Weekly Market Snapshot from Frazier Allen for the week of July 7th, 2013
July 7, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were mixed. The June ISM non-manufacturing survey disappointed, but motor vehicle sales were strong and the employment report was better than anticipated. Nonfarm payrolls rose by 195,000 in June (the median forecast was 165,000), while figures for April and May were revised a net 70,000 higher.
Manufacturing payrolls continued to slide, but there were strong gains in business and professional services, as well as retail and leisure and hospitality. Payroll gains at eating and drinking establishments were strong for a third consecutive month (accounting for a little over a quarter of private-sector job gains in 2Q13).
The unemployment rate held steady at 7.6% (labor force participation edged higher). Long-term unemployment fell, but remained elevated. Unemployment rates for teenagers and young adults remain high. [Read more]
Weekly Market Snapshot from Frazier Allen for the week of June 30th, 2013
June 30, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Federal Reserve officials were out in force trying to soothe market fears. A range of Fed comments had added to market uncertainty in previous weeks, but officials are now singing out of the same page of the hymnal. The message: there was no change in the Fed’s monetary policy intentions last week.
Bernanke was merely clarifying the Fed’s decision-making process. Future policy moves will remain data-dependent. If the economic data come in weaker than anticipated, any reduction in the pace of the Fed’s asset purchases would be pushed out. Tapering is not tightening.
As the Fed slows the rate of asset purchases, it would still be added accommodation. The Fed expects to hold these securities for a long time, maintaining policy accommodation. A rise in the federal funds rate target is still a long way off. Most Fed officials expect the first increase in 2015. Equities rose and bond yields declined. [Read more]
Weekly Market Snapshot from Frazier Allen for the week of June 25th, 2013
June 25, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The Federal Open Market Committee left short-term interest rates unchanged, did not alter its forward guidance on the overnight lending rate, and said it would maintain its asset purchase program at $85 billion per month. The policy statement was a near photocopy of the previous one.
The FOMC indicated that recent inflation readings have been low due partly to “transitory influences.” The downside risks to the outlook for growth and the labor market had “diminished” since the fall. The FOMC repeated that it could “increase or reduce” the pace of asset purchases depending on how the outlook for the labor market or inflation changes. [Read more]
Weekly Market Snapshot from Frazier Allen for the week of June 16th, 2013
June 16, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
U.S. market participants continued to fret about Federal Reserve policy, debating when policymakers would dial down the rate of asset purchases and what that would mean for the economy and long-term interest rates. The market volatility surrounding the Fed’s decision is somewhat puzzling.
Recall that the Fed has a qualitative threshold for the asset purchase program: “substantial improvement” in labor market conditions. That phrase means different things to different Fed officials. The total level of Fed purchases is what matters, not the monthly pace. There was no appreciable increase in long-term interest rates when QE1 and QE2 ended. QE3 differs in that it is open-ended. We don’t know exactly when it will end and what the total amount of purchases will be. So, the total amount of Fed purchases is unclear. [Read more]
Weekly Market Snapshot from Frazier Allen for the week of June 11th, 2013
June 11, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Next week, the important economic data bunch up at the end of the week. Retail sales are likely to have been lackluster-to-moderate in May.
Industrial production figures should remain soft, reflecting general weakness in the manufacturing sector.
None of the reports is expected to suggest a removal of monetary policy accommodation anytime soon. [Read more]
Weekly Market Snapshot from Frazier Allen for the week of June 4th, 2013
June 4, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were mixed, but generally better than expected. Home prices continued to advance. Consumer confidence improved. The estimate of first quarter GDP growth was revised lower (a 2.4% annual rate, vs. +2.5% in the advance estimate), but consumer spending and business fixed investment were both revised a bit higher. Personal income was flat in April (the Employment Report had shown a decrease in hours offsetting the impact of more jobs).
Personal spending fell 0.2%, partly reflecting lower gasoline prices and more normal temperatures (lower household energy consumption). Ex-energy, spending would have risen about 0.3%. Inflation-adjusted consumer spending (70% of GDP) edged up 0.1% – it’s only one month (and subject to revision), but spending appears to be on track for about a 2% annual rate in 2Q13 (vs. +3.4% in 1Q13). [Read more]
Weekly Market Snapshot from Frazier Allen for the week of May 26th, 2013
May 26, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The financial markets were confused by the April 30th – May 1st FOMC minutes, which noted that “a number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently strong and sustained growth.”
That’s not a majority view. In his testimony before the Joint Economic Committee, Fed Chairman Bernanke gave a balanced assessment but strongly suggested that monetary policy would unlikely be changed anytime soon. Bernanke told Congress that it was doing fiscal policy wrong, significantly restraining the pace of recovery in the near term, while doing little to address the long-term problems in the budget outlook. Stocks sold off sharply following the FOMC minutes, but recovered. [Read more]
Weekly Market Snapshot from Frazier Allen for the week of May 19th, 2013
May 19, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data reports were expected to be a series of tough hurdles for the stock market, but they ended up more like minor speed bumps. Share prices continued to rally broadly. The bond market was volatile, as investors debated when the Fed may begin to taper its asset purchases.
Retail sales results for April were better than anticipated – not strong, but not as bad as feared. Industrial production was weaker than expected. Residential construction figures were mixed, reflecting a high degree of volatility in the multi-family sector and continued strength in single-family homebuilding. [Read more]
Weekly Market Snapshot from Frazier Allen for the week of May 12th, 2013
May 12, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic calendar was thin. Jobless claims remained low, consistent with a low level of job destruction. However, the March JOLTS data (that’s the Job Openings and Labor Turnover Survey) continued to show relatively low rates of hiring and quits. Fed Chairman Bernanke spoke in some detail about how the Fed is monitoring the financial system for vulnerabilities.
One concern is that accommodative monetary policies could lead to excessive risk-taking. Bernanke said the Fed is watching for that, but he did not say whether it is currently seeing it. China indicated that it would move to free up capital flows into and out of the country. That’s one step toward eventually become an important global currency (although there is a long way to go) and will likely lead to a strengthening of the currency in the near term. Treasury reported a large budget surplus for April, implying a smaller-than-expected deficit for FY13. [Read more]
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]
