Clarksville Weekly Market Snapshot from Frazier Allen for the week of December 30th, 2013

Clarksville, TN – Next week, the ISM Manufacturing Index is expected to be the highlight, although the December figures can be exaggerated by the seasonal adjustment.

Market participants are likely to look ahead to the Employment Report.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of December 19th, 2013

Clarksville, TN – Taper, no tantrum. The Federal Open Market Committee decided to reduce the monthly pace of asset purchases from $85 billion to $75 billion in January. The FOMC added that it expects to further reduce the pace of asset purchases “in measured steps” depending on the economic data (that may mean every other Fed policy meeting in 2014).

It also emphasized that the federal funds target rate would remain in its current low range (0-0.25%) even after the unemployment rate falls below 6.5%.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of December 15th, 2013

Clarksville, TN – House and Senate leaders reached an agreement on a mini budget deal. This isn’t the “grand bargain” that lawmakers were tasked with, but it will prevent a government shutdown in January. That removes a major uncertainty for the markets, but also for Federal Reserve policymakers.

The deal reduces (but does not eliminate) the impact of the sequester cuts to spending that were slated for mid-January. The deal does not address the debt ceiling, which will go back into effect on February 7th, nor does it prevent over 1.2 million from losing extended unemployment benefits at the end of this month.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of December 10th, 2013

Clarksville, TN – Fear of Fed tapering hung over the stock market. Market participants believed that the November Employment Report would be the deciding factor for whether the Fed will begin to reduce the pace of asset purchases this month.

The jobs report was stronger than anticipated, but not as bad as feared. Payrolls rose by 203,000, a bit more than expected (median forecast: +180,000), with a mild net revision of +8,000 to the two previous months. Job gains were relatively broad-based.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of December 3rd, 2013

Clarksville, TN – Next week, the ISM Manufacturing Index should set the tone for the week, but the markets will put a lot of weight on the November jobs data.

Recall that the government shutdown did not have a noticeable impact on the October nonfarm payroll figures (which were stronger than anticipated), but did alter the household survey data (the unemployment rate and the employment/population ratio).

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of November 24th, 2013

Clarksville, TN – The minutes of the October 29th-30th Federal Open Market Committee meeting showed that monetary policymakers still expected the economy to improve in line with their earlier projections “and would thus warrant trimming the pace of purchases in coming months.”

Officials also considered scenarios where the Fed could taper “before an unambiguous further improvement in the outlook was apparent.” The stock market pulled back a bit on the taper talk, but rose to new highs anyway.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of November 17th, 2013

Clarksville, TN – In her nomination hearing before the Senate Banking Committee, Janet Yellen took a balanced approach in discussing how she would conduct monetary policy, but the markets took that as “dovish.”

She gave no hint that the pace of asset purchases would be tapered anytime soon, but she also cautioned that the program could not last indefinitely. She noted that the economy is far from fully recovered and indicated that “we have farther to go” in the labor market.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of November 12th, 2013

Clarksville, TN – The economic data surprised. Real GDP rose at a stronger-than-expected 2.8% annual rate in the advance estimate for 3Q13, but the figure was boosted by faster growth in inventories (which added 0.8 percentage point to GDP growth).

Consumer spending rose at a 1.5% annual rate, while business fixed investment rose 1.6% – nothing to write home about. The partial government shutdown had a mixed impact on the October employment figures.

Nonfarm payrolls rose by 204,000 (median forecast: +125,000), while August and September figures were revised a net +60,000.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of November 3rd, 2013

Clarksville, TN – As expected, the Federal Open Market Committee did not alter the pace of asset purchases (currently $85 billion per month). The FOMC noted that “the recovery in the housing sector slowed somewhat in recent months,” but removed the phrase (from the September 18th statement that “the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market.”

That suggests that the Fed could still begin to taper the pace of asset purchases at the December policy meeting if the economic data between now and then are strong enough (although that’s not seen as likely).

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Stock market offers tricks and treats in October 2013

Clarksville, TN – The markets sent investors mixed messages in October, generally trending upwards despite signs of volatility around the government shutdown and subsequent reopening.

At the end of the month, stocks – which had enjoyed a days-long record run – began to show some weakness after Federal Reserve policymakers said the economy wasn’t growing quickly enough to curtail its bond purchases and dial back on some of its economic stimulus.

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