The Weekly Market Snapshot from Frazier Allen for the week of September 30th, 2012
September 30, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were mixed, but mostly disappointing. Consumer confidence improved in September and the Case-Shiller Home Price Index continued to rise. Real GDP rose at a 1.3% annual rate in the 3rd estimate for 2Q12 (vs. +1.7% in the 2nd estimate). Personal income rose 0.1% in August (+3.5% y/y). Spending rose 0.5%, but gasoline accounted for about 80% of that. The PCE Price Index rose 0.4% (+1.5% y/y), up 0.1% ex-food & energy (+1.6% y/y) – trending below the Fed’s 2% target. Durable goods orders plunged 13.2%, partly reflecting a drop in civilian aircraft orders (which went negative due to order cancelations). [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of September 23rd, 2012
September 23, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were mixed. Homebuilder sentiment continued to improve. Existing home sales rose 7.9% in August (+24.5% y/y). Housing starts and building permits were mixed in August, but continued to reflect an improving trend in single-family construction (permits up 19.3% y/y). The Fed’s two key regional manufacturing surveys were mixed, but remained weak.
Intraday volatility increased in the stock market as investors tried to weigh the Fed’s recent actions (and promise to do more if need) against the near-term headwinds and downside risks. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of September 16th, 2012
September 16, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Citing concerns about the pace of improvement in the labor market, the Federal Open Market Committee extended its forward guidance and started a third round of large-scale asset purchases (what most people call “QE3”). The FOMC said economic conditions are expected to warrant exceptionally low levels of the federal funds rate target through mid-2015 (vs. “late 2014” in the previous policy statement) and added that “a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens.”
The Fed’s latest bond-buying program will be in mortgage-backed securities and, unlike the first two asset purchase programs, is open-ended ($40 billion per month). In his press briefing after the FOMC meeting, Chairman Bernanke emphasized that the Fed wanted to see “substantial” improvement in the labor market, but declined to assign specific numbers to that. Bernanke also said that the Fed cannot do everything (including offsetting the negative impact of the fiscal cliff, should that occur), but is obliged to do what it can to support growth. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of September 9th, 2012
September 9, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were mixed. The ISM Manufacturing Index disappointed in August, but the Non-Manufacturing Index was a bit stronger than expected. Unit auto sales picked up. The ADP estimate of private-sector payrolls rose by 201,000. However, the BLS nonfarm payroll figure rose 96,000 (median forecast: +135,000), with a net revision of -42,000 to the two previous months. The unemployment rate fell to 8.1% (from 8.3%), but that was due to a drop in labor force participation (I wouldn’t read much into that, it’s well within the normal range of uncertainty).
The European Central Bank unveiled its bond-buying program (dubbed Outright Monetary Transactions). The OMT is designed to address dislocations in the government bond market (that is, higher borrowing costs in Italy and Spain). It’s not monetary stimulus, but it should improve the transmission of existing monetary policy. Bond purchases will be unlimited, concentrated in maturities of three to five years, and conditional on fiscal progress. The OMT averts a near-term crisis, but doesn’t solve the region’s underlying problems. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of August 28th, 2012
August 28, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The FOMC Minutes from the July 31st/August 1st policy meeting showed that Fed officials were worried about the deceleration in economic growth. “Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.” However, “several members noted the benefits of accumulating further information that could help clarify the contours of the outlook for economic activity and inflation as well as the need for further policy action.”
Meeting participants discussed three policy options: extending the forward guidance (the length of time which the Fed expects to keep short-term rate exceptionally low), undertaking another round of asset purchases, and lowering the interest rate the Fed pays on excess bank reserves. Extending the forward guidance appeared to have the least amount of internal resistance, but additional asset purchases had some support. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of August 19th, 2012
August 19, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were mixed, but generally stronger than expected. Retail sales popped 0.8% (overall and ex-autos) in July, following weak reports in April, May, and June. The CPI was flat overall in July and up only mildly ex-food & energy. However, higher prices of food and energy are expected to show through more in the report for August. Industrial production advanced, fueled by strength in autos (seasonal adjustment issues?) and hot weather (higher output of utilities).
Residential construction figures were mixed. Housing starts slipped, but single-family building permits (which are reported more accurately) rose further. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of August 12th, 2012
August 12, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Nonfarm payrolls rose more than expected in July, reducing fears that the economy may be headed back into recession. One shouldn’t put too much weight on any one particular month, especially July. However, the figures are consistent with the broad range of data suggesting moderate growth over the near term – not especially strong, but not terribly weak either.
At face value, the July payroll increase (+163,000) was consistent with the view that mild winter weather pulled forward seasonal gains that would have occurred in spring and early summer. Nonfarm payrolls averaged a 151,000 gain over the first seven months of 2012, vs. a 153,000 pace in 2011. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of July 30th, 2012
July 30, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data was mediocre, but the financial markets apparently had expected worse. Real GDP rose at a 1.5% annual rate, matching expectations. There were no surprises in the key components – consumer spending growth slowed and business fixed investment was positive but not especially strong. New home sales fell unexpectedly in June, but figures for the three previous months were revised higher.
Jobless claims dropped, but the weekly figures are unreliable in July (due to difficulties adjusting for summer plant retooling shutdowns in the auto industry) – the underlying trend remains moderate. Durable goods orders were mixed in June, with strength in aircraft and weakness in most other sectors. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of July 15th, 2012
July 15, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Recent economic data have remained consistent with a moderate pace of economic growth in the near term. Europe and the fiscal cliff remain the two key uncertainties and the major downside risks to the growth outlook. Responding to these downside risks, the Federal Reserve extended Operation Twist through the end of the year.
Officials are poised to do more, which may make QE3 a close call for the policy meeting later this month (decision due on August 1st). For further information, refer to the Monthly Economic Outlook by Raymond James Chief Economist, Scott Brown. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of July 8th, 2012
July 8, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were disappointing, but generally consistent with moderate growth in the near term. Nonfarm payrolls rose by a disappointing 80,000 in June, not far from the median forecast of +100,000. Seasonal adjustment is difficult in June, so one should take the figure with a grain of salt. However, it does raise concerns that uncertainties (the election, the fiscal cliff, Europe) may be weighing against new hiring.
There were a number of positive elements in the report. Average weekly hours advanced. Hourly and weekly earnings are now outpacing inflation, which should provide some support for consumer spending growth in the near term. Temp help employment continued to rise, suggesting that employers are still somewhat cautious, but such a rise typically presages a pickup in permanent hiring. [Read more]
