The Weekly Market Snapshot from Frazier Allen for the week of December 18th

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

The economic data were mixed, but stock market participants were generally willing to embrace the good news and ignore the bad. Retail sales rose less than expected in November, but previous figures were revised higher, making it about a wash. The Fed’s regional manufacturing surveys (New York and Philadelphia) were stronger than expected in December, but these surveys don’t measure actual activity.

Industrial production weakened last month and results varied across industries. Initial claims for unemployment insurance benefits fell further, but seasonal adjustment is difficult, making the numbers suspect in December. The Consumer Price Index was flat, up 0.2% ex-food & energy, moderating in recent months after stronger gains earlier this year. Pipeline inflation pressures continued to recede. [Read more]

The Weekly Market Snapshot from Frazier Allen for the week of December 11th

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

The focus remained on Europe, as leaders struggled to come up with a fiscal compact. Results were mixed, with the euro zone economies reaching some agreement, but the United Kingdom opted out. That may set up future conflicts between the European Union and the euro zone countries embedded in it. As expected, the ECB lowered short-term interest rates and took further efforts to boost liquidity. However, ECB President Draghi said that the markets were wrong to interpret his previous comments as signaling that the ECB would do a lot more. Market participants still expect the ECB to come through eventually, despite its reluctance to take on the role of lender of last resort.

The economic calendar was thin. The ISM Non-Manufacturing Index slipped to 52.0 in November, vs. 52.9 in October, consistent with lackluster-to-moderate growth in the overall economy. Consumer sentiment improved in the mid-month assessment for December. [Read more]

The Weekly Market Snapshot from Frazier Allen for the week of December 6th

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

Following a horrible Thanksgiving Day holiday week, the stock market was due for a bounce, but the rebound was aided significantly by central bank action and favorable economic data.

The Federal Reserve joined five other central banks in efforts to boost dollar liquidity. The price of dollar swap arrangements between central banks was reduced to 50 basis points over the Overnight Index Swap rate (OIS), vs. 100 bps over OIS previously, and swap lines were extended to February 1st, 2013. This is U.S. dollar liquidity we’re talking about, but as a contingency measure, the central banks agreed to establish temporary liquidity facilities in other currency (euros, perhaps?) “should market conditions warrant.” The move does not go to the heart of Europe’s problems, but does aim to prevent the sort of seizing up that occurred among large global banks during the crisis of three year ago. Meanwhile, ECB president Draghi hinted of more support from the ECB if leaders could agree to a more comprehensive fiscal compact (a restatement of fiscal rules and enforcement of mutual commitments). [Read more]

The Weekly Market Snapshot from Frazier Allen for the week of November 29th

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

Recent data show that the U.S. economy is continuing its slow recovery as the Commerce Department revised its estimate of GDP to a 2.0% annual rate, though this was lower than the initial estimate at 2.5%. Both consumer spending and personal incomes increased in October as well, while orders for durable goods fell by 0.7%, a possible indication of tempered demand for U.S. manufactured goods from a slowing global economy.

Concerns about the debt loads of European nations that began with Greece have spread, and investors are now demanding higher yields on the obligations of much larger nations. The higher rates are seen as a sign that investors are questioning the European Union’s ability to restore confidence in its management of the debt crisis and to keep borrowing costs for major European nations from increasing to unsustainable levels. [Read more]

The Weekly Market Snapshot from Frazier Allen for the week of November 18th

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

The economic data reports were mostly stronger than expected, consistent with moderate growth in the near term. Retail sales rose more than the consensus forecast in October. Industrial production picked up, partly reflecting an increase in mining, but automobile production improved. Residential construction numbers were mixed, but suggested a modest uptrend in single-family activity (still at very low levels). As expected, the October inflation reports reflected lower energy prices. Core inflation was mild.

Tensions continued to heat up in Europe, with increased calls for the European Central Bank to step in as the lender of last resort. However, the ECB continues to reject that role. Borrowing costs for Italy, Spain, and France rose, but fell back a bit at the end of the week, as Greece and Italy made some progress in addressing their budget situations. [Read more]

The Weekly Market Snapshot from Frazier Allen for the week of November 14th

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

Anxieties about Europe intensified as borrowing costs in Italy ramped up, generating worries about the country’s ability to roll over its existing debt. U.S. investors relaxed toward the end of the week on signs that the Italian government was making some progress on austerity efforts. However, a further meltdown in Italy is a huge risk for the euro zone and for the global financial system. Much depends on whether the ECB will signal a more substantial backstop for Italian debt, but that does not seem likely at this point.

