Weekly Market Snapshot from Frazier Allen for the week of May 7th, 2013
May 7, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data reports were mixed. The ISM surveys were on the weak side of expectations. Consumer confidence improved in April, but has remained range-bound with a low trend in recent months. The ADP payroll estimate for April disappointed, but the Employment Report was stronger than anticipated. Nonfarm payrolls rose by 165,000, better than the median forecast (+150,000), but more importantly, not as bad as feared. Payroll figures for February and March were revised a net 114,000 higher.
The unemployment rate edged down to 7.5% (from 7.6% in March and 8.1% a year ago) and for once that was not due to a decrease in labor force participation. The employment/population ratio edged up, but the trend has remained flat over the last few years. The April payroll figures helped boost share prices. [Read more]
Weekly Market Snapshot from Frazier Allen for the week of April 28th, 2013
April 28, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were generally on the weak side of expectations. The advance estimate of 1Q13 GDP growth came in weaker than anticipated (at a 2.5% annual rate, vs. expectations of +3.0% or +3.1%). Consumer spending was stronger than anticipated at the start of the quarter, while business fixed investment rose more slowly than expected. Inventories rose at a faster pace, adding a full percentage point to overall growth. Government (mostly defense) remained a drag on overall growth. The PCE Price Index continued to trend far below the Fed’s 2% target (suggesting little need for the Fed to taper its rate of asset purchases).
Earnings reports were mixed, but generally with some caution in the forward outlooks. Relatively slow global growth isn’t going to help and fiscal policy has dampened the outlook domestically. [Read more]
Weekly Market Snapshot from Frazier Allen for the week of April 21st, 2013
April 21, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The terrorist bombing at the Boston Marathon and news of ricin-laced letters mailed to elected officials did not appear to have a major impact on the financial markets, but they certainly didn’t help. The major stock market averages were volatile. Bond yields remained low. Commodity prices remained under pressure.
Economic data were mixed, but generally weak. The Fed’s Beige Book noted that anecdotal reports from late February to early April were consistent with moderate economic growth. The Index of Leading Economic Indicators edged lower. Industrial production rose more than expected, but that was due to a jump in utility output (colder temperatures). Factory output fell modestly in March, with strength in autos, but weak otherwise. Seasonal adjustment led to a drop in gasoline prices, pushing the headline Consumer Price Index lower in March, while core inflation rose modestly. [Read more]
Weekly Market Snapshot from Frazier Allen for the week of April 14th, 2013
April 14, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were mixed. However, the key release, the retail sales report, disappointed. Retail sales fell more than expected in March, while figures for January and February were revised lower. Recall that the February personal income and spending numbers, released on Good Friday, pointed to a much better growth rate in consumer spending than had been anticipated earlier.
The retail sales report, in turn, should dampen the 1Q13 GDP outlook to some extent and reduce GDP projections for 2Q13. Consumer sentiment fell in the mid-month assessment. Jobless claims fell back, after having risen in the two previous weeks, suggesting that the recent moves merely reflecting some noise in the data. [Read more]
Weekly Market Snapshot from Frazier Allen for the week of April 8th, 2013
April 8, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were generally disappointing. Nonfarm payrolls rose by a disappointing 88,000 in March (median forecast: +200,000), up 759,000 before seasonal adjustment (vs. +901,000 in March 2012). Payroll figures for January and February were revised a net 61,000 higher (adjusted payrolls average a 168,000 monthly gain in 1Q13, roughly the same pace as the last two years).
Mild weather in February may have pulled forward some of March’s strength, but the slowdown could signal a lagged impact of the payroll tax increase. The unemployment rate fell to 7.6% (vs. 7.7% in February and 8.2% a year ago), but this was once again due to a decrease in labor force participation (participation should be rising if the labor market is strengthening, as individuals are lured back into the job market). The employment/population ratio edged down to 58.5%, trending roughly flat over the last few years. [Read more]
Weekly Market Snapshot from Frazier Allen for the week of March 31st, 2013
March 31, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were mixed. Third quarter GDP growth rose at a 0.4% annual rate in 4Q12 (vs. +0.1% in the 2nd estimate and -0.1% in the advance estimate), but consumer spending growth was revised down (suggesting less momentum into 1Q13). Consumer confidence fell in March, with a sharp drop in expectations (which are thought to be a factor in big-ticket purchases). Durable goods orders jumped, reflecting a rebound in aircraft, but were mixed and generally soft otherwise. Home prices continued to rise. Weekly claims for unemployment benefits rose unexpectedly, which could signal a lagged impact from the payroll tax increase and higher gasoline prices, but it’s only one week.
