil prices retreated, but remained a considerable worry for U.S. equity market participants. Libya tilted toward civil war. Moody’s downgraded Spanish debt. A major earthquake hit Japan. [Read more]
The Weekly Market Snapshot from Frazier Allen
March 6, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
The economic data were mostly on the strong side of expectations. Nonfarm payrolls rose by 192,000 in February, while the two previous months were revised higher by 58,000. February strength partly reflected a rebound from January’s poor weather (payrolls averaged a 127,500 monthly gain in the first two months of the year, nothing to write home about). Private-sector payrolls rose by 222,000 (+1.5 million from a year ago), while state and local government subtracted another 30,000 (-241,000 from a year ago). The unemployment rate fell to 8.9% (it was 9.8% in November), but that is misleading. The employment-population ratio, the preferred measure of slack in the labor market, held steady at 58.4% (vs. 58.5% in February 2010). Average weekly hours were flat (probably reflecting the weather). Average hourly earnings were essentially unchanged (+1.7% year-over-year), with weekly earnings also flat (+2.3% year-over-year). The February ISM manufacturing survey was the strongest since May 2004 and the non-manufacturing survey was the strongest since July 2005. Motor vehicle sales rose to a 13.4 million seasonally adjusted annual rate in February, vs. 12.6 million in January and 10.7 million in February 2010. [Read more]
The Weekly Market Snapshot from Frazier Allen
February 27, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
Investors remained focused on political developments in the Middle East and North Africa. The turmoil in Libya led to a drop in oil production (less than 1% of global output), higher oil prices, and a dampening of U.S. stock market sentiment. Assurances that other producers could make up for the Libyan shortfall helped stem the rise oil prices, although broader worries remain. At the end of the week, gasoline futures suggested about a $3.60 average price for a gallon of gasoline – the increase in gasoline prices, if sustained, would offset much of the positive benefit (to consumer spending) of lower payroll taxes.
The economic data were mixed, partly reflecting unfavorable weather in January. The estimate of real GDP growth for Q410 was revised down (to a +2.8% annual rate, vs. +3.2% in the advance estimate). Consumer spending growth was revised lower (to 4.1% from 4.4%), as anticipated, and business fixed investment was a bit higher (mostly business structures). Oddly, there was virtually no revision in either inventories (which subtracted 3.7 percentage points from GDP growth in 4Q10) or in net exports (which added 3.4 percentage points). State and local government expenditures fell at a 2.4% annual rate (vs. -0.8% in the advance estimate), reflecting budget strains. [Read more]
The Weekly Market Snapshot from Frazier Allen
February 20, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
- Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
The economic data were mixed. Retail sales and industrial production figures for January disappointed, but softness was seen as likely to have been the result of poor weather. The Fed’s two main regional manufacturing surveys were strong in February, with a further intensification of input price pressures and evidence that firms are a bit more able to pass along higher costs. January inflation figures were mostly higher than expected. The core CPI rose 0.2%, reflecting some one-time increases (such as apparel). Minutes of the January 25-26 Fed policy meeting showed that officials were somewhat more optimistic about 2011 GDP growth, but did not expect much improvement in the unemployment rate over the course of the year.
The stock market seemed to struggle a bit with the economic data, although reactions were limited. The major market averages still managed to forge ahead during the week. [Read more]
The Weekly Market Snapshot from Frazier Allen
February 13, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
The economic calendar was thin. The December trade deficit was narrower than expected, implying (all else equal) a small upward revision to the fourth quarter GDP growth figure. Consumer sentiment edged up in the mid-February reading, still relatively low by historical standards.
In testimony to the House Budget Committee, Fed Chairman Bernanke repeated that “we have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold,” but continued to caution that “it will be several years before the unemployment rate has returned to a more normal level.” He said that the Federal Open Market Committee will continue to review its current asset purchase program, but gave no indication that the program (which is set to finish at the end of June) would be cut short. [Read more]
The Weekly Market Snapshot from Frazier Allen
February 6, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
Most of the economic data reports were better than expected. The ISM surveys were strong, reflecting solid growth in new orders and employment, albeit with a further increase in input price pressures. The January Employment Report was confusing. Nonfarm payrolls rose by a disappointing 36,000 (median forecast was about +145,000) and average weekly hours edged down, but that likely reflected the impact of poor weather. Manufacturing payrolls rose by 49,000 and factory hours advanced, consistent with the inventory story that came out of the 4Q10 GDP report (that is, lean inventories suggest gains in production in the near term).
The unemployment rate fell unexpectedly to 9.0%, but not all of the drop could be explained by a drop in labor force participation. The employment-to-population ratio, a better measure of slack in the labor market, edged only slightly higher (suggesting improvement, but not as much as the drop in the unemployment rate would seem to suggest). In his speech to the National Press Club, Fed Chairman Bernanke was optimistic that the pace of the economic recovery would improve, but cautioned that it would be years before the job market returned to normal. [Read more]
The Weekly Market Snapshot from Frazier Allen
January 30, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
The economic data were mixed, but mostly positive. Real GDP rose at a 3.2% annual rate in Q410, a bit below the consensus forecast, but the details were relatively strong. Inventory growth slowed sharply, subtracting 3.7 percentage points from headline GDP. Exports continued to advance, but imports fell (note that imports have a negative sign in the GDP calculation), and combined, net exports added 3.4 percentage points to GDP growth.
Consumer spending rose at a strong 4.4% annual rate, partly reflecting a drop in the savings rate. Business fixed investment also rose 4.4%, slower than in recent quarters, but still positive. The sharp deceleration in inventory growth (assuming it holds up in revisions) suggests strong GDP growth in the near term (as inventory growth picks back up). Note that the 2% reduction in payroll taxes will boost disposable income and support consumer spending growth in early 2011. [Read more]
The Weekly Market Snapshot from Frazier Allen
January 23, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
The economic data were mixed, but generally consistent with a continued recovery. Housing starts fell in December, but building permits (which are reported more accurately than starts) rose sharply (partly reflecting the usual volatility in the multi-family sector). Existing home sales were stronger than anticipated in December, but these represent closings (and hence, lag somewhat). Higher mortgage rates may have dampened housing activity into the new year. The Index of Leading Economic Indicators posted another strong gain in December, boosted by the rise in building permits.
The stock market seemed to struggle with good news (earnings reports and the economic data releases). Bond yields rose, pressured by the economic data and by a disappointing 10-year TIPS auction. Crude oil prices backed down somewhat following reports of higher inventories. [Read more]
