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]
The Weekly Market Snapshot from Frazier Allen for the week of January 20th, 2013
January 20, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were mixed, but generally consistent with moderate growth in the near term. Retail sales and industrial production were largely in line with expectations. Jobless claims sank and housing starts jumped, boosting the major stock market indices, although seasonal adjustment likely played a part. The Fed’s two major regional surveys disappointed, reflecting contractions in new orders and employment and some pickup in input price pressures.
Earnings reports were mixed, but investors seemed more concerned with the path ahead. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of January 13th, 2013
January 13, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic calendar was thin. Jobless claims continued to trend at a moderately low level. The trade deficit widened unexpectedly in November. As a result, net exports are likely to subtract from 4Q12 GDP growth.
With little economic data, the stock market began to focus on earnings reports. President Obama nominated Jack Lew to succeed Timothy Geithner as treasury secretary. The move likely signals an emphasis on upcoming battles. Lew currently serves as Obama’s chief of staff. He also ran the Office of Management and Budget for both Clinton and Obama. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of January 6th, 2013
January 6, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
On New Year’s Day (technically, the December 31 legislative workday), Congress approved the Senate’s plan to lessen the impact of the fiscal cliff. The American Tax Relief Act (ATRA) raises taxes for upper income households. The passage of the plan removes a major uncertainty for the financial markets. That is, we now know what tax rates are going to be.
However, there were a number of problems with the plan. Congress failed to prevent (or offset) a two percentage point increase in payroll taxes, which should dampen consumer spending growth in the near term. The bill postponed large spending cuts by two months, did little to reduce the long-term budget shortfall, and did not address the federal debt ceiling. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of December 23rd, 2012
December 23, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Stock market participants were encouraged by progress (over the weekend) in fiscal cliff negotiations. However, the two sides remained far apart and discussions stalled on Tuesday. House Speaker Boehner proposed a plan B, which would raise taxes on those making more than $1 million per year. However, the plan faced opposition from Senate Democrats, a threat of a presidential veto, and rejection from some of the more conservative members of the House.
Lacking enough votes within his own party, Boehner pulled the plan on Thursday evening. The result was an even greater bargaining advantage for the Democrats and a near certainty of going over the cliff. There’s still a strong belief that a deal will be reached in January or early February, but negotiations may have to start over with the new Congress. Post-cliff, however, Republicans would be able to vote for tax cuts rather than tax increases. [Read more]
