Clarksville Weekly Market Snapshot from Frazier Allen for the week of January 13th, 2014

Clarksville, TN – The December Employment Report was a mixed bag. Nonfarm payrolls rose a disappointing 74,000 (median forecast: +195,000, although market participants were anticipating an upside surprise following a stronger-than-expected ADP estimate).

The November payroll figure was revised to +241,000 (from +203,000). Manufacturing rose by 9,000. Construction fell by 16,000, with weakness concentrated in nonresidential and in heavy construction and civil engineering (residential rose 6,200).

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of January 5th, 2014

Clarksville, TN – The economic data reports of recent weeks contained a few surprises. Consumer spending growth in 3Q13 was stronger than previously estimated, while monthly figures showed acceleration in spending growth in the first two months of 4Q13 (although this is somewhat inconsistent with the pace of income growth).

Right now, inflation-adjusted consumer spending (70% of Gross Domestic Product) appears to be on track for about a 4% annual rate in 4Q13 – impressive, although the current figures may be revised. Durable goods orders rose more than expected in November, with the details suggesting that capital spending plans were delayed due to the government shutdown.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of December 30th, 2013

Clarksville, TN – Next week, the ISM Manufacturing Index is expected to be the highlight, although the December figures can be exaggerated by the seasonal adjustment.

Market participants are likely to look ahead to the Employment Report.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of December 19th, 2013

Clarksville, TN – Taper, no tantrum. The Federal Open Market Committee decided to reduce the monthly pace of asset purchases from $85 billion to $75 billion in January. The FOMC added that it expects to further reduce the pace of asset purchases “in measured steps” depending on the economic data (that may mean every other Fed policy meeting in 2014).

It also emphasized that the federal funds target rate would remain in its current low range (0-0.25%) even after the unemployment rate falls below 6.5%.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of December 15th, 2013

Clarksville, TN – House and Senate leaders reached an agreement on a mini budget deal. This isn’t the “grand bargain” that lawmakers were tasked with, but it will prevent a government shutdown in January. That removes a major uncertainty for the markets, but also for Federal Reserve policymakers.

The deal reduces (but does not eliminate) the impact of the sequester cuts to spending that were slated for mid-January. The deal does not address the debt ceiling, which will go back into effect on February 7th, nor does it prevent over 1.2 million from losing extended unemployment benefits at the end of this month.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of December 10th, 2013

Clarksville, TN – Fear of Fed tapering hung over the stock market. Market participants believed that the November Employment Report would be the deciding factor for whether the Fed will begin to reduce the pace of asset purchases this month.

The jobs report was stronger than anticipated, but not as bad as feared. Payrolls rose by 203,000, a bit more than expected (median forecast: +180,000), with a mild net revision of +8,000 to the two previous months. Job gains were relatively broad-based.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of December 3rd, 2013

Clarksville, TN – Next week, the ISM Manufacturing Index should set the tone for the week, but the markets will put a lot of weight on the November jobs data.

Recall that the government shutdown did not have a noticeable impact on the October nonfarm payroll figures (which were stronger than anticipated), but did alter the household survey data (the unemployment rate and the employment/population ratio).

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of November 24th, 2013

Clarksville, TN – The minutes of the October 29th-30th Federal Open Market Committee meeting showed that monetary policymakers still expected the economy to improve in line with their earlier projections “and would thus warrant trimming the pace of purchases in coming months.”

Officials also considered scenarios where the Fed could taper “before an unambiguous further improvement in the outlook was apparent.” The stock market pulled back a bit on the taper talk, but rose to new highs anyway.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of November 17th, 2013

Clarksville, TN – In her nomination hearing before the Senate Banking Committee, Janet Yellen took a balanced approach in discussing how she would conduct monetary policy, but the markets took that as “dovish.”

She gave no hint that the pace of asset purchases would be tapered anytime soon, but she also cautioned that the program could not last indefinitely. She noted that the economy is far from fully recovered and indicated that “we have farther to go” in the labor market.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of November 12th, 2013

Clarksville, TN – The economic data surprised. Real GDP rose at a stronger-than-expected 2.8% annual rate in the advance estimate for 3Q13, but the figure was boosted by faster growth in inventories (which added 0.8 percentage point to GDP growth).

Consumer spending rose at a 1.5% annual rate, while business fixed investment rose 1.6% – nothing to write home about. The partial government shutdown had a mixed impact on the October employment figures.

Nonfarm payrolls rose by 204,000 (median forecast: +125,000), while August and September figures were revised a net +60,000.

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