The Weekly Market Snapshot from Frazier Allen

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

The economic data was mixed, but generally soft. Industrial production fell 0.2% in September. Manufacturing output fell 0.2%, with and without autos. Building permits fell in September, reflecting the usual volatility in the multi-family sector (single-family permits edged up 0.5%), while housing starts (which are choppy and subject to large revisions) rose more than expected. The Fed’s Beige Book noted that “on balance, national economic activity continued to rise, albeit at a modest pace, during the reporting period from September to early October.” Prices of final goods and services were “mostly stable as higher costs were not passed on to consumers.” Hiring remained “limited,” with “many firms reluctant to add to permanent payrolls given economic softness.”

Earnings reports were mixed, but mostly positive relative to expectations, fueling the stock market action. The bond market seemed to mark time, waiting for the November 3 Fed policy decision. The currency market saw brief short-covering in the dollar following China’s surprise announcement of an interest rate hike. [Read more]

The Weekly Market Snapshot from Frazier Allen

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

The minutes of the September 21st meeting of the Federal Open Market Committee showed some differences of opinion among Fed policymakers, but a general leaning toward further monetary policy accommodation (specifically, additional Fed purchases of long-term Treasury securities). Details of the mechanism and communications strategies had yet to be worked out. In the minutes, Fed officials pointed to the importance of real (inflation-adjusted) interest rates and the need to boost inflation expectations from current low levels (an increase in inflation expectations would reduce real short-term interest rates, boosting economic activity). Investors were looking for more details in the Fed chairman’s speech on Friday, but were disappointed by a lack of clarity. Bernanke indicated that “there appears to be a case for further action,” but he implied that that was not a done deal and was conditional on incoming economic data and a weighing of the potential costs and benefits. Still, with the Fed expecting both growth and inflation to trend too low for the foreseeable future, further accommodation seems more likely than not. [Read more]

APSU’s 2010 Homecoming features two sports events open to public

Clarksville, TN – The Austin Peay State University National Alumni Association will sponsor a couple of sports events during Homecoming 2010 that will be open to the public.

The 32nd Annual Homecoming Golf Tournament will be at 8:00am, Friday, October 8th at Swan Lake Golf Course. Cost is $60.00 per person, and advance registration is required. Fee includes ditty bag, refreshments on the golf course and light lunch. The event, sponsored by Budweiser of Clarksville, is co-chaired by alumni Nelson Boehms (’86) and Frazier Allen (’99). [Read more]

The Weekly Market Snapshot from Frazier Allen

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

Same old story. The economic data reports remained consistent with a near-term slowdown in the pace of growth, but not a double dip. The estimate of second-quarter 2010 real gross domestic product (GDP) growth was revised to 1.7% (compared to 1.6% in the second estimate and 2.4% in the advance estimate). Personal income rose 0.5% in August – more than expected – but was boosted partly by the extension of unemployment insurance benefits. Consumer spending rose 0.4% (up 0.2%, adjusting for inflation – about a 2% annual rate in the third quarter of 2010). The Institute for Supply Management (ISM) Manufacturing Index slowed about as anticipated in September.

We have two new Federal Reserve governors: Janet Yellen (appointed vice chair of the Fed) and Sarah Bloom Raskin. The Wall Street Journal reported that Fed officials are considering smaller-scale quantitative easing. During the financial crisis, the Fed announced large-scale plans to purchase mortgage-backed securities and Treasuries over a period of months. Instead, the Fed may now announce smaller purchases over a month or so. This would give the Fed greater flexibility in monetary policy accommodation, and it presumably would be easier to get some of the more moderate Fed officials to go along. However, the Fed has not made any decisions on whether to increase its purchases of long-term securities. [Read more]

APSU’s 2010 Homecoming themed ‘Peay Paradise,’ October 4th-9th

Clarksville, TN – Austin Peay State University will celebrate Homecoming 2010 with the theme, “Peay Paradise,” from October 4th-9th. Homecoming 2010 includes events for all ages, and most of the events are open to the public.

The following is the full schedule, which also can be accessed at www.apsu.edu/homecoming.
[Read more]

The Weekly Market Snapshot from Frazier Allen

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

As expected, the Federal Open Market Committee (FOMC) left the target range for the overnight lending rate unchanged at 0% to 0.25% and retained its conditional commitment to keep rates low for “an extended period.” The wording of the FOMC’s economic assessment was little changed. The committee repeated that “the pace of recovery is likely to be modest in the near term.” The big change in the statement was the admission that “measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability.”

In other words, the Fed views the underlying trend in inflation as too low (for those of you who remember the inflation of the 1970s, this may seem extraordinary). Recall that the Fed’s definition of “price stability” does not mean 0% inflation – rather, as former Chairman Alan Greenspan put it, “price stability exists when inflation is not a consideration in household and business decisions.” [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. The Fed’s Beige Book, the summary of anecdotal conditions from the 12 Federal Reserve districts, noted “widespread signs of a deceleration” in national economic activity (that means slower growth, not a double dip). After rising in August, claims for unemployment insurance benefits fell back to 451,000. However, it’s unclear whether August figures were distorted (possibly by classification errors related to the extension of unemployment insurance benefits) or whether the latest week was distorted (as the Labor Day holiday led to delays in state reports to the Labor Department). The trade deficit narrowed in July, after widening sharply in June.

Stock market participants were apparently encouraged by the view that the economy will likely avoid a double dip, but were not exactly ecstatic (in that growth is still expected to be subpar in the near term). Bond yields rose. Market activity was light due to the holidays (Labor Day, Rosh Hashanah). [Read more]

The Weekly Market Snapshot from Frazier Allen

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

After what has seemed like a long string of disappointing economic data releases, reports turned more mixed this week – consistent with a near-term slow patch in economic growth, but not a double dip. The stock market embraced the positive reports and ignored the bad (for the most part).

The August Employment Report was not a great report, but it was good relative to expectations. Nonfarm payrolls fell by 54,000, reflecting a decline of 114,000 in temporary census workers. Figures for June and July were revised a net 133,000 higher. Private-sector payrolls rose by 67,000 (vs. expectations of about 40,000), while figures for June and July were revised a net 66,000 higher: July’s revised figure showed a gain of 107,000 (compared to a rise of 71,000 reported a month ago) and June’s figure was revised to show a gain of 61,000 (compared to an earlier-reported gain of 31,000). August temp-help payrolls rose by 17,000 following virtually no gain in July. The unemployment rate edged up to 9.6% – from 9.5% in July – reflecting a pickup in labor force participation (a result of the extension of unemployment insurance benefits). [Read more]

The Weekly Market Snapshot from Frazier Allen

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

The July figures on new and existing home sales each fell well short of expectations, and durable goods orders came in much weaker than anticipated. Real gross domestic product (GDP) rose at a 1.6% annual rate in the second estimate for second quarter of 2010 (compared to +2.4% in the advance estimate and a median forecast of +1.4%).

Growth in the second quarter was stronger than it appears, however. Imports, which have a negative sign in the GDP calculation, surged at a 32.4% annual rate, subtracting 4.5 percentage points from overall growth. Domestic Final Sales (GDP less inventories and net exports) – a better measure of underlying domestic demand – rose at a 4.3% annual rate (vs. +4.1% in the advance estimate). That indicates relative strength. But so what? The GDP revisions tell us nothing about the current pace of growth or where we’ll be in the next few quarters – and that is what matters for the overall financial market outlook. [Read more]

The Weekly Market Snapshot from Frazier Allen

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

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