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]
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]
