The Weekly Market Snapshot from Frazier Allen

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

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

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

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

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

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]

The Weekly Market Snapshot from Frazier Allen

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

Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services

The economic data remained consistent with a moderate pace of economic expansion. Retail sales rose 0.6% in December, up 0.5% excluding autos, boosted somewhat by higher gasoline prices. Industrial production rose 0.8%, aided by colder temperatures (utility output up 4.3%, manufacturing up 0.4%). As anticipated, headline inflation figures were boosted by higher energy prices in December and the impact was magnified by the season adjustment. The Consumer Price Index rose 1.5% in the 12 months ending in December, up just 0.8% ex-food & energy (vs. the Federal Reserve’s implicit goal of around 2%). Jobless claims jumped, but the figures are normally choppy during this time of year (due to difficulties in the seasonal adjustment). [Read more]

The Weekly Market Snapshot from Frazier Allen

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

The stock market began the year relatively optimistic about the 2011 economic outlook, but the week’s mixed economic data dampened the euphoria to some extent. The ISM surveys improved in December, but the employment gauges in those reports were relatively soft. While the holiday shopping season was deemed a great success, chain-store sales results were mixed (as many disappointments as upside surprises).The December Employment Report was a mixed bag. The strong ADP estimate of private-sector payrolls (+297,000) led many economists to revise their forecasts of the official Bureau of Labor Statistics figure. The BLS payroll figure disappointed, rising by only 103,000, although a +70,000 revision to the two previous months took away some of the sting. Job gains were led by leisure and hospitality (+47,000) and healthcare (+35,700). Temp-help added 15,900 (+16.1% y/y). State and local government shed 20,000 (down 250,000, or 1.3%, over the last 12 months). The unemployment rate fell to 9.4% from 9.8%, but part of that appears to have been an unwinding of a quirk that boosted the rate in November. In addition, the temporary lapse in extended unemployment insurance benefits likely reduced the rate in December. The employment-to-population ratio has been little changed over the last 12 months. [Read more]

The Weekly Market Snapshot from Frazier Allen

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

It was a relatively quiet week in terms of the economic data. Consumer confidence figures for December disappointed. However, what people say and what they do are two separate things (the soft confidence figure is countered by evidence of increased consumer spending). Evaluations of current job availability remained depressed. Holiday sales were reported as “strong,” but heavy snow buried post-Christmas sales in some areas.

Claims for unemployment insurance benefits fell below 400,000 in the Christmas week, but the figures are suspect due to the seasonal adjustment. Still, the trend in claims has been lower over the last few months – still relatively high by historical standards (we need to see the figure moving below 350,000 to be consistent with a “strong” job market), but moving in the right direction. The December Chicago Purchasing Managers survey and the November Pending Home Sales Index rose more than expected, but failed to have much of an impact on the markets. [Read more]

The Weekly Market Snapshot from Frazier Allen

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

The Weekly Market Snapshot from Frazier Allen

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

The economic data were mixed, but generally consistent with a continued expansion. Retail sales rose more than expected in November, while figures for September and October were revised higher. Industrial production rose moderately, as a drop in auto production was offset by gains in other manufacturing sectors. Residential construction figures were mixed, but single-family activity improved. Consumer inflation figures remained low.

As expected, the Federal Open Market Committee left the target range for the overnight lending rate unchanged (at 0% to 0.25%), kept it’s conditional commitment to keep short-term rates low for “an extended period,” and did not alter its asset purchase plans ($600 billion by the end of Q211). In its economic assessment, the FOMC noted that the recovery “is continuing,” but “at a rate that has been insufficient to bring down unemployment.” Congress approved the tax cut package. European debt worries continued to simmer. [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 Flow of Funds data showed that household net worth rose $1.2 trillion in Q310 (to $54 trillion), down $10 trillion from 2007. The trade deficit narrowed unexpectedly in October. On 60 Minutes, Fed Chairman Bernanke said that the Fed could extend its asset purchases if conditions warrant.

With no major economic reports, market participants debated the outlook for 2011. President Obama and Republican congressional leaders agreed to a package that would extend the Bush tax cuts for two years, extend unemployment insurance benefits by 13 months, and cut the employee-paid portion of payroll taxes for a year. While many see this as “stimulus,” it’s more of a non-negative (preventing growth from weakening rather than driving it sharply forward). European debt worries continued to simmer, as Europe debated the possible creation of a euro-bond (not backed by specific countries). The fixed-income rout continued (in the U.S. and around the world), sending the 10-year Treasury back to levels last seen in June. [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 the week’s highlight, the November Employment Report, was disappointing. Nonfarm payrolls rose by 39,000 (vs. a median forecast of +140,000), while the two previous months were revised a net 38,000 higher. Private-sector payrolls rose by 50,000. State and local government fell by 13,000 (down 250,000, or -0.3% over the last 12 months). Manufacturing fell by 13,000. Construction slipped 5,000. Retail dropped 28,100 (up 300,800 before seasonal adjustment). Temp-help payrolls rose by 39,500 (up 9.2% year-over-year). The unemployment rate rose to 9.8% vs. 9.6% in October and 10.0% a year ago.

Ignoring most of the economic data, the stock market action seemed to be dictated largely by shifting views of the European debt crisis. An 85 financing package by the European Union and the IMF for Ireland (announced on Sunday) initially did little to calm the fears. However, stocks rallied broadly on Thursday. Equities fell on the November employment figures, but the damage was relatively limited considering the degree of disappointment relative to expectations. [Read more]

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