The Dutch finance minister said that the Cyprus bank bailout could serve as a model for other countries, although he tried to walk those comments back shortly after. Most observers see the Cypriot bailout as a disaster and are now looking at the possibility of similar debacles in the smaller eurozone countries (Malta, Slovenia, perhaps even Luxembourg with its outsized banking industry). It’s going to be another long year for Europe. [Read more]
Weekly Market Snapshot from Frazier Allen for the week of March 24th, 2013
March 24, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The “Crisis in Cyprus” dampened the U.S. stock market mood early in the week. Why is Cyprus important? Its economy is a little bigger than Scranton. However, like Iceland and Ireland, it has an outsized banking system, several times larger than the overall economy. Even a moderate contraction in the banking system can have a huge impact.
The biggest fear is contagion. The decision to tie aid to a haircut on deposits led to fears of runs on the banks in other countries, but there’s been little evidence of that so far.
There were no surprises from Fed policymakers. The Federal Open Market Committee did not change its forward guidance (on the federal fund rate target, still not expected to start rising until 2015), nor did it alter its asset purchase plans (still $85 billion per month). [Read more]
Weekly Market Snapshot from Frazier Allen for the week of February 10th, 2013
February 10, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Federal Reserve Governor Jeremy Stein fell short of declaring that credit markets are overheating, but suggested that an extended period of low interest rates could lead to the taking on of greater duration of credit risks, or to employment of greater leverage in a “reach for yield.” He said that the Fed must monitor the financial markets closely and could address signs of excessive risk-taking through regulatory efforts or through monetary policy.
Next week, President Barack Obama will deliver his State of the Union Address on Tuesday evening (which is also Mardi Gras). Most likely, the President will ask that Congress postpone the sequester through the end of the year. Note that it’s not costless to do so – there has to be an offsetting increase in revenues (possibly closed loopholes) or reduction in other types of spending (say, reduced farm subsidies). The reports on retail sales and industrial production have some market-moving potential, but seasonal adjustment could exaggerate what would otherwise be minor shifts in the data. [Read more]
Weekly Market Snapshot from Frazier Allen for the week of February 3rd, 2013
February 3, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
With so many economic reports, some surprises were likely. Real GDP fell at a 0.1% annual rate in the advance estimate for 4Q12, smacked down by slower inventory growth and a 22.2% drop in defense spending (otherwise, GDP would have risen 2.5%). Consumer spending rose at a 2.2% pace in 4Q12, while business fixed investment advanced 8.4%. Residential construction added 0.4 percentage points to GDP. Exports fell.
Consumer Confidence tanked in January, while the Consumer Sentiment Index improved. The ISM Manufacturing Index was stronger than anticipated. Personal income jumped 2.6%, reflecting a 34.3% spike in dividend income and earlier bonus payments. Spending rose 0.2%. The PCE Price Index was flat overall (+1.3%) and ex-food and energy (+1.4% y/y) – trending well below the Fed’s 2% goal. [Read more]
Weekly Market Snapshot from Frazier Allen for the week of January 30th, 2013
January 30, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The House voted to delay the need for a debt ceiling increase by three months, to May 19. Congress has not had a real budget since 2009, funding the government through a series of stopgap measures (Continuing Resolutions). This week, Congress set a goal to have a real budget by April 15th, or lawmakers won’t get paid. Actually, they’ll still get paid eventually.
Oh, and the House and Senate only have to come up with a budget that can be approved by one chamber. They don’t have to have a set of budget bills that can be approved by both chambers (that is, something that could be sent to the president and signed into law). Spending cuts are still slated to kick in on March 1st, with about half of that in defense. [Read more]