The economic data calendar was sparse. The trade deficit was narrower than expected in September, implying (all else equal) an upward revision to the third quarter GDP growth figure (+2.5% in the advance estimate). However, wholesale inventories were much lower than anticipated, implying (all else equal) and downward revision to the GDP estimate. Consumer sentiment improved in the mid-November assessment. Jobless claims moved below the 400,000 level, but the figures are a bit suspect at this time of year due to difficulties in the seasonal adjustment. [Read more]

The Weekly Market Snapshot from Frazier Allen for the week of October 23rd

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

The economic data were mixed, but consistent with lackluster-to-moderate growth in the near term (no recession). Headline inflation figures for August were boosted by higher food and energy costs, but the core CPI rose modestly. The 2012 adjustment to Social Security payments will be 3.6%, following no change in the last two years. Housing starts jumped 15% in September, reflecting the usual volatility in the multi-family sector – single-family building permits, the key figure in the report, edged down 0.2%.

The financial markets looked past the economic data, focusing instead on earnings reports and Europe. European leaders said that a plan to address the region’s problems would not be finished by Sunday, but may be completed following a second summit, by Wednesday at the earliest. The global markets have reacted to reports of bickering as the plan is cobbled together, but remains encouraged by the strong rhetoric by Germany’s Merkel and France’s Sarkozy. [Read more]

The Weekly Market Snapshot from Frazier Allen for the week of October 9th

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

The economic data were mixed, but consistent with lackluster-to-moderate growth in the near term. Unit auto sales rose more than expected in September. Nonfarm payrolls rose by 103,000 (more than expected, but the increase including the return of 45,000 workers who were on strike in August), with a net upward revision of +99,000 for July and August. The unemployment rate held steady, but would have edged lower if not for an increase in labor force participation (the employment-population ratio edged up, but has been little changed over the last year. Chairman Bernanke said that the Fed’s asset maturity program (Operation Twist) should “put downward pressure on longer-term interest rates and help make broader financial conditions more supportive of economic growth.” He told lawmakers to tighten the federal budget over the long term, but cautioned them “to avoid fiscal actions that could impede the ongoing economic recovery.” [Read more]

The Weekly Market Snapshot from Frazier Allen for the week of October 2nd

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

The news out of Europe was better. Leaders expressed a greater resolve to overcome the region’s difficulties and keep the euro intact. Germany’s parliament approved (by a wide margin) an expansion of the European Financial Stability Facility. However, the strains remain. There is a long and bumpy path ahead and the markets are expected to react to the news day by day.

U.S. economic data were mixed, but generally better than anticipated. The government’s third estimate of second quarter GDP growth was revised higher, to a 1.3% annual rate vs. +1.0% in the second estimate. The second quarter is pretty much ancient history at this point, but consumer spending and business fixed investment were both revised higher. The advance report on durable goods orders showed a pickup in shipments of nondefense capital goods ex-aircraft in August – suggesting that business fixed investment will post a strong gain in 3Q11 (not surprising, as corporate profits are a major driver of capital spending, and profits were at a record high in 2Q11). Consumer confidence remained depressed in September (after sinking in August), with continued pessimism on jobs. Weekly jobless claims fell unexpectedly in the latest week, but seasonal adjustment makes the figures unreliable. [Read more]

The Weekly Market Snapshot from Frazier Allen for the week of September 18th

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

Europe was the dominant factor for the markets, with fear (early in the week) giving way to some optimism (or at least, less pessimism) after European leaders expressed support for Greece and the euro, the BRICs offered some support (in buying European debt), and central banks announced dollar liquidity-providing operations. At this point, we’ve had more words than action. The news out of Europe is likely to vary over the next few weeks, which should have some day-to-day impact on the U.S. stock market.

The economic data were disappointing, although stock market participants did not seem to care. Retail sales were flat in August and figures for June and July were revised slightly lower. Industrial production rose modestly in August, restrained by a drop in the output of utilities (cooler weather) and supported partly by a gain in motor vehicle production – results were mixed across industries. [Read more]

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